HEIGHTENED GEOPOLITICAL RISK
While much of the conflict in 2016 has been longstanding, the reluctance of the largest economies – US, Germany, Japan and China - to engage in crisis resolution leaves a leadership vacuum which has been exploited by chancers like Russia's Vladimir Putin.
For the Middle East and Europe, terrorism and the unprecedented volume of migration are likely to drive more hard-line domestic political agendas.
Rising tensions between Saudi Arabia and Iran, as well as the potential for 'Brexit' (British exit from the European Union) also loom over the year ahead.
MATURE MARKETS SOVEREIGN RISK INCREASES
Post the global financial crisis, the leverage in the financial sector in mature markets (including Canada, US, Austria, Germany, Eurozone, UK etc) has decreased. However, this has been taken up by government leverage.
In those countries, risk has transferred from the financial sector to the government sector. Government debt to GDP for a number of key countries (amongst others) is now hovering around or over 100 per cent.
The US was 67 per cent in 2007 - now it is 95 per cent. France was 66 per cent in 2007 - now 98 per cent, Italy 102 per cent in 2007 - now 136 per cent, Japan 150 per cent in 2007 - now 212 per cent.
The implications of this increase in government indebtedness could include sovereign rating downgrades, a more limited ability (and willingness) for mature economies to intervene in global conflict situations and a requirement by the European Union for banks to raise capital, including subordinated debt, faster than currently expected to meet new 'bail in' rules to shift the burden from national authorities.