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Draft National Risk Assessment 2019Overview of Strategic Risks
Prepared by the Department of the Taoiseachgov.ie
Draft National Risk Assessment 2019Overview of Strategic Risks
gov.ie
Table of Contents1. Introduction 2019 1.1. OverviewoftheNationalRiskAssessmentProcess1.2. DraftRisks20191.3. OverviewofStrategicRisks
2. Draft Geopolitical Risks 2.1. DepartureoftheUKfromtheEU 2.2. Instability in Northern Ireland 2.3. FuturedirectionandstabilityoftheEU2.4. Changingdistributionofglobalinfluenceandmoveawayfromarules-basedsystem2.5. Terroristincidentsandarmedconflicts
3. Draft Economic Risks 3.0. Introduction 3.1. EconomicImpactofBrexit3.2. Lossofcompetitiveness3.3. PublicExpenditurePressures3.4. GlobalSlowdown,includingchangestointernationaltradingenvironment3.5. Internationaltaxchanges3.6. Relianceonmultinationalcorporationsandsectoralconcentration
4. Draft Social Risks 4.1. CapacityofHigherandFurtherEducationSystem
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4.2. SkilledLabourShortages4.3. AnAgeingPopulationincludingpensionsandhealthsystemchallenges4.4. ImpactofSocialMediaonPublicDebate4.5. SocialcohesionincludingPerceptionsofRuralandRegionalImbalances4.6. Migrationandintegration
5. Draft Environmental Risks
5.1. ClimateChange&Biodiversity5.2. Ensuringanaffordable,sustainableanddiverseenergysupply5.3. DeliveryofPublicInfrastructure5.4. Food safety 5.5. SupplyandAffordabilityofHousing
6. Draft Technological Risks 6.1. CyberSecurity6.2. Disruptivetechnologytrends6.3. Anti-MicrobialResistance6.4. MajorPandemics6.5. Nuclearcontamination
Annex 1. GovernmentTaskForceonEmergencyPlanning–NationalRisk AssessmentforIreland2017
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1. Introduction 2019
1.1. Overview of the National Risk Assessment Process 1.2. Draft Risks 2019 1.3. Overview of Strategic Risks
1.1. Overview of the National Risk Assessment Process
TheNationalRiskAssessment(NRA)pro-videsanopportunityfortheidentification,discussionandconsiderationofrisksfacingIrelandovertheshort,mediumandlongterm.SincetheNRAwasfirstpublishedin2014,theannualReporthasservedasanimportantindicatorofnational-levelrisks,andhascalledattentiontoanumberofrisksthatsubsequentlybecamemajorissuesforIrishsociety,includingBrexit,andrisksaroundhousingsupply,andcybersecurity.
TheNationalRiskAssessmentplaysanimportantpartintheearlyidentificationofpotentiallysignificantrisksthatIrelandmayface.Itisvitaltolearnfromthemistakesofthepast,andthisexercisewasintroducedtoensurethatwe,asaGovernmentandasawidersociety,encourageandparticipateinthesenecessaryhorizon-scanningdiscus-sionstoensurethatweidentifyrisksearlyandcanrobustlyprepareforthem.Whilenotintendedtoreplicateordisplacethedetailedriskmanagementthatisalreadyconductedwithingovernmentdepartmentsandagencies,theNationalRiskAssessmentdoesaimtoprovideasystematicoverviewofstrategicrisksthatcanformanimport-ant,andinclusivepartoftheoverallprocessofriskmanagement.
DetailedriskmanagementbeingconductedseparatelytotheNationalRiskAssess-mentprocessincludestheworkoftheDepartmentofFinanceandtheCentral
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BankofIrelandinrelationtofinancialandmacro-prudentialrisks;andtheworkoftheGovernmentTaskForce(GTF)onEmer-gencyPlanning,supportedbytheOfficeofEmergencyPlanning(OEP),whoproduceaNationalRiskAssessmentforIrelandcentredonrisksrelatingtopotentialcivilemergenciesatnationallevelwhichiscon-ductedinthecontextoftheStrategicEmer-gencyManagementNationalStructuresandFrameworkapprovedbyGovernmentin2017andIreland’sreportingcommitmentsundertheEUCivilProtectionMechanism.Inaddition,aNationalSecurityAnalysisCentre(NSAC)isbeingestablishedbytheGovernmentaspartoftheimplementa-tionofthereportoftheCommissionontheFutureofPolicinginIreland.TheNSACwillbringthevariousagenciesrelevanttonationalsecuritytogethertopoolexpertiseandinformation,soastoproduceacompre-hensivepictureofthethreatstotheStateanddevelopanintegratednationalsecuritystrategy.
TheDepartmentsandagenciesinvolvedintheseriskmanagementexercisesalsofeedintothisNationalRiskAssessmentprocess,therebyensuringcoherenceandalignmentwithotherelementsoftheoverallriskman-agementapproach.
Separately,andinaccordancewithacom-mitmentmadebyGovernment,anUpdateoftheWhitePaperonDefence(2015)iscurrentlybeingfinalisedbytheDepartmentofDefence.Akeystrandofthisisafullyupdatedassessmentofthesecurityenvi-
thatappropriatemitigationframeworksareinplace.Asoutlinedabove,thisincludestheworkoftheGovernmentTaskForceonEmergencyPlanning,supportedbytheOfficeofEmergencyPlanning,theworkoftheDepartmentofFinanceandtheCen-tralBankofIrelandinrelationtofinancialandmacro-prudentialrisks,thenewNSAC,andtheSteeringGrouprepresentinggov-ernmentdepartmentsandagencies,whichoverseespreparationoftheNRA.
AlloftheselayersofdebatewilltheninformthefinalReport,whichisgenerallyfinalisedandpublishedbyJulyeachyear.
Inthatspirit,wewouldthereforeliketowelcomeviewsontheDraftReporthere. Youcantakepartinarankingexercisetogaugeopiniononthepriorityofeachriskidentified,inthecontextofboththe‘Likelihood’and‘Impact’oftherisks,aswellasansweringthefollowingquestionsbelow:
1. Have the correct strategic risks been identified or are there other significant risks that should be included?
2. Are any of the risks listed not significant enough to warrant inclusion?
ObservationsontheDraftNationalRiskAssessment2019willbeaccepteduntilTuesday25June2019.
ronmentcarriedoutbyaninter-departmen-tal/inter-agencygroup.WhenapprovedbyGovernment,theupdatedassessmentofthesecurityenvironmentwillbepublishedaspartoftheWhitePaperUpdate.
AbroadanddiverserangeofcontributionstotheNationalRiskAssessmentareencour-aged through several layers of debate and engagement,toensureweavoidthepos-sibilityof‘groupthink’.AttheinitialstageoftheNationalRiskAssessmentprocess,aSteeringGroup,chairedbytheDepartmentoftheTaoiseachandcomprisingrepresenta-tivesfromallGovernmentDepartmentsandagencies,workedtogethertodrawupaninitialdraftlistofrisks,asinpreviousyears.
Asmentionedabove,oneoftheoriginalimpetusesbehindtheNationalRiskAssess-mentprocesswastoavoidthepossibilityof‘groupthink’whenidentifyingstrategicriskstothecountry.Tothisend,eachiterationoftheNRAhasinvolvedanopenpublicconsultationtogaugewhetherthereareanysignificantrisksthathavebeenoverlookedorunderplayed,andtoensureinclusiveengagementfromallcornersofsociety.
