Citibank risk guru outlines gathering storm clouds with Middle East prominent

The chief analyst of risk at Citibank told the Davos summit of the darkening skies that threaten global stability. But it’s not all gloom as she also identified several silver linings.

Tina Fordham, head of global risk for Citibank at their offices in London. Stephen Lock for the National

You could never accuse Tina Fordham of inconsistency. I heard the chief political risk analyst at Citibank last year in London delivering her gloomy message to the world under the headline Is this the start of the breakdown?

Now she talks of a “convergence” of global risks that threaten security, national economies and global markets. The breakdown, it seems, has arrived.

Of course, it’s in the nature of risk analysts to highlight the downsides. If there is no risk, they have no job. But Ms Fordham, who pioneered the profession in the banking industry when she persuaded Citi it needed a political risk analyst back in 2001, argues her depressing case with persuasive fluency.

A lot of her worries about the global risk horizon go back to the Middle East. Syria is the “problem from hell” putting pressure on Germany and therefore the rest of Europe because of the destabilising effects of the migrants issue, which will be further exacerbated by a possible UK Brexit. The low oil price is a further destabilising factor, limiting the scope for action of key Middle East economies, while the reemergence of Iran after sanctions further raises the stakes in the region.

At the same time, the end of the era of Pax Americana is another of the variables in the Middle East, further unsettling a region already shaken by terrorism and the policy inconsistencies of Turkey and Russia, among others. “It’s all interlinked,” she says.

Is it all really so depressing? I caught up with her at Davos, where, against a backdrop of plummeting financial markets, she presented Citi’s latest thoughts on the deteriorating global situation.

If there is such a thing as “Davos man”, then Ms Fordham would seem to be the perfect “Davos woman” – a self-confident and articulate cosmopolite equally at home in the Swiss mountains, the leafy suburbs of north-west London, where she lives, or her native California.

She went from a degree in English literature to study of the post-communist economies of eastern Europe and Central Asia, sharpening her appetite for international relations, which she then studied at postgraduate ­level in New York.

This got her involved with Ian Bremmer’s Eurasia Group, one of the first global risk consultancies, and gave her the experience to persuade Citi it needed a political risk analytical function.

“I’m living proof that you don’t have to have an MBA or be born with a silver spoon in your mouth to make it to senior levels in banking,” she told The Huffington Post. Her ranking among the 100 most influential women in finance and the top economists on Wall Street is further proof.

So when she talks, people listen, and in Davos she was warning of the convergence of geopolitical factors, such as inter-state tensions and economic downturns, with what she calls “Vox Populi “risks.

These are defined as the rise of new and non-mainstream political parties, populism, sectarianism, tribalism and more protests and referenda, which have the power to shock political and economic systems to the point of crisis. The Arab Spring and its consequences are examples of what she calls “vox pop” risks.

These new socio-economic risks are converging with old geopolitical risks such as military conflict, failing states and risk of non-conventional warfare, to threaten global security on multiple levels. Her motto that “everything that rises must converge” is illustrated by ­Syria. “Five years ago Syria was not regarded as a systemic threat. Now, with half its population displaced, it is adding to a migrant problem in which as many as 60 million people around the world are displaced, and threatening its neighbours in Europe, Asia and the Middle East,” she says.

Set against this negative backdrop, global leaders seem increasingly powerless. “The prospects for international collaboration and coordination in many areas are rather poor. International institutions, once the great hope for maintaining the stability of the international system, have suffered an erosion of their capacity to address global challenges, while the international standing of the US has been steadily eroding,” she says.

She points to a chart in the presentation she has given leaders in Davos, mapping out the interlinked effects of the Syrian crisis. It looks like a recipe for chaos, with all the key regional players having different interests and endgames in the Syrian conflict.

In the Arabian Gulf, the falling oil price aggravates these pressures.

“The Gulf countries have been here before in different phases of the oil economy, but the big question now is whether the low oil price will act as a motivation to diversify. You could argue that a period of economic weakness is not the time to make reforms. That is the dilemma the Gulf countries face,” she says.

In the midst of this message of almost unbridled gloom, Ms Fordham breaks off to look at some “silver linings” – Cuba, the EU-Turkey relationship, the “positive promise” of post-Arab Spring Tunisia, and the work­able “frenemy” relationship between the US and China.

And she is unconvinced that the turbulence in equity and energy markets really is the harbinger of a financial crisis along the lines of 2009.

“The problems of economic growth do not necessarily cause a financial crisis, so this is not the perfect storm. I think what we’ve seen at the beginning of 2016 is financial markets fin­ally waking up to the geopolitical and economic problems of the world. Have things really changed for the worst, or are people just waking up to the negative factors that were there all along?” she asks.

So it’s not all bad. But I Ieft our Davos meeting with the firm conviction that when Ms Fordham does call “perfect storm”, it will be time to run for the hills.

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