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Volume 3, Issue 2

PreViewProtiviti’s View on Emerging Risks

As organizations continue to evolve their risk governance practices, focused and relevant information about emerging risks is at a premium. The objective of Protiviti’s PreView newsletter is to provide an input for these efforts as companies focus on risks that are developing in the market. In each issue, we discuss emergent topics and look back at prior topics discussed to help organizations understand how these issues are evolving and anticipate their potential ramifications.

This issue’s topics focus on the rise of viral outbreaks, the opportunities that drones offer, the implications of the growing volatility of natural resources and the key risks of autonomous vehicles. Additionally, we revisit the risks associated with the accessibility of the internet worldwide and the possibilities of blockchain technology. As you review this issue, we encourage you to think about your organization and ask probing questions: How will these risks affect us? What should we do now to prepare? Is there an opportunity we should pursue?

Our framework for evaluation of these risks is rooted in the global risk categories designed by the World Economic Forum. Throughout this series, we will continue to use these categories as a framework for classifying macro-level topics and the challenges they present.

We are very interested in your feedback. We plan to continue the conversation on emerging risks on our blog. “The Protiviti View” (blog.protiviti.com) and on our microsite (www.protiviti.com/emergingrisks). We welcome your input and comments.

Foreword

Emerging Risks

Environmental

GeopoliticalSocietal

Technological

Economic

Inside This Issue

• Drones and the Opportunities They Offer Page 2• Blockchain: A Groundbreaking Disruptive Technology or a Passing Fad? Page 4• The Evolution of Autonomous Vehicles Page 7• Viral Outbreaks: The Risks of Pandemic and Panic Page 10• Global Volatility of Natural Resources and China’s Influence Page 12• The Next Billion: Bringing the Internet to the Rest of the World Page 15• On the Radar Page 18• Where to Learn More Page 19• The Protiviti View – Continuing the Conversation on Our Blog Page 21• About Protiviti Page 21

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DRONES AND THE OPPORTUNITIES THEY OFFER

Key Industries Impacted: Government; Technology, Media & Communications; Real Estate; Consumer Products & Services; Agriculture; Energy & Utilities

Originally developed and used primarily for military and intelligence collection purposes, unmanned aerial vehicles, commonly referred to as “drones,” have evolved to offer a seemingly unlimited range of applications extending beyond the battlefield and aerial surveillance. From crop monitoring to oil and gas exploration, an increasing number of industries are tapping into the vast potential that drones bring to the skies. By the year 2020, the Federal Aviation Administration (FAA) projects that the amount of drone sales will triple, indicating a readiness by the market to embrace this disruptive technology and create a competitive advantage through its many unique applications.

The following graphic represents some of the current and anticipated uses of drone technology across key industries:

Agriculture Entertainment and Media

Drone technology can assist with the tracking and management of crop health and production, including pest control, irrigation and seeding, along with the monitoring of livestock.

Drones can provide a variety of new vantage points for viewers and unique aerial shots for filmmaking, live sports coverage and broadcasting.

Security and Law Enforcement Energy and Mining

With a set of eyes in the sky, police and other law enforcement organizations can identify, monitor and prevent dangerous and hostile situations while maintaining a safe distance.

Drones will allow companies to safely view and inspect stockpiles, pipelines and natural resource deposits, in addition to exploring and mapping new potential sites.

Mapping and Real Estate Disaster Management and Emergency Services

Drone videography and photography can provide agents and sellers with dynamic images for better marketing, and assist developers and appraisers with evaluating properties and parcels of land.

Drones can quickly reach areas struck by disaster, such as a tsunami, hurricane, flood or avalanche, aid in search-and-rescue operations and deliver emergency supplies to stranded communities.

Retail and E-Commerce Environmental Research and Conservation

As an exciting alternative to traditional shipping and delivery mechanisms, drones have the ability to transform the way retailers and consumers send and receive a variety of goods, including groceries, apparel, household items, and even medicine.

From the monitoring of coastline erosion to the tracking of endangered animals, drone technology can further a variety of environmental research and conservation initiatives.

Infrastructure Monitoring Insurance

Drones are an effective means by which utility companies and local governments can perform aerial inspections and support maintenance of high-voltage powerlines, roads and bridges.

Drones can help property adjusters assess commercial and residential property damage in a disaster zone quickly, from the convenience and safety of an off-site location.

TECHNOLOGICAL, SOCIETAL & ECONOMIC

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Key Considerations and Implications

As with any emerging and transformative technology, the clear benefits that drones present can be clouded by questions and concerns raised by their large-scale implementation. As the market for drones expands and new applications are explored, companies, governments and others will need to consider how to incorporate this complex technology into our skies safely and responsibly, without restricting its potential.

• Regulation: As the popularity of drones skyrockets, especially in the commercial sector, policymakers are being forced to develop and implement legal and regulatory frameworks quickly to govern the use of drones. On June 21, 2016, the FAA finalized the first operational rules for routine, non-hobbyist use of drones weighing less than 55 pounds. Considered by the FAA to be a first step toward fully integrating the use of commercial drones into the American airspace, the rules aim to reduce the risks to other aircraft and stationary objects on the ground. Included in the set of rules are key restrictions on drone use, such as permitted hours of operation, height and speed limitations and other operational requirements. These new regulations are scheduled to take effect in August 2016, and additional rules are expected to be proposed in the coming years, at both the federal and state levels. Companies will need to examine and monitor carefully this fluid regulatory environment as they tap into the vast potential of drone technology for applications suited to their respective business models.

• Safety: While drones inherently remove the danger to a human pilot aboard an aircraft, other obvious safety concerns arise. Despite being controlled from the ground, by either a computer or a person, drones still present a threat of collision, either accidental or intentional, with other aircraft or with structures on the ground. In May 2016, the European Aviation Safety Agency initiated a study to assess the risks and potential damage from drone collisions with airliners and other aircraft. Further-more, as pieces of programmable technology, drones are susceptible to corruption or hacking, even while in flight, raising concerns about potential terrorism. With 7 million commercial and civilian drones expected to be flying the U.S. skies by 2020, a potentially catastrophic accident is waiting to happen, unless appropriate measures are taken to manage safety risk.

• Privacy: Drones, which typically carry video and sometimes sound equipment, are raising concerns about intrusive aerial surveillance and making personal privacy and civil liberties the topics of heated discussions. Traditional barriers meant to demarcate physical property and safeguard privacy, such as fences, can be easily circumvented by drones. The privacy impli-cations resulting from the use of this technology to penetrate airspace will need to be carefully and adequately addressed, taking into account the heightened sensitivity around this subject.

As incidents continue to arise from rogue drone operators invading sensitive airspace and private property, interfering with efforts of California firefighters and flying dangerously close to airports, we can be sure we haven’t heard the last word on the related questions and concerns. The benefits and risks of drone technology will command the attention of policy makers in the months and years to come as companies leverage the technology in their operations.

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BLOCKCHAIN: A GROUND-BREAKING DISRUPTIVE TECHNOLOGY OR A PASSING FAD?