Inthatcontext,thisdraftNationalRiskAssessment2019isnowbeingpublishedasthebasisforapublicconsultationexercise
Forthisexercisetoberobust,comprehen-siveandinclusive,itisimportantthatallvoices–includingdiscordantorminorityones–areheard.Amorerigorousandwide-ranging debate will support our ability toidentifyandquantifytheriskswefaceandourabilitytomaketherightchoicesforthe future.
Inparallelwiththisconsultation,workwillcontinuewithingovernmentdepartmentstofurtherstrengthenthequalityofIreland’sriskgovernancemechanismsandtoensure
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1.2. Draft Risks 2019
1.3. Overview of Strategic Risks
WhilemanyoftheStrategicRisksdiscussedinthe2018NationalRiskAssessmentcon-tinuetoberelevantfor2019,thecontextandpressuresaroundseveralofthemhaveshiftedandevolvedintheinterimperiod.
Forexample,wehaveseentheuncertain-tiesaroundtheformBrexitwilltakepersistandindeedincreaseoverrecentmonths,bringingwithitastrongerfocusonthepotentialriskofano-dealBrexitandtheimpactsuchanoutcomecouldhaveontheIrisheconomyandonstabilityinNorthernIreland,aswellaswiderimplicationsacrosstheentireriskspectrum.PotentialrisksfortheopenIrisheconomyarisingfromacon-tinuedincreaseintradetensionsevidentattheinternationallevel,andexacerbatedbytheemergenceofaglobaleconomicslow-down,alsocontinuetobeareasofconcernforus,warrantingclosediscussionandawareness.Domestically,emergingspend-ingpressuresmustbecloselymonitoredandcontrolled,toensurethatourpublicfinancesremainsustainableandstable,andtoensurewecanrespondtothechallengesarisingfromtheserisks.
Inaddition,severaloftheriskshaveevolvedinnewdirections,includingthosearoundthecapacityoftheHigherandFurtherEducationsystem,identifiedasastrate-gicsocialriskthisyear.Whilerisksaroundhumancapitalandskillsneedsforagrowingeconomywerediscussedlastyear,andinprevious years, and are dealt with this year undera‘SkilledLabourShortages’risk,anadditionalriskfor2019focusesaroundtheimportantroletheHEandFETsectorsplayintheIrisheconomy,andtheimportanceofensuringadequatelevelsoffundingfortheHEsectoraremaintained,andthatanappropriate,sustainablemodeloffundingisinplace,especiallyinlightofdemographic
challengesandtheincreasingdemandforthirdlevelplacesoverthecomingyearsthatisnowforecast.
Anotherstrategicsocialriskthathasemergedthisyearrevolvesaroundriskstosocialcohesionandinparticularrisksaroundperceivedimbalancesinaregionalandruralcontext,versusurbanareasandcities.InlinewithsimilartrendsinothercountriesinbothEuropeandtheUS,therearesignificantperceptionsofafocusonjobcreationandinfrastructureinvestmentconcentratedincities,andtothedetrimentofruralcommunities.
OtherongoingriskssuchasinternationaltaxchangesandtheIrisheconomy’sreli-anceonmultinationalcorporations’inaneconomiccontext,thesocialrisksassoci-atedwithourchangingdemographicsandageingpopulation,environmentalriskssuchassupplyandaffordabilityofhousingandovercominginfrastructuregaps,andongo-ingandevolvingcybersecurityrisksarestillrelevant,andarediscussedthroughouttheReport.
Forsomeongoingrisks,whiletheymaynotbenewrisksidentifiedforthefirsttimethisyear,greaterpublicawarenessandanincreasedsenseofurgencyandresponsive-nesstotheriskscanbefelt,forexample,inthecaseofbothClimateChangerisks,whereanincreaseddemandforactioncanbefeltfromthepublicandthepoliticalsys-tem,andinthecaseoftheimpactofsocialmediaonpublicdebate,withboththepolit-icalandpolicysystemandindustryrampingupactioninthisarea.
Asalways,andasevidentthroughtheabovediscussions,theinter-connectionsbetweentheserisksareeverapparentandmustbetotheforefrontinanydiscussionofindividualrisks.WeknowthatBrexit,
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regardlessoftheformittakes,willimpactnegativelyontheIrisheconomy,whichinturnwillhaveimplicationsbothforotherpotentialrisksfortheeconomyincludingtheriskofoverheatingandlossofcompet-itivenessontheonehand,aswellasim-pactingonsocialrisksidentified,includingexpectationsforpublicexpenditure,andrisksandissuesaroundmigrationandinte-gration,tonamebuttwo.Indeed,Brexitcanbeseenasanoverarching,umbrellarisk,interactingwithandamplifyingthemajorityoftherisksidentifiedacrossthegeopolit-ical,economic,social,environmentalandeconomicspheres.
Similarly,inter-connectionsandknock-onimplicationscanbeseenbetweenunderin-vestmentinHigherEducation,theimpactofdisruptivetechnologytendsonjobsandtheeconomy,andperceptionsofregionalandruralimbalances.Andofcourseweknowthatnuclearcontaminationcouldhaveseri-ousimplicationsforfoodsafetyandanimaldisease,thatchallengesarisingfrombio-diversityriskshaveeconomicandsectoralimpactsaswellasenvironmentalimpacts,andthatrisksaroundsupplyandaffordabili-tyofhousinghavebothsocialandeconomicaspects,aswellasenvironmental.
WhilewecategorisetherisksinthisReportonthebasisofthemodelusedbytheWorldEconomicForum(geopolitical,economic,social,environmentalandtechnological),forthepurposesofbothorganisationandeaseofconsideration,manyoftheriskscross-cutseveralcategories,andtheRisksandReportshouldbereadandconsideredwiththatinmind.
GeoPolitical RisksAsasmallopeneconomy,weknowthatIrelandisparticularlyvulnerabletogeopolit-icalrisks.Whilethetop5strategicgeopo-liticalrisksidentifiedforthe2019National
RiskAssessmentmirrorthosediscussedin2018,itisclearthatineachcasetheriskshaveevolvedandinsomecasesincreasedsignificantly.
Asmentionedabove,therisksaroundBrex-ithavecontinuedtointensifyinthemonthssincethe2018Reportwaspublished,withbothuncertaintyandthepossibilityofano-dealBrexitpersistingthroughoutthenegotiationstodate.Alliedtothisarepotentialimpactsandriskstothestabilityof Northern Ireland, and to the Good Friday Agreement.These,andotherriskscontinuetoberelevantinthecontextofriskstothestabilityandfuturedirectionoftheEU,asitlookstothestartofanewlegislativecyclein2019withbothEuropeanParliamentelectionsinMayandanewEuropeanCom-missionlaterintheyear.
OutsideofEurope,thelasttwelvemonthshavealsoseenanincreaseingeopoliticaltensions at a regional and global level, as wellasthecontinuedwithdrawaloftheUSfromthefreetrademodelandincreasinglystrainedrelationswithRussia,withassociat-edrisksofreducedglobaleconomicgrowth,andincreasedinstabilitiesintheglobaleconomy,andfortheIrisheconomy.Risksarisingfrompotentialterroristincidentsandarmedconflictsendure,withsignificantpublicsafetyandsecurityimpacts,aswellaslonger-termreputationaldamage,shouldsuchanattackhappenhere.
