Welcome to the Spotlight podcast, a series of conversations with risk specialists both within and external to the Gallagher business.
The series takes our subject matter experts on a deep dive into the many themes covered in the Spotlight Thought Leadership series.
In this fourth episode, Gallagher Editor Helen Yates talks to Jake Hernandez, chief executive officer of Gallagher consultancy AnotherDay* about some themes covered in the Spotlight Elections series.
Nearly half the world's population are due to go to the polls in 2024, with implications for businesses ranging from an increase in state-sponsored cyber attacks and disinformation to the increased likelihood of social unrest.
In this podcast discussion, Hernandez explains why this year is so important for democracy. The discussion took place at the end of June, at the mid-year point.
*AnotherDay, a Gallagher Company, is a specialist consultancy firm working with insurers on strategic risk advisory encompassing cyber threats, geopolitical intricacies and climate change implications. The AnotherDay team works in conjunction with Gallagher's core insurance broking business as a complementary risk management and consulting series for clients.
Helen Yates: Let's discuss why many people are referring to this year as the "Super Bowl of election years." What is the reason behind the record number of elections taking place worldwide?
Jake Hernandez: This year, it's almost by accident that we have effectively half of the world's population going to the polls. That's about a billion people in India alone and over 1.2 billion worldwide. The United States, Russia and many other countries are all having elections. It's a big deal because having so many elections in a single year can lead to significant political and geopolitical changes.
And now that we're halfway through the year, I was expecting it to be quite surprising. I wasn't necessarily expecting it to be as surprising as it turned out to be, which is both good and bad, as you can imagine.
Helen Yates: So, what have been some of the key surprises so far?
Jake Hernandez: There are a few good examples of that. You may have recently seen that we had the European elections, and now we have a situation where we're going to have even more elections this year. This is because Emmanuel Macron effectively announced that he's taking France to the polls in a snap election.
It was surprising that he decided to take a chance and do that. The European elections were interesting as they highlighted the division within the European project. Despite the headlines about the far right making gains, the situation is more nuanced. The far right performed poorly in the Scandinavian region, particularly in Sweden and Denmark. However, they did well in some locations, including France, Germany, and Italy.
They performed well in some parts of Eastern Europe, particularly in the newer member states of the European Union, where the elections were fairly normal. It's a mixed picture overall, but the decision by Emmanuel Macron to call for elections in France was particularly surprising. Another surprise was that we were expecting Narendra Modi in India to further solidify his hold on power. However, Indian democracy worked remarkably well, and his power was constrained. He didn't perform very well at all.
The BJP [Bharatiya Janata Party] performed poorly compared to expectations. Narendra Modi has accepted the result, and they are now forming a new government. However, he seems to have a reduced stature, which is unexpected. This situation demonstrates the strength of the Indian democratic system, so it's actually a positive outcome, I believe.
Helen Yates: These elections are taking place against a shifting geopolitical landscape, which has set the stage for this year's events. Can you provide more context on this?
Jake Hernandez: So you've got a couple of what we would call wedge issues. In US parlance, they'd call it wedge issues on the foreign policy side because, as you know, geopolitics is a function of different states' foreign policy at any particular time. There are two really huge wedge issues.
The first wedge issue is the Ukrainian conflict with Russia and the role of NATO. You've got political parties coming out on both sides of that divide. Are they effectively saying that Ukraine should try and sue for peace? Are they saying that our support for Ukraine should continue?
The first key issue is domestic policies, and the second key issue is the conflict in the Middle East. Both of these issues have influenced major elections in the Western world, particularly in the US and the UK. The domestic policies of most parties in these countries are very similar. For example, if you compare Joe Biden and Donald Trump, they both aim to impose additional trade barriers and increase investment in the US.
It's interesting how many similarities there are between the domestic policies of different political parties. However, the real differences become apparent when you compare their foreign policy positions. Many of the elections taking place this year are essentially foreign policy elections. For example, even in the UK, the Conservative and Labour parties have quite similar domestic positions, but their foreign policy suggestions differ significantly. From a geopolitical perspective, this means that every election is like rolling the dice, as the country's foreign policy could undergo radical changes based on the election outcome. When you consider the impact of multiple elections in a single year, it becomes clear that the geopolitical landscape can undergo significant shifts, as each country pursues a completely different agenda.
There are two competing views of the world, really. So the first view of the world supports a pro-globalization approach, advocating for foreign direct investment and participation in global supply chains. Interestingly, following Brexit, the UK has attempted to distance itself from globalization. However, the current Labour government is looking into reintegrating the UK into global supply chains that it had previously exited. This view emphasizes the need to protect globalization, acknowledging its substantial impact on lifting people out of poverty and generating economic growth.
The second view is that globalization is effectively dead, and we are witnessing a rollback of global supply chains, with the erection of trade barriers between economies. The outcome of the upcoming elections will likely determine the extent to which these supply chains will fracture. If President Trump gets re-elected, we may see significant trade barriers between the US and China, as well as between the US and Europe. President Trump seems to feel that Europe has been taking advantage for years.