Key Industries Impacted: Government; Financial Services; Technology, Media & Communications; Consumer Products & Services

Bitcoin is a controversial cryptocurrency the potential of which remains significant, even though its popularity has flatlined in recent years. We covered the topic on two separate occasions – in PreView Volume 1, Issues 1 and 2. While Bitcoin may be the better known concept and term, it is now becoming apparent that the technology behind Bitcoins – blockchain – may take center stage as the real revolutionary innovation. Blockchain is a potentially very secure ledger of digital events that is shared between all parties that participate in the events, with the parties’ identities being protected by cryptography. The record of events can only be updated after a consensus from 51 percent of the participants, and once information is entered, it can never be erased. Blockchain technology therefore can operate without any central authority.

From a technology perspective, the blockchain moves beyond the single cryptocurrency focus of Bitcoin to represent a variety of cryptocurrency-based applications. While the underlying technology concept may appear analogous to a database due to the blocks within the chain containing the data, blockchain is more a unique data structure than a database. The blocks represent the transaction log of a specific database implementation that constantly grows as “completed” blocks are added in a linear, chronological order with a new set of recordings. Blockchains are more secure in that falsification of recorded information is harder and accidental errors are much less likely. As a result, the blockchain technology represents a paradigm shift for developers and users, and it will impact how software engineers will write software applications in the future.

Over the next two pages, we discuss various blockchain considerations, implications and application.

Example of a BlockchainThe graphic below demonstrates the bonded nature of a blockchain. Each block in a blockchain can contain several transactions and has a unique proof of work attached, as well as the unique proof of work from the previous block, thus creating the “chain” effect. This makes the altering of information impossible.

BLOCK

0000009875vvv

000000432qrza1

vc4232v32

09345w1d

Ik54lfvx

51

Previous block

Transaction

Transaction

Transaction

Proof of work

BLOCK

000000zzxvzx5

0000009875vvv

001hk009

22qsx987

dd5g31bm

52

BLOCK

00000090b41bx

000000zzxvzx5

34oiu98a

abb7bxxq

94lxcv14

53

ECONOMIC & TECHNOLOGICAL

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Key Considerations and Implications

Blockchain has gained popularity due to the many benefits it provides. The full power of blockchain is still to be determined, and so are the potential drawbacks. Below are some of the key reasons for its adoption, and a few drawbacks already identified.

Efficiency and lower costs due to ledger format: Because entries on the blockchain ledger are immediately validated, blockchain technology can lead to quicker, more efficient transfer of assets and/or data. For investment banks, this can lead to more efficient asset trading by eliminating certain back-office tasks and reducing the time between initiating a trade and receiving the asset. Over 42 global banks have joined fintech consortium R3, which recently partnered with Microsoft to develop a framework and a platform for applying blockchain technology to markets in the hope of saving billions in future costs.

Greater transparency in transaction activity: At every stage in a blockchain transaction, the network of participants in the event must agree to the latest block of transactions. This agreement is reached through majority consensus, with duplicate entries eliminated. Unlike a bank ledger, which can be altered by its owner (or a government), the blockchain cannot be changed without simultaneously overwriting all of the thousands of copies used by the participants at any one time. As a result, individuals who do not know or trust each other can transact or exchange assets safely and reliably. One potential drawback is the public nature of the transaction: Because all users must agree on the blocks of transactions, all activities performed are public. While participants’ identities are disguised via pseudonyms, their activities are still visible, which could pose a potential privacy concern for some users.

Security stemming from multiple users: One of the key benefits of the blockchain is the ability to execute transactions without the help of a third-party intermediary, such as a bank. The blockchain ledger is distributed across thousands of computers, so hacking the ledger is nearly impossible. Additionally, because no single authority has control, the fault of one system will not affect the whole network.

Applicability across multiple industries: The blockchain efficiencies referenced above are applicable across multiple industries. Applications built on top of blockchain technology can automate the processing of property titles, clear interbank settlements, replace the need for user names and passwords and revolutionize many other processes. Companies in all industries should be paying attention to this disruptive trend, as it can drastically alter the need for their services. See the “Spotlight” section on the next page for more information.

Vast amount of computing power necessary: Some critics point out that blockchain technology will have diminishing network capacity and would not be able to sustain large-scale usage. For example, Bitcoin in its present form can process just seven transactions per second, whereas a large credit card company like Visa can comfortably take on tens of thousands.

Regulations still to be determined: While blockchain is still a relatively new concept, the interest which surrounds it means that regulators will likely react quickly by creating regulations to ensure blockchain is used for legitimate activities – as well as to perhaps obtain a share of the taxes associated with transactions. As regulators become more educated on blockchain and determine the means to regulate it, companies looking to utilize the technology should stay informed and keep an eye on any changes in the regulatory landscape.

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Spotlight on Blockchain Applications

Smart contracts are blockchain-enabled programs that can record the execution of various stages of a contract and complete it once all the terms are met. Every member of the blockchain cryptographically protects and powers the contract, ensuring objective and nondiscriminatory execution. Applications of smart contracts could include invoices, loans, inheritances and trade contracts, among many others. Platforms for smart contracts include Ethereum and Linq.

• The Linq application, launched by Nasdaq Private Markets in 2015, is a blockchain ledger platform that enables private companies to conduct securities transactions prior to going public. It is the first blockchain platform from an established financial services firm. The first-ever private securities issuance documented with blockchain technology was executed on Linq in December 2015.

• Ethereum runs on a custom-built blockchain that can handle more data than Bitcoin’s blockchain, allowing for more complex algorithms – for example, creating an invoice when a shipment is dispatched and providing a receipt once payment is made. Ethereum comes with its own programming language used to build the smart contracts. The Swiss-based firm was crowdfunded to the tune of more than $18 million in August 2014.

A decentralized online marketplace consists of a network of members without a central location who engage in transactions arbitrated by other marketplace members. Many such marketplaces are currently in development, with some providing their own cryptocurrency, such as Syscoin, and others, like OpenBazaar, using Bitcoin as a medium of exchange. OpenBazaar has received over $1 million of funding from investors and is touted as a “decentralized eBay.” However, since Bitcoin transactions cannot be blocked, there is a concern that the marketplace could be flooded with illegal contraband. While OpenBazaar has not yet been associated with any illegal activities, it remains to be seen what the startup will do to combat the potential misuse of its services.

Decentralized Marketplaces

Cryptocurrencies – Bitcoin

and Beyond

Smart Contracts

Identity Management

and Digital Ownership

Voting Systems

For decentralized marketplaces to function, it is necessary to establish tamper-proof identities – which is what a company called Onename is aiming to do. With Onename, a person can link a blockchain identity to email signatures, social media and other applications to allow others to verify that person’s identity. Another company, MyPowers, provides technology allowing this identity to be used to establish ownership of digital property.

Nasdaq recently announced its plans to allow residents of Estonia who are registered shareholders in the Tallinn Stock Exchange to vote in shareholder meetings via the Linq blockchain ledger platform. This will significantly impact the way in which shareholders and management communicate securely over long distances. Combined with the identity management described above, blockchain could revolutionize many other polling and voting processes. Since the voting is recorded on the blockchain, it will be authorized by the individual and authenticated by every user, making it extremely hard to forge or replicate.