Inthisincreasinglytensegeopoliticalland-scape,andwithsuchhighstakes,wemustensure that we are as prepared as possible forhowtheserisks–bothnearandfar-mightimpactonIrelandeconomicallyandsocially,aswellasinthecontextofpeaceandsecurity.
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toprepareforan‘economicstorm’asglobalgrowthlevelsundershootexpectations.AsasmallopeneconomyIrelandishigh-lyexposedtosuchfluctuationsinglobaleconomicandtradingconditions,andtheeconomicrisksinthiscontextforIrelandaresignificant.Workoninternationaltaxreformcontin-ues,andcontinuestobehighlyrelevantforIreland,particularlyinthecontextoftheim-portanceofIreland’scompetitivecorporatetaxofferingwhichisanimportantpartofourwidercompetitivenessoffering,andtheemergenceofchallengestoourcorporatetaxregime.Relatedtothis,andasdiscussedinpreviousyears,oureconomyandemploy-mentareheavilyinfluencedbyarelativelysmallnumberofmultinationalcorporations,concentratedinafewenterprisesectors.While,ontheonehand,thismultinationalinvestmenthasbeentransformativefortheIrisheconomy,italsocreatesavulnerabilitytochangesinIreland’sattractivenessasalocationforthosecompanies,aswellastosector-specificchangesorrisks,andthesearediscussedinSection3.6oftheDraftReport.
Social RisksAsmentionedabove,someoftherisksidentifiedinthesocialcategoryhavetakenaslightlynewdirectioninthisyear’sRe-port,includingrisksaroundthecapacityoftheHigherandFurtherEducationsystemandthepotentialimpactsonoureconomy,discussedinSection4.1andrisksaroundagrowingpublicdiscourseonruralandregionalimbalancesinthecontextofsocialcohesionastheeconomicrecoverycontin-ues,whicharediscussedinSection4.4.
Aspreviouslymentioned,whiletherisksarisingfromtheimpactofsocialmediaonpublicdebatewereincludedinthe2018Report,increasingpublicawarenessandagreater sense of responsiveness on all fronts
Economic RisksWhileIreland’seconomycontinuestoperformstrongly,itsgrowthisagainstabackdropofcontinuinghighindebtedness(bothpublicandprivate)whichimpactsonourscopetobuildmeaningfulfiscalbuffersinthecomingyears,againstabackdropofBrexit,theshapeandimpactofwhichisstillunclear,andinthecontextofemergingspendingpressureswhichriskdestabilisingthepublicfinancesifnottightlycontrolled.
WeknowthatanyformofBrexitwouldhavenegativeimpactsfortheIrishecon-omy,buttheimpactsofano-dealBrexitwouldbeparticularlyharsh,andtheserisksaresetoutinSection3.2oftheDraftReport,withaparticularfocusonthemostvulnerablesectorsoftheeconomyinthisregard.
NotwithstandingthepossibleeffectsofBrexit,therisksofoverheatingintheecon-omy,andrelatedlossofcompetitivenesscontinuetoberelevantfor2019.Asthelabourmarketcontinuestotightenandtheeconomypotentiallyreachesandexceedsitssustainablelevelofproductioninthecomingyears,andinthecontextofongoingdifficultiesaroundinfrastructureconstraintsandhousing,wecouldseeriskstoourcompetitivenessandoverheatingpressuresemerge.
Inaddition,publicexpectationsofaddition-alexpenditureareanincreasingconcern,especiallyatthispointintheeconomiccy-cle,andinthecontextofsignificantdomes-ticandexternalrisks,andtheimportanceofmaintainingappropriatecontrolonexpendi-tureisdiscussedinSection3.3.
Thereareindicationsthatescalatingtradeconflictsattheinternationallevelnowappeartobeimpactinggrowth,withtheIMFrecentlywarningnationalgovernments
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2020and2030.Itwillalsobecriticalbothtopricethecostofcarbonintooureco-nomicmodeltoprovideappropriatelong-termsignals,andtodefineourapproachtocarbonneutralityfortheagriculturesectorinawaythatallowsfortheachievementofourclimatetargetsanddecarbonisationgoalswhilerespectingsustainablefoodsecurity.
Intermsofenergy-relatedrisks,disruptionstothesupplyorpriceofoil,gas,orelectric-itycouldhavesignificanteconomic,socialorcompetitiveimpacts,andourgeographicpositionrendersusparticularlyvulnerabletosuchdisruptions.Brexitposesaparticu-larriskasIrelandimportsthevastmajorityofitsenergyrequirements,oil,gasandtransportfuels,fromorviatheUK.Thispro-videsanaddedimpetustoincreasetheuseofourrenewableresourcesandtodiversifyoursourcesofsupplybydevelopingfurtherelectricityinterconnectiontoneighbouringmarketsincludingFrance.Asweelectrifyvitalservices,newassociatedrisksarounddevelopmentcosts,andsocietalsupportandacceptancefornecessaryinfrastructuredevelopmentwillemerge.
Relatedtothis,widerrisksaroundourcapacitytoovercomeinfrastructuregaps,inthecontextofchallengesindeliveringasig-nificantincreaseincapitalinvestmentunderProjectIreland2040,arestillrelevant,particularlywhencoupledwithanongoingundersupplyofhousingandassociatedaf-fordabilityissues,atighteninglabourmarketandcontinuedstrongeconomicgrowth(asdiscussedinthecontextofoverheatingrisks).
Risksaroundfoodsafetycontinuetoberelevant,asinpreviousyears,withsignifi-canthealth,trade,andreputationalimplica-tionsshouldafoodscareorincidentoccur,andarediscussedinSection5.4.Again,
isapparent,withboththepoliticalandpol-icysystemandindustryrampingupactioninthisarea.Withlargenumbersofcitizensnowobtainingtheirnewsfromsocialmediaplatforms,thereareclearimplicationsforthegeneration,rapiddissemination,andimpactofonlinedisinformation.Large-scaledisinformationor‘fakenews’campaignsspreadonlineareahigh-riskissueforsoci-etyglobally,includingIreland,andinpartic-ularwheretheytargettheelectoralprocess,andelectoraloutcomes.DevelopmentsinthisareaareoutlinedinSection4.3.
Thischapteralsooutlinestherisksemerg-ingfromdemographicissues,andinpartic-ularpensionandhealthsystemdifficultiesinthecontextofourageingpopulation,aswellasexpectationsforpublicexpenditureandassociatedrisks,andtherisksinvolvedifwefailtomaintainourpositivetrackre-cordintermsofmigrationandintegration,madeallthemorepertinentinthecontextofBrexit.
Environmental RisksAsmentionedabove,whiletherisksaroundClimateChangeandBiodiversityhavebeendiscussedinpreviousyears,greaterpublicawarenessandanincreasedsenseofurgen-cyanddemandforactiononrelatedrisksareapparentthisyear.RecentresearchfindsthatEarthiscurrentlylosingbiodiversityatarateseenonlyduringmassextinctions.Inaddition,Irishbiodiversityishighlyvulner-abletotheimpactsofclimatechangeandhasalowadaptivecapacitycomparedtoothervulnerablesectors.
