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PRISM'S CURRENT VIEW
This is the time to prepare for the American presidential transition. However, other significant developments this month also merit attention and action.
Inflation: Inflation in advanced economies trended higher again this month. While under current conditions, inflation would be expected to subside again, the impact of tariffs and trade wars could lead to a resurgence in global inflation levels. Go deeper.
Non-tariff trade risks: In response to the prospect of trade wars with the US, trade partners are increasingly looking to non-tariff measures to retaliate against the US. China continues to employ export controls (expanding controls on critical minerals), and Canada is now looking to tax critical exports (e.g., energy) in the US. Go deeper.
Middle East: The collapse of the Assad regime in Syria shakes up dynamics in the region. An outright conflict between Israel and Iran is lower, given Iran’s weakened position. Go deeper.
German election: The largest economy in Europe will now go to the polls in early 2025, with a likely change in leadership. Go deeper.
ESG: Rapid changes are occurring in ESG regulation. In the EU, a significant proposed consolidation of reporting requirements, a delay of the deforestation law, and the approval of a forced labor ban are all in flight. In the US, the trend is the opposite; ESG policy backsliding is likely under the new administration. Go deeper.
US presidential transition: Now is the time to prepare. Trump takes office on January 20 and promised many immediate actions. Go deeper.
RISK DASHBOARD
Economics
Inflation trended higher again this month, but interest banks continue to cut rates. China's economic malaise continues despite recent stimulus, raising the risk of tariffs on its exports.
China Economic Risks
Real estate and financial crises threaten China’s economy, Chinese suppliers’ financials, and the global financial system.
Risk level:
Risk trend:
Moderate
Stable
Oil Prices
Expect oil prices to rise in the coming months but remain subdued relative to 2023 highs.
Risk level:
Risk trend:
Moderate
Stable
Global Inflation Outlook
Inflation in advanced economies has largely subsided, and central banks are now cutting interest rates. China continues to face a heightened risk of deflation.
Risk level:
Risk trend:
Moderate
Increasing
Global Growth Outlook
Expect weak growth to persist into 2025.
Risk level:
Risk trend:
Moderate
Stable
HIGHLIGHTED TOPICS
Logistics
Shipping rates declined from last month. However, there is a significant risk that US East and Gulf Coast port workers will likely strike in January, which could have global impacts on trade and logistics.
Red Sea Disruptions
Attacks on vessels by the Houthis are the single largest risk to global maritime shipping. Rates will remain high but will not reach 2021-22 highs.
Risk level:
Risk trend:
Critical
Stable
Ports & Waterways
The most significant active risks are the disruptions to the Red Sea and Panama Canal; be alert for US port strikes in January.
Risk level:
Risk trend:
Critical
Stable
Maritime Shipping
Disruptions at critical waterways are the largest disruption risk.
Risk level:
Risk trend:
Critical
Stable
HIGHLIGHTED TOPICS
Materials & inputs
Energy shortage risk increased. The US election cast a shadow on the future of critical mineral and semiconductor investments in the US. China enacted new restrictions on critical minerals.
Artificial Intelligence
AI will be a transformative enterprise technology. But, it comes with near-term cost challenges and ESG risks.
Risk level:
Risk trend:
Low
Stable
Critical Minerals
Rare earth minerals are caught in geopolitical competition, raising the risk of shortages, particularly in countries impacted by economic competition between China and the West.
Risk level:
Risk trend:
High
Increasing
European Energy Shortages
Energy shortage risk is higher this winter. Extreme shortages are unlikely, but prices may be higher than last year.
Risk level:
Risk trend:
Moderate
Increasing
Semiconductors
Chip demand for low-end chips will remain weak this year, preventing shortages. High-end chips used in AI applications will remain in scarce supply. US tariffs and export restrictions to impact China’s chip sector.
Risk level:
Risk trend:
Moderate
Increasing
HIGHLIGHTED TOPICS
ESG
ESG policy continues to advance in the European Union. A new report on Europe's competitiveness and the formation of a new European Commission suggest future efforts to regulate may be scaled back.
ESG Macro Overview
The pace of ESG progress faces setbacks, forcing a more strategic view on ESG initiatives and creating new compliance risks.
Risk level:
Risk trend:
Moderate
Increasing
Supply Chain Due Dilligence
A patchwork of new rules is coming across jurisdictions, raising compliance costs and the risk of violations.
Risk level:
Risk trend:
Moderate
Stable
Strikes & Collective Bargaining
It's a major election year. Strike action and protests will be elevated and cause logistics disruptions and production delays.
Risk level:
Risk trend:
Moderate
Stable
ESG Transparency & Disclosures
EU transparency rules drive a race to the top that drives costs and reputational risk.
Risk level:
Risk trend:
Moderate
Increasing
Carbon Taxes & Import Rules
New EU rules set the stage for significant cost increases from 2026 onward.
Risk level:
Risk trend:
Moderate
Stable
Climate & Net-Zero Policy
Supply chain leaders must prepare for the expanding scope of environmental risks and the potential for sudden policy change.
Risk level:
Risk trend:
Moderate
Declining
HIGHLIGHTED TOPICS
Domestic politics & elections
Donald Trump enters office on January 20 and continues to threaten tariffs and other disruptive actions. Additional risks should be monitored in Germany and Canada.
Canda Politics
Chrystia Freeland resigned as finance minister and deputy prime in a move that raises doubts about the Trudeau government’s longevity.
Risk level:
Risk trend:
Moderate
Increasing
German Election
Shift in government expected in the February 2025 federal elections.
Risk level:
Risk trend:
Moderate
Increasing
China Decoupling
Risks associated with doing business in China are high, and an EU-China trade war appears increasingly likely.
Risk level:
Risk trend:
High
Increasing
US Tariff Policy
Trump’s win presents significant supply chain risks over the coming four-plus years. Prepare for risks now to mitigate their potential impacts.
Risk level:
Risk trend:
Critical
Increasing
HIGHLIGHTED TOPICS
Geopolitics & more
The prospect of an escalation in the Middle East remains high and has escalated following continued tit-for-tat attacks between Israel and Iran.
Critical Infrastructure Disruption
Risks to critical infrastructure are high and growing amid a volatile geopolitical outlook. Internet cables and energy infrastructure face the largest risks.
Risk level:
Risk trend:
High
Increasing
China Decoupling
Risks associated with doing business in China are high, and an EU-China trade war appears increasingly likely.
Risk level:
Risk trend:
High
Increasing
Middle East Conflicts
Despite ceasefire negotiations, the conflict will continue causing supply chain disruptions for months.
Risk level:
Risk trend:
Critical
Increasing
Ukraine War
Militarily at a stalemate, the outlook improved for Ukraine after the US approved new aid.
Risk level:
Risk trend:
Moderate
Increasing