Cryptocurrencies are entirely digital currencies – simply an entry on the ledger of a blockchain. Because the blockchain technology behind cryptocurrencies does not exist in one central location or institution, cryptocurrencies have the potential to reduce reliance on banks and other institutions as gatekeepers to the financial system. Central banks recently have begun to experiment with their own cryptocurrencies, seeing several benefits: Cryptocurrencies do not require printing, are harder to forge, and make issuing money significantly easier. Furthermore, electronic currency cannot be moved around without a trace as physical money can. In light of the recent Panama Papers leak and other anti-money laundering (AML) concerns, traceable transaction records offer a huge advantage to central banks.

Recently, a blockchain platform named Waves raised $2 million in the first 24 hours of a crowdfunding campaign. The platform uses blockchain tokens, which are issued by a platform member in exchange for existing national currencies, financial instruments, and other items with inherent value. In this manner, the platform allows traditional financial institutions to issue and support blockchain tokens, and is therefore a step forward in closing the gap between the current financial system and the cryptocurrency world.

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THE EVOLUTION OF AUTONOMOUS VEHICLES

Key Industries Impacted: Consumer Products & Services; Auto Manufacturing; Government; Financial Services; Technology, Media & Communications

Research today predicts that by 2050 owning a smart autonomous vehicle will become the norm for consumers. The first big leap in introducing autonomous vehicles to the consumer market is expected in 2017 from Google, whose self-driving technology now costs a tenth of its original $80,000 price tag. Every major automotive manufacturer will likely follow by the early 2020s. Many of the key pieces of technology necessary for the manufacturing of autonomous vehicles are continuing to decrease in cost as the technology is perfected. And while the price of a self-driving car is still outside the price range of most consumers, investor interest continues to increase.

According to a University of Texas report, if 90 percent of the cars on roads in the United States were replaced by autonomous vehicles, the savings across various industries, such as automakers, insurers and the government, could reach as high as $450 billion. This would be a huge incentive for policymakers to clear the way for self-driving cars in the future. The full adoption of autonomous vehicles will likely take decades, but the anticipated safety, economy and convenience will no doubt help speed up the process.

Estimated Percentage of Autonomous Vehicle Adoption, and Key Milestones

2010 2020 2030 2040 2050 2060

0%

20%

40%

60%

80%

100%2010 – Develop performance and data collection requirements for autonomous vehicles operating on public roadways.1

2019 – A fully autonomous vehicle will be able to drive from point A to point B and encounter the entire range of on-road scenarios without any interaction from the driver.3

2020 – 10 million self-driving vehicles will be on the highways.3

2025 – Self-driving features couldrepresent a$42 billionmarket.4

2017 – Autonomous long-haul highway trucks start testing in the U.S., Europeor Japan.2

2015 – Google launches first short-range fully autonomous vehicle service in California.2

2060 – If autonomous vehicles prove to be very beneficial, human-driving maybe restricted.1

2035 – 12 million fully autonomous units could be sold globally each year.5

2030 – Driverless vehicles will be used for taxi, car-sharing and demand response services.1

2050 – Estimated90 percent reduction in traffic fatalities.7

2040 – 75 percent of all vehicles will be autonomous.6

Adoption curve source: Autonomous Vehicle Implementation Predictions, Victoria Transport Policy Institute, December 2015: www.vtpi.org/avip.pdf.

Milestones sources:

1 www.vtpi.org/avip.pdf2 www.driverless-future.com/?p=6783 www.businessinsider.com/report-10-million-self-driving-cars-will-be-on-the-road-by-2020-2015-5-64 www.marketwired.com/press-release/self-driving-vehicle-features-could-represent-a-42-billion-market-by-2025-1981515.htm5 www.bcg.com/expertise/industries/automotive/autonomous-vehicle-adoption-study.aspx6 www.carinsurancequotes.net/ieee-predict-that-75-of-cars-will-be-autonomous-by-2040/7 www.fool.com/investing/general/2016/04/19/sorry-your-next-car-will-probably-be-smarter-than.aspx

TECHNOLOGICAL, ECONOMIC & SOCIETAL

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Key Considerations and Implications

Widespread use of autonomous vehicles will affect a number of established sectors and industries. Below, we outline key sectors and the changes they are likely to experience.

Industry Impact

Automobile Manufacturing & Technology

• Automated vehicles will cause an initial surge in new and used car sales, estimated at $600 billion a year globally, but sales could drop significantly once it becomes possible for unmanned cars to be summoned via an app and shared by multiple people. Parallel with this, there will be a market for technology designed to retrofit vehicles with self-driving abilities. A startup company called Otto is developing a self-driving kit for trucks, which sells for $30,000.

• Security is always a risk with newly introduced technology. Car manufacturers will need to ensure cybersecurity vulnerabilities in the technology used to build out autonomous vehicles is properly addressed and assessed once adoption becomes widespread. As more and more cars connect to the internet, the attack surface for hackers will increase, providing them with a greater incentive to invest in car-hacking skills and with a greater return on their efforts.

• Currently, automakers are limited in testing their vehicles in real-life conditions, due to a legal proposition which states that a human must be “in control” of a vehicle. U.S. regulators are making some progress toward guidelines for testing self-driving vehicles on roads shared with human drivers, such as allowing automakers to apply for exemptions to the rules in order to advance progress. Google recently received guidance clarifying that its software used to control the self-driving vehicle can be considered a “driver.” However, progress remains slow, partly because states make their own road laws.

Insurance

• As cars become automated, accidents are expected to decrease, and car owners are expected to incur less insurance costs, leading to less coverage over time. A study by the Eno Centre for Transportation estimates that if 90 percent of the cars on American roads were autonomous, the number of accidents would fall from 5.5 million a year to 1.3 million, and road deaths from 32,400 to 11,300. Customer premiums could drop as much as 60 percent in 15 years as adoption increases.

• The auto insurance industry will not disappear altogether, as cars will still face risks such as flooding, damage or theft; however, the underwriting process will change. The traditional underwriting criteria, such as miles one expects to drive, will still apply, but the model, make and style of the car will assume greater importance. In the short term, insurer premiums will remain the same until insurers actually see declines in accident frequency. Over the long run, insurance companies will need to adjust their business strategies to reflect the reality of fewer accidents. Those that can’t will likely exit the market.

Law Enforcement

• Autonomous vehicles have the potential to cut police forces in half. According to the Bureau of Justice Statistics most recent survey, more than 85 percent of the 31 million people who were involuntarily stopped by the police in 2011 were stopped for traffic-related reasons. The need for these activities could decrease significantly with the adoption of autonomous vehicles since they will be programmed to obey all traffic rules.

• Reducing the number of officers can have a negative impact on safety and crime, however. About 4 percent of all drivers stopped for traffic violations each day are also searched by the police, often resulting in the discovery of more serious crimes. This crime-fighting opportunity may be reduced with driverless cars.

Government

• Once self-driving vehicles become available, ordinary cars will gradually be banned, starting with city centers, business parks and campuses. Car-sharing services will increase, causing the number of cars on the road to drop. Initially, government revenues may decrease due to the elimination of licensing fees, taxes and tolls, and a reduction in fines from traffic violations.