Intermsofclimatechangemitigation,weknowthatthecostofinactionexceedsthecostofaction,andthatthisdifferentialwillrisesteeplywithtime.PotentialcoststotheexchequerincludethoseassociatedwithnotachievingcompliancewithourEUGHGemissionsandrenewableenergytargetsto
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inter-linkagesbetweenrisksarepertinenthere,withtheagri-foodsectoroneofthesectorsparticularlyexposedtoBrexit.
Finally,thesupplyandaffordabilityofhous-ingpersistsasasignificantriskinthisyear’sNationalRiskAssessment,witheconomicandsocial,aswellasenvironmentalim-plications.WhileCSOstatisticsfor2018showthatsupplyisincreasing,difficultiesaroundhomelessnessandaffordabilityarepersisting,andoverallhousingdemandisalsoincreasing.Inthecomingyears,housingshortagesarelikelytoactasaconstraintoneconomicactivityandcompetitiveness,andreflectoneofthemostprominentrisksfacingthecountry.
Technological RisksIntermsoftechnologicalrisks,risksaroundcybersecurity,includingpotentialdisrup-tiontocriticalinformationinfrastructure,anddatafraudandtheft,remainpertinentandcontinuetoevolveastheextenttowhichsocietyreliesondigitaltechnologyincreases.WithIrelandpositioningitselfasatechnologicalsociety,withagrowingdependenceononlineservices,theimpactofanattackorincidentontheprovisionofservices,andonthereputationofbusiness-esandpublicservicewouldbesignificant.
Disruptivetechnologytrendslikewisecon-tinuetoadvance,andtheseadvancesbringrelatedrisksastheypredictsignificantjobsshiftsanddisruption.Automationisexpect-edtoreplacesomejobs,re-shapeothers,andalsocreatenewones.Inaregionalcontext,recentresearchalsohighlightedthegreaterrisksforregionsfromautoma-tionandjobloss.Therisks,therefore,ifoureducationandskillssystemdon’trespondappropriatelyandintime,aresubstantial.
Asinpreviousyears,risksaroundAnti-Mi-crobialResistanceandMajorPandemics,
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andNuclearContaminationarerelevant.Anti-MicrobialResistanceisanincreasingconcernglobally,withtheextensiveuse,misuse,andoveruseofantimicrobialsinhu-manhealthraisinglevelsofresistanceinawiderangeofpathogensinallcountriesandinpatientsofallagegroups.Intheanimalpopulation,therateofdevelopmentandspreadofantimicrobialresistancehasalsoincreased.Inaddition,therisksarisingfromapotentialMajorPandemichaverelevanceacrossseveralriskcategories,includingfinancial,geopolitical,social,environmental,andtechnological.Intermsofnuclearcon-tamination,whiletheprobabilityforIrelandislow,theobviousriskstopublichealthandwell-being,aswellasnegativeeconomicimpactsareclear,andbothawarenessandplanningisimportantinthisregard.
2. Draft Geopolitical Risks
2.1. Departure of the UK from the EU 2.2. Instability in Northern Ireland 2.3. Future direction and stability of the EU 2.4. Changing distribution of global influence and move away from a rules-based system 2.5 Terrorist incidents and armed conflicts
2.1. Departure of the UK from the EU
ThedecisionoftheUKtoleavetheEUpresentsuniquelysignificantandunprec-edentedpolitical,economic,socialanddiplomaticchallengesforIreland,giventheextentoftheinter-connectednessofoureconomiesandpeople.ThesearechallengesbothtoIreland’speaceandprosperity,andhowtheyaredealtwithinthemonthsandyearsaheadmayhavesignificantimpactsfor Ireland into the future.
Ireland’sprioritieshaveremainedconsistentthroughouttheprocess:minimisingtheimpactonIreland’stradeandeconomy;pro-tectingthePeaceProcessandtheGoodFri-dayAgreementinallitsparts;maintainingtheCommonTravelAreawiththeUK;andsecuringIreland’sfutureinastrongEU.Asa result of intensive and sustained engage-mentattheEUlevel,Ireland’suniqueissuesandconcernshavebeenfullyunderstoodbytheEU27andhavebeentotheforeoftheEU’snegotiatingapproach.
FollowingtwoyearsofintensiveArticle50negotiationsbetweentheEuropeanUnionandtheUnitedKingdom,theEuropeanCouncilendorsedtheWithdrawalAgree-mentandthePoliticalDeclarationonthefuturerelationshipinNovember2018.TheWithdrawalAgreementwassubsequentlypassedtotheEuropeanParliamentandis
awaitingitsconsent.TheBritishGovern-menthasalsoagreedtoboththeWith-drawalAgreementandthePoliticalDeclara-tion.However,theWithdrawalAgreementisstillsubjecttoratificationbytheUKParliament.
TheWithdrawalAgreementestablishesthetermsoftheUK’sdeparturefromtheEU.Itensures that the withdrawal will happen in anorderlymannerandofferslegalcertaintyoncetheTreatiesandEUlawceasetoapplytotheUK.TheWithdrawalAgreementcoversallelementsoftheUK’swithdrawalfromtheEUincludingcitizens’rights,thefinancialsettlement,atransitionperiod,ProtocolsonGibraltarandIreland,aswellasarangeofotherseparationissues.ItincludesaProtocolonIrelandandNorthernIrelandandalegallyoperational‘backstop’to ensure that there will be no hard border between Ireland and Northern Ireland. It containsUKcommitmentsnottodiminishtherightssetoutintheGoodFridayAgree-ment1998andrecognisesthatpeopleinNorthernIrelandwillcontinuetoenjoyEUcitizenshiprights,andtoprotectNorthSouthcooperation.ItacknowledgesthemaintenanceoftheCommonTravelAreaarrangementsbetweenIrelandandtheUK,andforthepreservationoftheSingleElec-tricityMarketontheislandofIreland.
ThereispersistinguncertaintyregardingtheratificationoftheWithdrawalAgreement
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intheUKparliament.ThedecisionoftheEuropeanCounciltoextendtheArticle50processuntil31October2019providestheUKwithmoretimetoensureanorderlywithdrawal.However,thepossibilityoftheUKleavingtheEuropeanUnionwithoutanagreement–ano-dealscenario–remainsasignificantrisk.
Duetotheclose,highlyintegratedandcon-centratednatureofourtradingrelationshipwiththeUK,amongstallEUMemberStatesIrelandcouldbethemostadverselyaffect-edbyBrexitandtothegreatestextentinano-dealscenario.ThepotentialimpacthasbeensetoutinanumberofGovernmentpublications1,andtheeconomicrisksarediscussedfurtherinChapter3. TheprimarychannelthroughwhichBrex-it’seconomiceffectswouldemergewouldbethroughapplicationofWTOtariffsandregulatorydivergence(non-tariffbarriers).Thesecouldaffectsupplychainsandthecostand/oravailabilityofimportsfromtheUK. Further falls in the value of Sterling wouldimpactthecompetitivenessofIrishbusinesses,whileadeteriorationineco-nomicconditionsintheUKcouldimpactexports.