For organizations, it's a good idea to thoroughly map out their supply chains before the end of 2024. Knowing who the primary and secondary suppliers are will be essential. Even if no immediate action is taken, having this information will be valuable if the geopolitical environment changes, providing the opportunity to reconfigure supply chains if necessary.
Helen Yates: One issue we discussed in our elections at the Spotlight series is the increasing polarization of society. This has led to a rise in disinformation, misinformation, and social unrest. How is this contributing to the threat landscape that businesses are facing?
Jake Hernandez: It definitely creates an environment which is more febrile, like a tinderbox, compared to historical expectations. The US is a good example of this concern, as we are worried about civil unrest before and after November. This is partly due to the increasing polarization of most societies. It's not normal that a person's political views on one issue can predict their views on every other issue. This polarization is a result of many years of social media use, around 12-14 years. Overall, the general use of the internet has contributed to increased polarization.
The rise in the use of machine learning algorithms for recommendations has led to people being confined to their own echo chambers. This happens because the algorithms show content based on what users search for, reinforcing their existing views, including political ones. This poses security risks, especially during elections.
I believe another important thing to consider within organizations is to carefully monitor how the organization handles specific political issues, whether they are domestic or international. For example, the conflict in the Middle East serves as a perfect example of this. It's crucial to pay attention to how the organization talks about and responds to these issues, and how it engages with its people, as they may hold diverse and conflicting views. Managing these internal and external communication risks is also essential.
Helen Yates: And I suppose that where we do see instances of civil unrest, such as the recent events in Nairobi, Kenya, there is the potential for business interruption and supply chain disruption, isn't there?
Jake Hernandez: Yes, Kenya is a place where we have done a lot of work over the years. You might see images on the BBC, CNN, or any other news channel showing the typical scenes of civil unrest — people running around, police firing tear gas, and shots going off. However, civil unrest has a much wider societal impact. It makes people very nervous and scared. We have friends in Kenya who have told us about the current situation. They mentioned that everyone is staying at home this week due to the national midterms for Kenyan students. This disruption means that exams are on hold and people are not going to school. It significantly affects how people feel and how they view each other for quite some time.
If we look back at the London riots in 2011, it took a while for London to recover and regain stability. The impact of such riots extends beyond just the immediate security incidents. There is also a significant loss of productivity and disruption to the society in the weeks and months following the unrest, which has far-reaching effects on business operations and supply chains.
Helen Yates: What lessons can we learn from this year's elections, especially when it comes to business continuity and building resilience in the face of unexpected events around the world?
Jake Hernandez: I believe that if you were to ask almost any organization what their top three risks are, cyber threats would be among them. Recently, there was an attack on a private healthcare provider in the UK that served several hospitals. Strangely, my girlfriend, who has a rare blood type, received emails from the NHS requesting blood donations because they couldn't access their systems to determine the blood types of the supply they had received in the past few months.
This incident highlights the importance of having a continuity plan in place for your organization in case of system outages, breaches, civil unrest, or other unforeseen events. It has become essential rather than optional. It's crucial to not just pay lip service to it, but to build a functional plan that will actually work.
The world is changing rapidly, and this trend is expected to continue over the next 10 years. Therefore, having a continuity plan is not only important for cyber threats but also for other unforeseen events. The current election year exacerbates these issues, and given the amount of change we've seen this year, the impacts of the elections will likely be felt in 2025. It's uncertain whether these impacts will be positive or negative.
Helen Yates: And just picking up on the point about cyber, you know that it is the new battleground in many ways, right? So, for foreign actors who may want to try to change the outcome of certain elections, this is one way for them to have that influence and potentially something that businesses should also be aware of in terms of the threat.
Jake Hernandez: Yeah, I think disinformation is a huge issue, and it's very worrying. Artificial intelligence creates opportunities for disinformation to be tailored and served up to people at a large scale, reaching millions of people at a very low cost. In the past, it would have taken hundreds of thousands of people employed in propaganda departments to create political messaging, but now, AI can achieve similar results more efficiently and at a fraction of the cost.
Now, you only need a few people in a room with an API connection to an artificial intelligence provider or a large language model running on a server, and an internet connection, and you're good to go.
So, what we're really entering is an arms race. I think we're already starting to see it being used in elections this year, and it's definitely being used with great intensity.
But if we think about the next round of elections in 2 or 4 years, the power of artificial intelligence is going to become significantly greater.
The major platform providers, like Meta (formerly Facebook), Google, and TikTok, are currently engaged in a competitive race to develop methods to minimize the negative impact of their platforms. Whether they will succeed in this endeavor is uncertain, especially since there is little financial incentive for them to invest significantly in these efforts without government regulation. This situation presents a bit of a "chicken and egg" scenario, and it will certainly have a substantial influence on the political landscape in the next decade. That's for sure.
Helen Yates: That's all we've got time for today. If you missed it, you can catch up on our election series on ajg.com/insights. Among other things, the series looks at the rise of AI-fueled disinformation campaigns, and the risk of civil unrest against a more uncertain geopolitical backdrop. Crucially, it asks what businesses should be doing to protect their people and property. Thanks for listening.