• With fewer cars on the road, the existing roadway infrastructure would be used more efficiently and the need for new roadways may decrease. Even though road repair will still be necessary, the federal and state governments may be able to reallocate a good portion of the roughly $30 billion spent annually on new roads and highways.

• For local governments, active police forces comprise 5 percent of their spending. A reduction in law enforce-ment staff, as explained above, would mean more money in local and state budgets. The potential savings that autonomous vehicles present is the main reason the government has proposed almost $4 billion for automated vehicle research over the next decade, even with the initial decline of revenue.

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Spotlight: Autonomous Semi-Trailer Trucks

The adoption of autonomous semi-trailer trucks, aka “big rigs” in the U.S., has progressed much faster than the adoption of autonomous cars. The main benefits that self-driving trucks present are safety, reduced labor demand and fuel efficiency.

• Autonomous trucks have the potential to save thousands of lives by eliminating driver fatigue – the key factor in the 4,000 deaths caused by truck accidents each year. The U.S. Congress is already pushing for stricter trucking regulation in 2016 that will limit operating times for truckers – an unpopular idea for trucking companies already short on drivers. The safety issues presented by fatigued drivers can be solved by utilizing autonomous trucks instead.

• Autonomous trucks can significantly alleviate driver shortage, or eliminate the need for drivers altogether. Truck driver short-age is estimated at more than 50,000 drivers currently, and could exceed 100,000 drivers in a few years. Self-driving trucks are not expected to eliminate drivers in the short term, but within the next 5-10 years it is expected by some that long-haul drivers will be 100 percent replaced.

• Self-driving trucks will increase fuel and driver efficiency. Because trucks will be able to communicate with one another and with other autonomous vehicles, they will navigate traffic more quickly, increasing fuel efficiency as a result.

• For truck drivers, adopting autonomous trucks represents the elimination of their jobs. Already there are a number of groups campaigning against autonomous trucks, including the International Brotherhood of Teamsters labor union. Businesses that rely on truck drivers for income, such as restaurants and motels along highways, may also be negatively impacted.

Spotlight: Unmanned Vehicles via App

With the adoption of autonomous vehicles, it will be possible for unmanned cars to be summoned, via app, to a given location. This will not only reduce road congestion and accidents, but impact the lives of people of all ages. Various industries may be altered or may diminish in importance due to the new ease of transportation.

• Self-driving cars can significantly change the lives of people who are blind, disabled or too young to drive by giving them independence, social interaction and access to essential services. Drunk-driving fatalities will decrease significantly due to the ease of hailing transportation. This will not only save the lives of drivers, but create safer surroundings for cyclists, pedestrians and bystanders.

• People will benefit from hands-free driving by gaining time to be more productive while in transit, as they do not need to be making actual decisions behind the wheel. Commute time will be shortened due to fewer accidents and more efficient routes.

• Ride-sharing services have already upset the taxi industry, and the need for taxi drivers will continue to decrease with the encroachment of self-driving cars. Companies such as Uber would benefit greatly from the ability to summon vehicles where needed without having to pay drivers; however, they would still need to upfront the costs of owning their fleets. Uber will be deploying a test vehicle in the near future to advance its driverless car goals. It is unclear yet what legal implications Uber could face in shifting toward an autonomous vehicle fleet. What is clear, however, is that a future Uber that no longer needs drivers will affect those individuals currently relying on income as Uber drivers.

• The demand for expanded public transportation could decrease as autonomous vehicles would be able to service out-of-the-way locations that currently lack public transportation services. Domestic and short-haul flights will face competition from on-demand cars, as many people may choose the convenience of being picked up and driven by an autonomous car the entire way.

• The real estate industry could undergo changes as the ease of transportation may shift the demand for property back to the suburbs. In addition, the need for parking will decrease as driverless car fleets will be moving continuously between places, rather than taking up parking spots.

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VIRAL OUTBREAKS: THE RISKS OF PANDEMIC AND PANIC

Key Industries Impacted: Transportation; Hospitality; Retail; Healthcare & Life Sciences

With the growth of globalization and global economic interdependence, viruses and virus-borne diseases can travel across borders like never before. However, in recent years, the fear of viral infections, spread by the media’s global reach

and propensity for amplifying information, has had a bigger impact on economies than the virus itself. The fear of a virus can shut down airports and naval ports, keep people home from work and disrupt global supply chains that include areas linked to an outbreak. Business leaders must view viral outbreaks strategically and assess their business continuity planning and risk profiles carefully to ensure they are prepared to handle an outbreak of a disease and the residual behavior that accompanies fear of contraction.

The National Science Foundation predicts that we can expect five new emerging pandemic diseases each year. Over the past two decades, such outbreaks have had devastating effects on global economies.

Major Viral Outbreaks – Economic Impact

2003 SARS Outbreak

The SARS outbreak, first reported in China and spreading across the world shortly thereafter, was estimated to have cost $50 billion in economic losses to the East Asian region, and triple that number globally.

2009 Swine Flu Outbreak

In Mexico City alone, the swine flu outbreak and the resulting fear-driven behavior led to an estimated loss of $57 million a day due to cancelled or delayed trips, cancelled public events and closed public venues, such as movie theaters and nightclubs.

2014 Ebola Outbreak

At the height of the Ebola outbreak, the humanitarian and medical aid direct costs were estimated at around $4 billion. The indirect costs to the economies of West Africa in the next three years were estimated at $15 billion or more, resulting from impacts on trade, investment and tourism.

2015 MERS Outbreak

The MERS outbreak in South Korea led to an estimated $900 million deficit to the country’s economy due to a fear-induced drop in tourism.

1991 Cholera Outbreak

A cholera outbreak in Peru led to a $770 million loss due to food trade embargoes and the negative impact on tourismto Peru.

2016 Zika Virus Outbreak

See Spotlight on the next page.

ECONOMIC, SOCIETAL & GEOPOLITICAL

“It is the fear that transfers faster than the virus. Ninety percent of the social and economic impact is caused by the fear and only 10 percent is caused by the disease itself.”

Dr. Julie Hall, Former Country Representative, World Health Organization

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Key Considerations and Implications

Many leading researchers believe that the only way to aggressively combat the increase in global viral infections is through better multinational guidance and cooperation. Public health organizations and private companies can collaborate and utilize each other’s resources to help prevent or contain outbreaks. Examples of such collaboration would be using big data for predictive modeling of potential outbreaks, using mobile technology to collect real-time data on the spread of diseases, and relying on social media to disseminate pertinent information to the masses.

Economists have found that indirect costs due to “public risk aversion” following an outbreak can lead to more economic damage than the explicit costs of healthcare and containment of the virus itself. Typically affected industries are transportation providers (airlines), hospitality sectors and retailers with global supply chains. A telling example: As Ebola became an international fear in 2014, the NYSE ARCA Airline Index dropped by 16 percent, and individual airline stock prices dropped each time there was a report of a new case of Ebola.

In today’s interconnected world, business leaders must evaluate the disruptive effects viral outbreaks can have on their domestic and global workforce, supply chains, interactions with governments in affected areas, and geographical markets, and include proactive outbreak-related measures in their risk management practices.