WhileBrexit’spotentialmacro-economicimpactsareinfocus,Brexithasthepoten-tialtoimpacteveryelementofeconomicfunctionality:tradeflows,supplychains,economicandbusinessoperations,thelabourmarketandconsumerconfidenceandspending.Therewouldbeparticular
1 TheseincludepreviousNationalRiskAssessments,Budget2019documentation,theCopenhagenEconomicsreport“IrelandandtheImpactsofBrexit”publishedbytheMinisterforBusiness,EnterpriseandInnovation(available:https://www.copenhageneconomics.com/publications/publication/ireland-the-impacts-of-brexit),the2019ESRI/DepartmentofFinancereport“IrelandandBrexit:modellingtheimpactofdealandno-dealscenarios”(available:https://www.esri.ie/news/new-study-estimates-the-impact-of-various-brexit-scenarios-on-the-irish-economy),andtheContingencyActionPlan,Dec2018(available:https://www.dfa.ie/brexit/getting-ireland-brexit-ready/governmentcontingencyactionplan/)
pressuresoncertainsectors,suchasagri-food,fisheries,aviationandroadtransport,pharma-chemicals,electricalmachinery,retailandwholesalebusiness.Theeconomicimpactisalsolikelytobegreaterincertainregions–especiallytheborderregion–andonsmallerbusinessesthataremoredepen-dentontradewithBritainandNorthernIreland.
AllformsofBrexitwouldhavenegativeconsequencesforIrishgrowth,bothintheshortandlongrun,relativetoano-Brexitscenario.ResearchpreparedbytheESRIandtheDepartmentofFinanceandpub-lishedinMarch20192findsthat,comparedtoano-Brexitbaseline,tenyearsafterBrex-it,IrishGDPwouldbearound2.6percentlowerinadealscenario,4.8percentlowerinanodealand5percentlowerinadis-orderlynodeal.Themagnitudeofeachoftheseshocksisconsiderableandwillhavenegativeeffectsthroughouttheeconomyonthehouseholdsector,thelabourmarket,firmsandthepublicfinances.ThestudyassessestheimpactoflowerUK-EUtradeonIreland’smaintradingpartnersandfindsthatitwouldseverelyreducethedemandforIrishexports.TheresearchalsofindsthatwhileIrelandmightbenefitfromtherelocationordiversionofFDIfromtheUK,whichwouldraiseGDP,ultimately,thepos-itiveimpactisoutweighedbythenegativetradeeffect.
AdditionalBrexit-relatedimpactsincludethosetotheCommonTravelArea(CTA)be-tween Ireland and the UK, allows Irish and Britishcitizenstomovefreelyandresideineitherjurisdictionandenjoyassociatedrightsandentitlementsincludingaccesstoemployment,healthcare,education,socialbenefitsandtherighttovoteinlocalandnationalparliamentaryelections.Aswellas
2Availablehere:https://www.esri.ie/news/new-study-estimates-the-impact-of-various-brexit-scenarios-on-the-irish-economy
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theEast-Westdimension,theCTAar-rangementsalsounderpintheGoodFridayAgreementinallitsparts,aswellasthecross-borderfreedomscentraltothelivesand livelihoods of the people of Northern Irelandandtheborderregion.Anydiminu-tionoftheCTAcouldhaveadestabilisingimpactonthepeaceprocessandonNorth-Southrelations.TheIrishandBritishGov-ernmentshavecommittedtothecontinu-ationoftheCTAinallcircumstancesandaMemorandumofUnderstandingontheCommonTravelAreawassignedbybothGovernmentson8May2019.Separate,sectoralagreementstounderpintherightsoftheCTAhavealreadybeen,orwillshortlybeintroduced.Forexample,theagreementrequiredtomaintainthecurrentarrange-mentsinthefieldofsocialsecurityaftertheUKleavestheEUisinplace–itwassignedbybothStateson1February2019andcompletedtherequiredParliamentaryproceduresinbothStatesduringMarch.
BrexitwillalsoimpactontheoperationofawiderangeofEUlegalinstrumentscon-cerninglawenforcementandjudicialcoop-eration.OfgreatestconcerntoIrelandisthefutureoftheEuropeanArrestWarrant,aswellasEUinstrumentsthatprovidefortherecognitionandenforcementofjudgementsincivil,commercialandfamilylawmatters.DisruptiontolawenforcementandjudicialcooperationarrangementswouldhaveaparticularimpactatNorth-Southlevel3.
Inthecontextofimmigration,Brexitmayalsogiverisetoanincreaseinillegalmovementofthirdcountrynationalsinto
3ThePoliticalDeclarationsettingouttheFrameworkfortheFutureRelationshipbetweentheEUandtheUKoutlinesthebasisforaSecurityPartnershipwhichreferencesmeasurestoensurecoopera-tioninlawenforcementandjudicialcooperationincriminalmatters.IfaWithdrawalAgreementisratifiedtheapplicationofthefullEUacquistotheUKduringatransitionalperiodisofgreatimportance.IntheeventthataWithdrawalAgreementisnotratified,domesticlegislationisbeingpreparedtoensureworkableextraditionandimmigrationarrangementswiththeUKcancontinue.However,anycontingencymeasureswillnotandcannotmitigatetheoverallimpactofano-dealscenario.
IrelandfromtheUK,aswellaspossibleconsequencesforsecondarymovementsofasylumseekersandillegalmigrantsfromtheUKtoIrelandintheeventofUKdivergencefromEUasylumlaw. Ano-dealBrexitwouldbeanexceptionaleconomiceventwhichwouldbemetwithexceptionalmeasurestosupportthecontin-uedoperationoftheIrisheconomyandourinternationaltradinglinks.Extensivecon-tingencyplanningandpreparednessworkisunderwayacrossallGovernmentDepart-mentsandAgenciesforapossibleno-dealBrexit.Thisresponsewouldbeimplementedincloseco-operationwithourEUpartners.
2.2. Instability in Northern Ireland TheresultsofthereferendumontheUK’smembershipoftheEuropeanUnioninJune2016showedthatamajorityofvotersinEnglandandWalesvotedtoleavewhilstamajorityinNorthernIrelandandScotlandvotedtoremainwithintheEU.ThishasgivenrisetoconsiderableissuesforWest-minsterandthedevolvedadministrationstoconsider.
ThebreakdownoftheNIExecutiveandthecollapseofthetalksontheformationofanewExecutivetogetherwithincreasesincrosscommunitytensionscreatedbytheBrexitvote,meansthatNorthernIrelandisfacingachallenging-periodahead.TheinabilityoftheNorthernPartiestoreachacompromiseoncontestedissuesduringthetalksprocesshasallowedthedevelopmentofapoliticalvacuuminNorthernIreland,alongwiththeincreasedpossibilityofthere-introductionofdirectrulebytheUKGovernmentinNorthernIreland.ThisissomethingtowhichtheIrishGovernmentisopposed.
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Therestorationoftheinstitutionsisessen-tialinthecontextoffullimplementationoftheGoodFridayAgreement.FollowingthetragickillingofLyraMcKeeinDerry,thetwoGovernmentsconvenedanewshortandfocussedtalksprocessaimedatrestor-ingalltheinstitutionsoftheGoodFridayAgreement.
TheGovernmentwillcontinuetoengagewiththeBritishGovernmentandthepartiesinNorthernIrelandasaco-guarantoroftheGoodFridayAgreementtosupportthere-establishmentattheearliestopportunityofthepower-sharinginstitutions.