Companies should confirm and update their business continuity plans to include specific guidance in case of a pandemic threat. For example, business leaders should assess corporate travel procedures, define work-from-home scenarios and develop contingency plans for their global partners or suppliers to reduce production downtime in the case of an outbreak. Protiviti’s Guide to Business Continuity Management contains a section on dealing with pandemic events specifically.

The key to reducing panic is information, so risk managers should ally with their communication teams to ensure that correct and thorough information is reaching all employees.

Spotlight: The Zika Virus in the 2016 Olympics and Beyond

The 2016 Olympics will be held in Rio de Janeiro, Brazil, this August. In 2014, the Soccer World Cup, a month-long event also hosted by Brazil, resulted in 600,000 additional foreign tourists – a 10.6 percent increase from the year before and an additional $1.15 billion spent across the 12 different host cities by tourists and locals alike. These large events, and the increased spending by tourists, provide a significant boost to Brazil’s economy, one-tenth of which is supported by tourism.

However, with the spread of the Zika virus this year in Latin America, and specifically Brazil, many economists are concerned that the fear of the virus and its hard-to-detect symptoms could keep patrons and athletes away from the games. This will add to Brazil’s current economic crisis and further cripple the government’s ability to efficiently combat the spread of Zika. In May 2015, states throughout Brazil stopped receiving shipments of insecticide from the government, which went into belt-tightening mode following a political crisis. With tourism dwindling, the outlook for Brazil’s economy and the health of its population appears dire.

Potential Impact of the Zika Virus on Brazil and Other Economies

Short Term Midterm Long Term

The potential decrease in tourism in Brazil could significantly hurt expected revenue for a country already reeling from a recent political and economic crisis.

According to CNBC, several country-led Olympic committees have recommended that athletes or trainers concerned with the Zika outbreak in Brazil should consider not attending.

If the outbreak persists, workers who choose to stay home from work for fear of contracting the virus, or those who must stay home to take care of virus-stricken family members, can cause a temporary reduction in the labor force with significant financial impact on their countries’ economies.

Zika causes microcephaly (underdeveloped head and brain) in unborn babies. For this reason, several Latin-American countries are urging women to postpone pregnancy for six months to a year. El Salvador’s government has asked women to wait until 2018. If women choose to follow these suggestions, the period of low birth rates could have huge impacts on the demographics of the area for years to come. In addition, children born with the defect may require lifelong state assistance, further taxing these countries’ economies.

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GLOBAL VOLATILITY OF NATURAL RESOURCES AND CHINA’S INFLUENCE

Key Industries Impacted: Financial Services; Energy & Utilities; Industrial Products & Services; Technology, Media & Communications; Transportation

As the world’s population grows and global connectedness increases, the economics of natural resources have lost any semblance of predictability. As such, economies and companies serving as consumers and suppliers of natural resources are operating in increasingly uncertain environments. In recent months, we have seen unusual volatility in the prices of some of the world’s critical natural resources, such as oil, gold, coal, rare earth elements and water. Further, China has emerged as the foremost global influencer of the price and supply of natural resources, raising concerns about concentration risk among both mature and emerging economies. In the graphic below, we highlight the implications facing key industries across the globe due to the volatility of the five key resources mentioned: oil, gold, coal, rare earth elements and water.

Key Resources and Their Effect on Various Industries

Oil Gold Coal WaterRare Earth Elements

Financial Services

The top 10 U.S. banks have more than $140 billion in unfunded loans to energy companies. As the price of oil decreases, due in part to the failure of key oil-producing countries to control output, there is an increasing chance that energy companies will draw on these loans. While investment-grade companies are less likely to need the additional cash, the unrated companies may need to tap into their unfunded loans. Banks that made loans based on the assumption of stable or increasing oil prices will see their profit expectations challenged.

Gold prices rose significantly through the first four months of 2016 as the U.S. dollar has stagnated; this occurred after two years of gold price decline while the dollar value was rising. China is the world’s largest producer and second biggest consumer of gold; however, it has had less influence on gold price-setting than Western countries have. Recently, China announced that 18 Chinese banks will join the group of benchmarking institutions, which contributes to the gold price setting process. China’s history of currency manipulation and its position as the world’s primary consumer of gold could fundamentally alter the traditional patterns of currency and gold price fluctuations.

Declining demand for coal will have a significant impact on banks involved in coal companies’ financing. Five of the largest coal-mining companies in the U.S. have recently filed for bankruptcy, leaving creditors with significant exposure in uncertain positions. Additionally, many international public financial institutions have started to report direct emissions contributions based on their coal-financing activities, which places pressure on the private finance sector to follow suit to decrease coal-financing activities.

ECONOMIC, TECHNOLOGICAL & GEOPOLITICAL

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Energy

As China, a major oil importer, transitions from a manufacturing-dominated economy to a service-driven one, the country’s demand for oil may continue to decrease. Additionally, the rise of hydraulic fracturing, or “fracking,” has made it cheaper to extract and produce oil. These price pressures, and increasing environmental concerns pertaining to oil production, have caused the largest energy firms to both invest in alternative energy and merge operations to reduce costs. Banks, however, are increasingly reluctant to lend to these firms due to increased default risk, and many energy firms have already completely tapped out their existing lines of credit. The situation places energy firms at a high risk for bankruptcy.

In 2014, coal accounted for 39 percent of the world’s electricity production, however, homes and businesses are increasingly being powered by renewable forms of energy, reducing the need for coal. Scotland recently shut down its coal power plant in favor of gas and wind farms for energy. In the U.S., the cheaper price of natural gas produced by fracking has led to a decline in coal prices, and a high likelihood that coal companies will default on their debts as a result.

The severe air pollution problem in China has prompted the government to place greater emphasis on the use of electric vehicles and alternative energy sources. This will increase China’s need for rare earth elements, such as dysprosium and terbium, of which China is currently the sole supplier and which are used in wind turbine generators and solar panels. Other rare earth elements, such as europium and yttrium, used for energy-efficient LED lights, and lanthanum, used in rechargeable batteries in electric vehicles, are also largely controlled by China. As the demand for green technologies grows, rare earth mining companies, both in China and other competing economies, will see an increased demand for their products, while China will see its position as a main source of these elements grow stronger. Countries dependent on rare earth metal imports will need to consider options for increasing production domestically, such as tariffs on imports, to stimulate domestic production.

Airlines

As one of the most oil-dependent industries, the airline industry stands to benefit from falling oil prices. Cheaper oil will decrease operational costs for airlines and, if the savings are passed on to travelers, will increase demand for air travel.

Railroads

Railroad companies that have historically depended on heavy coal transport will struggle to cope with the plight of coal. In 2011, non-intermodal coal transportation accounted for 45 percent of the U.S. rail companies’ business; however, in April 2016, coal only accounted for 26 percent. Rail companies should continue to consider diversification options, such as intermodal transportation, to ensure their total operating revenue does not suffer significant losses.

Technology

Rare earth elements, such as lithium, play an important part of the technology used in smartphones, computers and televisions. As technology companies continue to innovate and develop new products, the demand for lithium will rise. However, with China’s stranglehold on rare earth elements, technology companies must consider the risk of demand outpacing supply. Additionally, inflation of rare earth prices by Chinese companies can eat into technology companies’ profits. Other detrimental effects globally, such as a rise in illegal rare earth mining and its accompanying problems of pollution and crime, are also possible.

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Military Weapons

Some rare earth minerals, such as samarium, are invaluable in military equipment as they can be used in extremely high temperatures and are not affected by electromagnetic pulses. Examples of such equipment are night-vision goggles, GPS equipment, amplifiers for data transmission and other electronics used for military defense measures. Once again, China is in possession of about half of all the earth deposits of these minerals, presenting a concentration risk and a major concern to the U.S. military.

Agriculture

The world’s supply of water for agriculture is decreasing due to climate change, while demand is increasing due to an exploding population and urbanization in previously undeveloped parts of the world. In addition, much of the available fresh water is wasted in agricultural runoff or inefficiently distributed due to an aging water infrastructure and lack of regulation. The potential scarcity of fresh water poses a major risk for everyone on the planet, and for the agricultural industry specifically, which needs a reliable supply of water to grow crops and raise livestock. The food industry should prepare for potential water shortages and evaluate options for continuing its business operations despite the volatility of water availability.

Other

Organized crime cartels in Latin America are increasingly mining gold illegally to earn cash – more than 90 percent of all gold mining in Venezuela is performed illegally. The illegal mining operations, which often exploit the forced labor of human-trafficking victims, have contributed to deforestation and contamination of the local water supply, soil and air. As these illegal mining operations grow, they could soon expand to the exploitation of other precious metals. If Latin American governments do not address the problem, they will miss out on significant mining tax revenue, in addition to enabling organized cartels to gain control of large portions of this valuable commodity.

Key Considerations and Implications

The potentially significant economic and cultural impacts of natural resource control and volatility will continue to shape the global risk landscape. As China continues to influence the supply and demand of critical natural resources, country policy makers and industry leaders need to evaluate their comfort level with such a concentration of power and the associated risks.

Further, due to the volatility of oil and coal, the financial services industry has been forced to adopt new financing strategies to mitigate the increasing risk of oil- and coal-collateralized portfolios. In the energy industry, mature firms are consistently facing the risk of default and increasing competition from companies that offer alternative, environmentally friendly energy sources. Lastly, the food and agricultural industries will face major challenges as they deal with diminishing availability of fresh water globally.

Due to the inherent risks associated with the volatility of key commodities like oil, gold, coal, rare earth elements and water, economies and companies across the globe will need to continue to adapt to the changing natural resource environment and adjust their policies, strategies and risk management plans accordingly. Nonetheless, the environment also presents opportunities for financial services firms in the form of hedges, insurance, and other securitizations to help their clients mitigate future volatility.

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THE NEXT BILLION: BRINGING THE INTERNET TO THE REST OF THE WORLD

Key Industries Impacted: Technology, Media & Communications; Consumer Products & Services

There are 7.4 billion people in the world, and over 4 billion of them don’t have the technology to look that number up. For companies whose business model depends on collecting information about people, connecting this population to the internet presents a huge opportunity. Organizations such as Facebook and Google are already working on massive projects to help expedite the spread of internet accessibility. Increasing the online audience in the developing world also presents new opportunities for other companies that may not have had a way to reach these markets previously.

Forces Driving Connectivity

One of the most impactful developments in a global context is cell phone ownership. In emerging markets alone, 84 percent of people said they owned some type of cell phone, according to a Pew Research Center study conducted in March 2015. While basic mobile devices are currently the most prevalent in these nations, smartphone ownership rates are rising significantly, climbing from 21 percent in 2013 to 37 percent in 2015. Network experts at Ericsson estimate that by 2020 there will be 6.1 billion smartphone users, with the growth occurring primarily in developing and emerging markets. More specifically, experts estimate that 80 percent of this growth will be generated by smartphone owners located in the Asia-Pacific region, the Middle East and Africa.

According to the Pew study, which asked internet users in 31 developing nations about their internet use over the past 12 months, the main factor driving connectivity in developing markets is the need to socialize with friends and family. Over 75 percent of participants in all regions surveyed said they have contacted close relations via the internet in the past year.

Adult Internet Activity in Developing Nations

Socializing Getting Information Career and Commerce

0%

20%

40%

60%

100%

80%

Eastern Europe Middle East Asia Latin America Africa

Source: Pew Research Center Global Attitudes & Trends Survey, March 18, 2015: www.pewglobal.org/2015/03/19/internet-seen-as-positive-influence-on-education-but-negative-influence-on-morality-in-emerging-and-developing-nations/technology-report-10/.

TECHNOLOGICAL & SOCIETAL

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• Socializing: Eighty-two percent of total users surveyed said they have used an internet connection to access social networks. This presents advertising opportunities for companies with social networking platforms.

• Getting Information: Around half of users polled in developing nations said they are using the internet to get information. Companies interested in this new audience must seize the opportunity to provide the information they believe is relevant to their potential new users or customers.

• Career and Commerce: Only 16 percent of the total surveyed users say they have used the internet to buy products. Companies need to understand what drives consumers in emerging markets to make a purchase.

Barriers to Connectivity and Initiatives to Bridge the Gap

Despite the interest in accessibility in the developing world, there are still barriers that prevent regular access to the internet. These barriers cannot be addressed in isolation, as each one affects the others. Corporations, governments, nongovernmental organizations and nonprofits must all work together to overcome the digital divide by addressing these barriers.

Barriers to Connectivity Initiatives to Bridge the Gap

Availability. Access to internet services depends on the proximity of the necessary infrastructure. While the availability of mobile broadband technology reaches roughly 78 percent of the global population, at least 1.6 billion people lived outside mobile broadband coverage areas at the end of 2015.

Google’s Project Loon is a network of giant balloons launched into the stratosphere and designed to connect people in rural and remote areas, help fill coverage gaps, and bring people back online after disasters.

Affordability. For users in developing nations, the most affordable way to get online is to use a prepaid mobile broadband service. However, basic data packages offering 100MB of data per month are affordable for just over half of the people in emerging countries.

Internet.org is a Facebook-led initiative that aims to bring affordable internet access to less-developed countries by providing access to basic websites, such as BBC News and AccuWeather without charging data costs. To date, Internet.org has brought more than 25 million people online.

Relevance. In order for information to be relevant, content must be useful, relatable, and accessibly written and delivered in the languages people speak. There are over 7,000 languages spoken around the world; however, only 10 languages account for 89 percent of websites (56 percent are in English).

World Wide Web Consortium (W3C) is an international community of organizations focused on developing international standards for the internet, ensuring that all W3C’s formats and protocols are usable worldwide in all languages and writing systems.

Readiness. The ability to read and write is crucial for full utilization of the internet, yet there are 1 billion illiterate people worldwide, nearly all of whom live in developing countries. Further, the majority of current nonusers lack the digital skills and understanding required to use the internet.

DTAC is the second-largest 2G mobile phone provider in Thailand whose “1 Million Hours for Thai Children – Internet for All” initiative aims to introduce and improve digital literacy among children by bringing internet awareness to schools. Its ultimate goal is to introduce 1 million Thai students to the internet.

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Key Considerations and Implications

• A study by Roland Berger estimates that 80 percent of the world’s middle class will live in emerging markets by 2020. Additionally, urbanization and increasing incomes are changing consumption habits. Experts predict that by 2020, consumer spending in developing regions will likely rise from $14 trillion to $22 trillion. It is crucial that businesses analyze the trends and market changes in these markets to better understand consumer needs and market their products effectively.