Brexithasaddedanadditionalandsignif-icantchallengetothepoliticalsituationinNorthernIreland.Thelackofpower-shar-ingExecutiveinrepresentingandpursuingNorthernIreland’sinterestsinthecontextoftheEU-UKnegotiations,withtheUKandIrishgovernmentsasappropriate,isofsignificantconcerninrelationtothespecificchallengesofBrexitforNorthernIreland.
AnExecutiveisalsorequiredforthefunc-tioningoftheNorthSouthMinisterialCouncil,tooverseeandfurthercross-bordercooperationintheagreedsectorsandtoconsiderandaddresstheall-islandissuesraisedbyBrexit.ThelackofanExecutivehas resulted in a tangible slowdown in NorthSouthengagementatpoliticallevelandhashadadetrimentaleffectontheef-fectiveoperationoftheNorthSouthbodiessetupundertheGFA.
BoththeIrishandtheUKgovernmentshaveaffirmedthattheprinciples,proce-duresandinstitutionsoftheGoodFridayAgreementremainthebasisfortheiren-gagementinNorthernIreland.EnsuringthattheGoodFridayAgreementandthebenefitsofthepeaceprocessarenotdisturbedbyaUKexitfromtheEUispriorityfortheGovernment.
AsmentionedaboveasregardstheUKwithdrawalfromtheEU,theWithdraw-alAgreementalsoincludesaProtocolonIreland and Northern Ireland and a legally operationalbackstoptoensurethattherewill be no hard border between Ireland andNorthernIreland.ThereiscontinuinguncertaintyregardingtheratificationoftheWithdrawalAgreementintheUK.TheGov-ernmentsobjectivesinanyBrexitscenarioareclear–toavoidahardborderontheisland of Ireland and to ensure the integrity ofthesinglemarketandthecustomsunion.
BrexithasalsoplayedsignificantlyintothedebateinScotlandaboutitsfuturewithintheUK,raisingquestionsinrelationtothedevolutionsettlementandthepossibilityofafurtherindependencereferendum.DisagreementshavearisenbetweentheScottishandUKGovernmentsinrelationtotheoperationofcurrentdevolutionar-rangements,andinparticularthehandlingpost-BrexitofmattersofEUcompetencethatwerenotreservedtoWestminsterunderthetermsoftheScottishdevolutionsettlement.ThestatusofScotlandintheUnitedKingdomisaninternalmatterforthepeopleofScotlandandthepeopleoftheUnitedKingdom,andthereforeamatteronwhichtheIrishGovernmentdoesnotandwill not engage.
QuestionshavebeenraisedregardingtheapplicabilitytoScotlandofanyarrange-mentsmadetoaddressthechallengesposedbyBrexitforNorthernIrelandandfortheislandofIreland.However,thesituationinNorthernIrelandisuniqueandnotdirect-lycomparableto,thatinScotlandinparticu-lar, any other region, given the nature of the politicalandconstitutionalsettlementoftheGoodFridayAgreement.
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2.3. Future direction and stability of the EU
Europehasundergoneaseriesofcrisesinrecentyears:theeurozonecrisis,themi-grationcrisis,terrorattacksinanumberofMemberStatesandtheshockofBrexit.Thesehaveplayedoutagainsttheback-groundofariseofpopulismasshowninelectoraladvancesbyextremeright-wingand/oreuroscepticpartiesinanumberofEUstateswhileinsomeCentralandEasternMemberStates,thereisagrowingdefianceofEUvaluesandnorms.
Inaddition,concernsaboutadversemarketreactionsasmonetarypolicynormalises,andvulnerabilitiesinthebroadereuroarearemain,particularlyinthecontextoftheunwindingoftheECB’sQuantitativeEasingprogramme,andsignificantamountsofdebtinsomeEUeconomies,includingIreland,withrelatedrisksaroundthesustainabilityoftheEurozone.
Ontheotherhand,employmentinEuropeisatarecordhighandunemploymentatarecordlow4.TheEuropeaneconomyisexpectedtogrowfortheseventhconsec-utiveyearin2019,butatamoremoderatepaceatatimeofmorepronouncedglobaluncertainty.
ThisyearmarksthestartofanewlegislativecycleintheEU.InMay,therewillbeEuro-peanParliamentelectionsand,inturnthenewParliamentwillelectthenextEuropeanCommissionPresidentandapprovetheap-pointmentofanewEuropeanCommission.
TheEuropeanCouncilisresponsibleforde-terminingthegeneralpoliticaldirectionandprioritiesoftheEUandinJuneitwilladoptanewStrategicAgendafor2019-2024.
4 Availablehere:https://ec.europa.eu/social/main.jsp?langId=en&-catId=89&newsId=9316&furtherNews=yes
ButarecentEuropeanCouncilonForeignRelations(ECFR)reportprovidesaworryingsnapshotofthepotentialdisruptiveeffectaone-third“anti-European”Parliamentcouldhaveonforeigntrade,theruleoflaw,mi-gration,foreignpolicy,andtheappointmentofthenextCommission5.
ThenewEuropeanParliamentwillalsohaveanimpactontheEUbudgetfor2021to2027,theMultiannualFinancialFramework(MFF).ThisisthefirsttimeIrelandwillenteranewMFFasanet-contributor.Itwillbeachallengetoensurethefinaloutcomere-flectsIrishprioritiessuchastheprotectionoftheCommonAgriculturalPolicyandpro-videsadequatefundingfornewchallengessuchasmigration.
AdditionalongoingorcontinuingriskstotheunityandeffectivenessoftheEUinclude:
• Riskofnegotiationsbreakingdown,caus-ingdivisionsamongstMemberStates–forexample,inrelationtotheEUbudget;• RiskthatthelossoftheUKvoiceinEUdecision-makingcouldtipthebalanceofintereststowardsamoreconservativeorprotectioniststance;and•RisksspecifictoIreland’sinterestsandin-fluencingpowerwithintheEUwhichcouldemergefromadisruptiveEuropeanParlia-mentandthelossoftheUKasanegotia-tionpartner.
2.4. Changing distribution of global influence and move away from a rules-based system
Geopoliticalvolatilityanduncertaintycontinuedthroughout2018andinto2019,giving rise to heightened threats to inter-
5 Availablehere:https://www.ecfr.eu/specials/scorecard/the_2019_European_election
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nationalpeaceandsecurity,exacerbatedbyeffortstoweakenthemultilateralrules-basedsystem.
Thelasttwelvemonthshaveseenanin-creaseingeopoliticaltensionsatregionalandgloballevel,including(thoughnotlimit-edto)theKoreanPeninsula,betweenRussiaandtheUS,RussiaandUK,ChinaandtheUS,theUSandIran,andIndiaandPakistan.TheseriousconflictsongoinginSyriaandYemenarecausingsignificanthumanitariancrisesandirregularmigration.Thehumani-tarianandpoliticalsituationintheOccupiedPalestinianTerritorydeterioratedfurtherin2018,withsettlementbuildingincreasingintheWestBank,andsignificantunrestinGazabeingmetbyseeminglydispropor-tionateIsraelimilitaryforce.TheUSwith-drawalfromtheIrannuclearagreementhasincreasedtensionsacrosstheMiddleEast,andrisksdamagingthepotentialtoresolveotherglobalconflictsbymeansofinterna-tionalagreements.Themarkedincreaseintheuseofchemicalweaponsinrecentyearshasseriouslythreatenedtounderminetheuniversalprohibitionontheuseofchemicalweapons.