• As initiatives aimed at global connectivity work to bring internet access to those in developing nations, foreign and domestic companies alike have a huge opportunity to reach new markets. Fortunately, historical risks faced by foreign companies in developing nations, such as unauthorized seizure or loss of assets, may not be as prevalent as they were at one time. To be successful, foreign companies need to be aware of societal attitudes and cultural differences in these new markets as they can have a drastic impact on a business’s success or failure in a developing nation. There are many past examples of culturally incompatible marketing content. For example, Coca-Cola had to change its marketing message in India when it was discovered that water is more commonly consumed at most meals, while soft drinks are reserved for guests and special occasions.

• Understanding the values of new consumers in developing markets and adopting a flexible strategy will aid in a company’s success and lessen the risk of backlash from political leaders and community members. Organizations that have successfully entered into developing markets have shaped their messages to present new products as positive for the community rather than the individual. Job creation, technological advancements and spurred economic growth are all benefits companies should highlight to increase their chances of success in a developing market.

• To reach new internet users effectively, companies must understand their usage activities in order to avoid advertising spend on websites and platforms that are not frequently visited. The majority of internet users in developing nations access social networks on a regular basis. Companies must consider that social platforms like Facebook, Twitter and Instagram could prove more useful and effective for reaching new consumers compared to other outlets.

• One of the significant technological risks in emerging markets is cybersecurity. As the number of internet users in emerging markets grows, so does the risk of cyber attacks. According to CNBC, smartphones present the biggest future cybersecurity risk category due to the number of potential attack vectors (e.g., malicious apps, web browsing, attacks targeted at a particular model of phone). The most sophisticated defenses, such as Apple’s TouchID, are only available on the latest (and most expensive) devices, and many private-sector firms and cybersecurity startups focus on developing and providing cybersecurity solutions to wealthier consumers in developed nations. However, because emerging markets now play a greater role in the global supply chain than in previous years, the risk for companies is greater, especially with regard to the handling of sensi-tive customer information.

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ON THE RADAR

Brexit and Regrexit

The shocking decision of the UK to leave the European Union has left the UK, Europe and the global markets reeling from the fallout. Overnight, the value of British pound dropped to its lowest level in 30 years. Stock markets fell in what has been calculated by Standard & Poor’s to be the biggest one-day loss ever, with more than $2 trillion wiped off the global equity markets. Banks and financial institutions were hit hard as investors braced for what could signal the start of another recession.

The initial response has led to many petitioning the British government for a re-vote; however, it remains uncertain if this call will be heard. The exit process is likely to take at least two years once the UK notifies the European Council of its intention to exit (which likely will not happen until a new British prime minister is elected), with everything from trade agreements to benefits retention and international relationships up for renegotiation. The long-term implications for markets, industries and the global political climate are yet to be made clear. In a future publication, we will look more deeply at the economic, financial and political risks resulting from this decision. In the meantime, this situation is highly fluid and bears watching closely.

Artificial Intelligence: Quantum Machine Learning

Artificial intelligence (AI), also known as machine learning, is progressing at a pace that is exciting to some and concerning to others – for example, Google’s search algorithms are increasingly relying on large computational systems, aka “deep neural networks,” rather than human-written rules. Machine learning has evolved to a point where even an engineer does not know exactly how or why a computer performs a certain task.

Pairing machine learning with quantum computing – another technological leap with huge disruption potential – could have effects we may not yet be able to grasp at the present time. For this reason, billions of dollars are being invested into responsible AI development to avoid the possibility of a “cyberpocalypse.” As a follow-up to this topic, introduced in a previous issue, we will focus on the impact of AI in the next five years.

Talent Retention

The National Association of Corporate Directors and Protiviti conducted several roundtables in 2015, at which it became clear that directors consider talent strategy to be closely tied to the overall business strategy. Companies need talented people with the requisite knowledge, skills and core values to execute their challenging growth and innovation strategies.

Talent retention is an evolving risk for many companies faced with an aging workforce and a new wave of millennials whose increased visibility to the job market and tendency to switch jobs with greater frequency make them a difficult demographic to gauge from a retention standpoint. Companies need to address this risk with succession plans that emphasize building executive bench strength through a strategy designed to groom and retain younger, strong-performing managers with the potential to lead. The ability to attract and retain top talent will be a key determining factor in companies achieving their operational targets.

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Where to Learn More

Drones

“DOT and FAA Finalize Rules for Small Unmanned Aircraft Systems,” [press release], Federal Aviation Administra-tion, June 21, 2016: www.faa.gov/news/press_releases/news_story.cfm?newsId=20515.FAA Aerospace Forecast: Fiscal Years 2016–2036, Federal Aviation Administration: www.faa.gov/data_research/aviation/aerospace_forecasts/media/FY2016-36_FAA_Aerospace_Forecast.pdf.“U.S., European Regulators to Study Drone Risk to Commercial Aircraft,” by Robert Wall and Andy Pasztor, The Wall Street Journal, May 4, 2016: www.wsj.com/articles/europe-aviation-watchdog-to-study-drone-risk-to-commercial-air-craft-1462378447. [Subscribe or sign in.]“Drones For Good (Infographic),” ZDNet, Feb. 11, 2015: http://www.zdnet.com/article/drones-for-good-infographic/.

Blockchain

“The Next Big Thing,” The Economist, May 9, 2015: www.economist.com/news/special-report/21650295-or-it-next-big-thing.“Why Bitcoin’s Tech Could ‘Change Everything’ for Banks,” by Arjun Kharpal, CNBC, Dec. 31, 2015: www.cnbc.com/2015/12/31/blockchain-what-the-big-banks-say-about-the-tech.html.“Redistributed Ledger,” The Economist, Mar. 17, 2016: www.economist.com/news/finance-and-economics/21695088-even-central-bankers-are-excited-about-blockchain-redistributed-ledger. [Subscribe.]“Some of Tech’s Biggest Investors Are Funding a Police-Proof Marketplace That Lets You Sell Literally Anything,” by Rob Price, Business Insider, June 11, 2015: www.businessinsider.com/openbazaar-gets-1-million-seed-round-from-andreessen-horowitz-union-square-ventures-2015-6?r=UK&IR=T.“Blockchain Startups Make Up 20% of Largest Crowdfunding Projects,” by Alex Sunnarborg, Venturebeat.com, May 15, 2016: http://venturebeat.com/2016/05/15/blockchain-startups-make-up-20-of-largest-crowdfunding-projects/.“Understanding the Blockchain,” by William Mougayar, O’Reilly, January 16, 2015: www.oreilly.com/ideas/under-standing-the-blockchain.“Blockchain, What Art Thou? Defining an Industry Buzzword,” by Dave Hudson, CoinDesk, January 16, 2016: www.coindesk.com/blockchain-what-art-thou-buzzword/.