ThecurrentUSadministration’swithdraw-alfromtheJointComprehensivePlanofActionwithIran,aswellastheTrans-Pa-cificPartnership(TPP),re-negotiationoftheNorthAmericanFreeTradeAgreement(NAFTA),reducedroleattheWorldTradeOrganisation(WTO),andintroductioninMarch2018ofimporttariffsof25percentonsteeland10percentonaluminium(ex-emptingCanadaandMexico,andtemporar-ilyexemptingtheEUandSouthKorea),aswellas25percenttariffson$60bnworthofChineseimports,allfurtherstrengthenpreviousindicationsthattheUSaremov-ingawayfromthefreetrademodel,withassociatedrisksofreducedglobaleconomicgrowth,andincreaseduncertaintiesand
instabilitiesintheglobaleconomy.
Russia-USrelationsareincreasinglystrained,asarerelationsbetweenRus-siaandtheUKandWesternallies.Thisisreflected,forexample,intheexpulsionbytheUKof23diplomatsfollowingapoison-ingincidentintheUKinMarch2018withsuspectedRussianinvolvement,andthesubsequentexpulsionsbyanumberofEUandWesternstates,includingIreland,andtheUSandNATOinsolidarity.TheRussiangovernmentretaliatedwiththesubsequentexpulsionof59diplomatsfrom23coun-tries,including1fromIreland.
PreviousNRAReportsdiscussedglobalisa-tiontrendsinvolvinganongoingandsignif-icantshiftofpoliticalandeconomicpowertowardscountriesintheEastandSouth,representingachallengetotheexistinginternationalorder.Commentsthatsuchtrendsnecessitatemorestrategicanddeep-erengagementwithAsian,AfricanandLatinAmericancountriescontinuetobevalid,intermsofprotectingandpromotingIreland’strade,tourismandinvestmentinterests.
Asanopenglobaleconomy,anymoveawayfromarules-basedmultilateralismsystemattheinternationallevelwouldnotbeinlinewithIreland’sinterests,andcouldposesignificantrisksforus.
2.5. Terrorist incidents and armed conflicts
Therisksarisingfromterroristincidentsandarmedconflicts,ashighlightedinpreviousReports,remain.2018sawcontinuinghightensionsintheMiddleEastandinNorthEastAsia(DemocraticPeople’sRepublicofKorea)aswellasterroristincidentsandattacksacrossEurope,inparticularintheUK. Ongoing tensions between India and
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Pakistanrepresentathreattoregionalsta-bility and thus Irish interests in the region. Inaddition,asbotharenuclearpowers,in-creasedconflictisathreattoIreland’spolicypositiononandeffortstosupportnuclearnon-proliferation.
Overthepast12months,conversationsaroundtheriskstoIrelandandtheIrishresponsecapacityinthisregardhavealsoincreased,highlightingincreasedawarenessoftherisksinvolvedintheIrishcontext.
Europoldatasuggeststhattheoverallthreatfromjihadistterrorismremainshigh,withthenumberofarreststotalling705in2017,downslightlyfrom718in2016.Therehasalsobeenasignificantslowdowninthenumberofforeign-bornfighterstravellingtoSyriaandIraq.Therehasbeenamarkedriseinright-wingextremistattacks,withajumpfrom99attacksin2016to137attacksin2017.ThistrendisevidencedbytherecentmosqueattacksinNewZealand.Leftwingandanarchistterrorismhasdeclinedslightlybetween2016and20176.
Likeothercountries,Irelandanditscitizenscouldbenegativelyaffectedbyterroristincidents,dependingonthelocationofsuchincidentsandtheirwiderimpact.The2017attacksinLondon,ManchesterandtherecentattacksonaMosqueinChrist-churchandSynagogueinPittsburghservetohighlightthechallengingnatureofthethreatandtheneedforcontinuedco-oper-ationamongpartnerstatestocounteractit.Suchanattackherecouldhavesignificantimpactintermsofpublicsafetyandsecurityintheshortterm,andtherecouldpossiblybelonger-termreputationaldamagetoIre-landasasafeandsecuredestinationtoliveandworkin,andtovisit.Anyimpactsonthetourismsector,forexample,couldhave
6EuropeanUnionTerrorismSituationandTrendReport2018;https://www.europol.europa.eu/activities-services/main-reports/eu-ropean-union-terrorism-situation-and-trend-report-2018-tesat-2018
potentiallyseriouseconomicconsequences.
Likewise,abreakdownininternationalpeaceandsecurityarisingfrominter-statewarsorotherarmedconflictscouldhavesignificantrepercussionsforIrelandandtheEU,includingpotentialimpactsonenergysupplies, transport routes or the environ-ment.
On the island of Ireland, the Good Friday Agreementhasdeliveredastablepeaceprocessthatcommandsoverwhelmingcrosscommunitysupport.Nonetheless,certaingroupsinbothcommunities,albeitwithverylimitedlevelsofsupport,remainintentondisruptingthesignificantprogresswhichhasbeenachievedandperpetratingactsofviolence.Recenthigh-profileincidents,includingattacksonsecuritypersonnelinNorthernIreland,thecarbombinDerryandthemurderofjournalistLyraMcKee,areareminderthatwecannotbecomplacent.Accordingly,therelevantauthoritiesneedtocontinuetheirworktocombatthesegroupsandtheiractivities.LegacyissuesarisingfromconflictinNorthernIrelandandcurrentsocialandeconomicchallengesalsoneedtobeaddressed.BoththeIrishandBritishgovernmentshavereaffirmedtheircommitmenttoensuringthatthebenefitsofthepeaceprocessarepreservedinanynewarrangementsarisingfromtheUK’sexitfromtheEU.
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3. Draft Economic Risks
3.1. Economic Impact of Brexit 3.2. Loss of competitiveness 3.3 Public Expenditure Pressures 3.4. Global Slowdown, including changes to international trading environment 3.5. International tax changes 3.6. Reliance on multinational corporations and sectoral concentration
3.0. Introduction
WhiletheIrisheconomycontinuestoperformstrongly,thereareanumberoffactorsthatcouldpresentsignificantrisks.Therisksareoutlinedinthefollowingsectionsindetail.Theyshouldbeseenagainstabackdropofcontinuinghighindebtedness(bothpublicandprivate)andemergingexpenditurepres-sures.TheState’scomparativelyhighlevelofdebtmeansthat,atanadvancedstageoftheeconomiccycle,Irelandexhibitsminimalscopetobuildmeaningfulfiscalbuffersinthecom-ing years. In dealing with these issues, to date Irelandhasbenefittedfromabenigninterna-tionalfinancialenvironment.Anyreversalinlowglobalinterestrates,suchastheexpectednormalisationinECBmonetarypolicy,wouldleadtoincreaseddebtservicingcostsandassociatedimpactsonthepublicfinancesovertime.Thesefactors,andalackofmeaningfulfiscalspace,wouldamplifytheimpactontheeconomy,,shouldemergingspendingpres-suresriskdestabilisingthepublicfinances,andshouldanyoftheeconomicrisksoutlinedbelowmaterialise.