Autonomous Vehicles

“13 Industries Other Than Auto That Driverless Cars Could Turn Upside Down,” CB Insights, Feb. 1, 2016: www.cbinsights.com/blog/13-industries-disrupted-driverless-cars/.“All About Flex: Three Emerging Trends That You Can Bet On,” by Dave Becker, I-Connect007, Mar. 10, 2016: flex.iconnect007.com/index.php/article/96316/all-about-flex-three-emerging-trends-that-you-can-bet-on/96319/?skin=flex.“Cops May Feel Biggest Impact from Driverless Car Revolution,” The Conversation, Mar. 16, 2015: http://theconver-sation.com/cops-may-feel-biggest-impact-from-driverless-car-revolution-38767.“Security Nightmare of Driverless Cars,” The State of Security, Oct. 25, 2015: www.tripwire.com/state-of-security/security-data-protection/cyber-security/security-nightmare-of-driverless-cars.“‘Killer Robots’ Hit the Road – and the Law Has Yet to Catch Up,” by Brendan Gogarty, The Conversation, Nov. 8, 2015: http://theconversation.com/killer-robots-hit-the-road-and-the-law-has-yet-to-catch-up-49735.“If Autonomous Vehicles Rule the World: From Horseless to Driverless,” The Economist, July 1, 2015: http://worldif.economist.com/article/12123/horseless-driverless.“How Google’s Self-Driving Car Will Change Everything,” by Joseph A. Dallegro, Investopedia, Sept. 6, 2014: www.investopedia.com/articles/investing/052014/how-googles-selfdriving-car-will-change-everything.asp.“U.S. Guidance on Self-Driving Cars Due Within Months, Foxx Says,” by Jeff Plungis and John Hughes, Bloomberg News, Mar. 29, 2016: http://www.bloomberg.com/politics/articles/2016-03-29/u-s-guidance-on-self-driving-cars-due-within-months-foxx-says.

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Viral Outbreaks

“The Zika Virus Could Take a Huge Toll in the Americas,” by Laurie Garrett, The Huffington Post, Jan. 27, 2016: www.huffingtonpost.com/laurie-garrett/zika-virus-americas_b_9080204.html.“Panicking Only Makes It Worse,” The Economist, Aug. 16, 2014: www.economist.com/news/international/21612158-epidemics-damage-economies-well-health-panicking-only-makes-it-worseht.t.“IOC Predicts 480,000 Tourists in Rio for 2016 Olympics: Daily,” The Rio Times, July 15, 2014: http://riotimesonline.com/brazil-news/rio-business/ioc-predicts-480000-tourists-in-rio-2016/#.http://www.cnbc.com/2016/02/09/kenya-could-pull-out-of-rio-olympics-due-to-zika-concerns.html.“Brazil Expects Tourism Boost From Olympics 2016,” Ritz G-5: www.ritz-g5.com/brazil-expects-tourism-boost-from-olympics-2016/.“Growing Support Among Experts for Zika Advice to Delay Pregnancy,” by Donald G. McNeil Jr., The New York Times, Feb. 5, 2016: www.nytimes.com/2016/02/09/health/zika-virus-women-pregnancy.html?_r=1.

Natural Resources

“Banks Face New Headache on Oil Loans,” by Rachel Louise Ensign, The Wall Street Journal, Apr. 12, 2016: www.wsj.com/articles/banks-face-massive-new-headache-on-oil-loans-1460453401?cb=logged0.7115383726220939.“China Is One Step Closer to Global Gold-Price Domination,” by Myra P. Saefong, Marketwatch, Apr. 19, 2016: www.marketwatch.com/story/china-is-one-step-closer-to-global-gold-price-domination-2016-04-19.“The Coal Miner ‘On Everybody’s List’ as Next Bankruptcy Victim,” by Jodi Xu Klein and Tim Loh, Bloomberg, Jan. 20, 2016: www.bloomberg.com/news/articles/2016-01-21/the-coal-miner-on-everybody-s-list-as-next-bankruptcy-victim.“Some Drug Cartels Now Make More Money From Gold Than Cocaine,” by Carolyn Beeler, PRI, Apr.19, 2016: www.pri.org/stories/2016-04-19/some-drug-cartels-now-make-more-money-gold-cocaine.“Agriculture-Related Water Risks: Understanding the Threat,” by Monika Freyman, CFA Institute, Apr. 5 2016: blogs.cfainstitute.org/investor/2016/04/05/agriculture-related-water-risks-understanding-the-threat.“When Coal Companies Go Bankrupt, the Mining Doesn’t Always Stop,” by Daniel Cohan, The Hill, Apr. 18, 2016: http://thehill.com/blogs/pundits-blog/energy-environment/276628-when-coal-companies-go-bankrupt-the-mining-doesnt.

The Next Billion

“Offline and Falling Behind: Barriers to Internet Adoption,” McKinsey & Company, Sept. 2014: www.mckinsey.com/industries/high-tech/our-insights/offline-and-falling-behind-barriers-to-internet-adoption.“Social Networking Very Popular Among Adult Internet Users in Emerging and Developing Nations,” by Jacob Poushter, Pew Research Center, Feb. 22, 2016: www.pewglobal.org/2016/02/22/social-networking-very-popular-among-adult-internet-users-in-emerging-and-developing-nations.“Biggest Cybersecurity Threats in 2016,” by Harriet Taylor, CNBC, Dec. 28, 2015: www.cnbc.com/2015/12/28/big-gest-cybersecurity-threats-in-2016.html.“The Hidden Risks in Emerging Markets,” by Witold J. Henisz and Bennet A. Zelner, Harvard Business Review, Apr. 2010: https://hbr.org/2010/04/the-hidden-risks-in-emerging-markets.“State of Connectivity 2015: A Report on Global Internet Access,” Facebook Newsroom, Feb. 21, 2016: newsroom.fb.com/news/2016/02/state-of-connectivity-2015-a-report-on-global-internet-access.“Smartphone Ownership and Internet Usage Continue to Climb in Emerging Economies,” by Jacob Poushter, Pew Research Center, Feb. 22, 2016: www.pewglobal.org/2016/02/22/smartphone-ownership-and-internet-usage-continues-to-climb-in-emerging-economies/.

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Protiviti (www.protiviti.com) is a global consulting firm that helps companies solve problems in finance, technology, operations, governance, risk and internal audit, and has served more than 60 percent of Fortune 1000® and 35 percent of Fortune Global 500® companies. Protiviti and our independently owned Member Firms serve clients through a network of more than 70 locations in over 20 countries. We also work with smaller, growing companies, including those looking to go public, as well as with government agencies.

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We partner with management, board members and outside counsel to help organizations comply with regulatory requirements, respond to situations of noncompliance and improve the processes around information systems supporting governance, risk and compliance. We help clients take a disciplined approach to managing credit, market and operational risks through a combination of assessments, process improvement, and model review and validation.

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About Protiviti

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The Protiviti View — Continuing the Conversation on Our Blog

The risk areas summarized above will continue to evolve, and there is no question that new risks will emerge and affect organizations globally. We invite you to continue the discussion we’ve started in this and prior newsletters on our blog, “The Protiviti View” (blog.protiviti.com). Our blog features commentary, insights and points of view from Protiviti leaders and subject-matter experts on key challenges and risks companies are facing today, along with new and emerging developments in the market. You also can find additional information on our microsite, www.protiviti.com/emergingrisks.