3.1. Economic Impact of Brexit
TheexitoftheUKfromtheEUisanunprec-edentedeventforIrelandand,assuch,itwillhaveseriousimplicationsforoureconomyandthepublicfinances.Thereremainsconsider-ableuncertaintyregardingmanyissues,not
leastofwhichisthelikelyformat–agreedorno-deal–thattheUK’sexittakes.
Asmentionedpreviously(Section2.1),itisclearfrompublishedstudiesthatallformsofaUKexitwillhaveadetrimentalimpactontheIrisheconomyandthatthemoredisorderlytheexit,thelargerthemacroeco-nomicimpact.Furthermore,givenIreland’suniquemacroeconomicandsectoralex-posurestotheUKtheseimpactswouldbedisproportionaterelativetotherestoftheEU.
Inano-dealexit,whileinaggregatetermstheeconomyislikelytocontinueexpand-ing,thepaceofgrowthwouldbelowerthaniscurrentlyexpected.Aspreviouslymen-tioned,researchcarriedoutbytheESRIandDepartmentofFinance1,findsthatcom-paredtoano-Brexitbaseline,tenyearsaf-terBrexit,GDPinIrelandwouldbearound2.6percentlowerinadealscenario,4.8percentlowerinanodealand5percentlowerinadisorderlynodeal.Theresultsindicatethatemployment,inthelong-run,wouldbe1.8percentlowerinadealscenario,3.2percentlowerinanodealscenarioand3.4percentlowerinadisorderlynodealscenariorespectively,comparedtoano-Brexitsitua-tion.Aspreviouslymentioned,themagnitudeofeachoftheseshocksisconsiderableandwillhavenegativeeffectsthroughouttheeconomy.
1 https://www.esri.ie/news/new-study-estimates-the-impact-of-var-ious-brexit-scenarios-on-the-irish-economy
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ThestudyassessestheimpactoflowerUK-EUtradeonIreland’smaintradingpartnersandfindsthatitwouldseverelyreducethedemandforIrishexports.ItalsofindsthatwhileIrelandmightbenefitfromthereloca-tionordiversionofFDIfromtheUK,whichwouldraiseGDP,ultimately,thepositiveimpactisoutweighedbythenegativetradeeffect.ThefindingswhilebroadlyinlinewiththeestimatesrecentlypublishedbytheCentralBank2,arestarker.
Thereductioninthepaceofgrowthwillhavenegativespill-overstothepublicfi-nancesandtothelabourmarket.Inrelationtothepublicfinances,theheadlinedeficitcoulddeterioratebynearlyapercentagepointofGDPintheshort-term.Intermsofthelabourmarket,theunemploymentratewouldincreasebyanestimated2percent-agepointsrelativetoBudget2019projec-tions3.
TheCopenhagenEconomicsReport4(Feb-ruary2018)ontheeconomicimpactsofBrexitestimatesthatby2030GDPwillbelowerby7percentunderWTOterms(inthecaseofano-dealBrexit)relativetoastatusquobaseline.Ofthis7percent,1percentisestimatedtobeduetotariffsand6percentisduetonon-tariffbarriers(regu-latorydivergenceandservicebarriers).
Itisimportanttorecognisethatsuchesti-matesmaynotcapturethefullimpact.In-deed,theimpactincertainexposedsectorsand regions will be worse than the average, withthemostadverseimpactslikelytobefeltintheagri-foodandindigenousmanu-
2 https://centralbank.ie/news-media/press-releases/uncertain-back-drop-poses-risks-economic-growth-25-Jan-2019
3 https://www.dfa.ie/brexit/news/news-archive/minister-donohoe-outlines-initial-assessment-of-economic-and-fiscal-impact-of-no-deal-brexit.php
4CopenhagenEconomics(2018)‘IrelandandtheImpactsofBrexit,StrategicImplicationsforIrelandarisingfromchangingEU-UKTradingRelations’
facturingsectors,aspreviousresearch5 has shown. Inaddition,weknowthatimpactsonIrishtradewillbesignificantandall-pervasive,rangingfrombarrierstotradeingoodsandservicesandregulatorybarriers,tobar-rierstoaccessingprocurementmarkets,andnewskillsneedsforSMEstosupporttradediversificationandthemovementofgoodsacrossborders.TheriskofnewtradebarriersaccessingtheUKmarketislikelytohaveconsequencesforthecostbaseofmanufacturersinIrelandascostsassociatedwithcross-bordertrading,energyandtrans-portarelikelytoincrease.ThiswillalsohaveimplicationsforIrish-basedMNCsaccess-ingglobalsupplynetworks.TheincreasingvalueoftheEurorelativetotheSterlingisalreadybeginningtoimpactthecompeti-tivenessofIrishexportsintotheUKastheybecomerelativelymoreexpensive.ThisisparticularlyofconcernforgoodsexportersheavilyreliantontheUKmarket.
TheUKaccountedfor11percentoftotalgoodsexportsin2018and22percentoftotalgoodsimports.Forcertainsectorsandsub-sectors,however,thefiguresweremuchhigher.Some37percentofIrishfoodanddrinkexportswenttotheUKin2018,and34percentofallfishlandingsbyIrishvesselsarecurrentlytakenfromUKwaters.Inadditiontotradingdifficulties,theIrishfisheriessectoralsofacesverysignificantdifficultiesinthecontextofpotentiallossofaccesstoUKwaters,therisktothesustain-abilityoffishstocksinthewatersaroundIrelandfromasubsequentincreaseinfishingactivity,andpotentiallossofquotashare.
TheOECDestimatesthata‘HardBrexit’withtradegovernedbyWTOrulescouldre-
5 https://www.gov.ie/en/publication/e97608-uk-eu-exit-an-expo-sure-analysis-of-sectors-of-the-irish-economy/
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duceexportsby20percentinsomesectorssuchasagricultureandfood6. The Depart-mentofFinance’sanalysisofBrexitsectoralexposureidentifiedPharma-chem;Food&Beverage;TraditionalManufacturing;Ma-terialsManufacturing;andPrintingasthemostexposedmanufacturingsectors7. The studyestimatedthattogetherthesesectorsaccountedfor75percentofmanufacturingGrossValueAdded(GVA)andover112,000jobs.Thestudyalsonotestheregionalspreadofthesesectorsismoreconcentrat-edinruralregionswhichhavehadacom-parativelyslowerpost-crisisrecoverythanthe Dublin region.
Theservicessectortoofacessignificantdis-ruption.TheIrishfinancialservicessectorisparticularlyintegratedintoCityofLondon,meaningtheimpositionofanynewbarri-erstotradecouldhavesignificantnegativeimpactsonthesectorhere.
Intermsofregulatoryrisks,ano-dealBrexitwillintroducebothimmediateandlon-ger-termdisruptionforIrishbusinessesandindustrieswhocarryoutsignificanttradewiththeUK.Inadvanceoftheoutcomeofnegotiations,thelevelofriskisdifficulttofullyassess.LessdemandingregulationcouldputUKfirmsatacompetitivead-vantagewhilstfurtheradvantagescouldemergeshouldtheUKbeabletosupportits industries and business through the use ofStateAidinthefuture.Regulatorydi-vergencewouldalsointroducebarrierstotrade,potentiallyinterruptingthesupplyofgoodsandservices,disruptingsupplychainsetc.
Moregenerally,Brexithasintroducedalev-elofuncertaintywhichmayresultinforeignenterprisesholdingoffoninvestmentde-
6 OECD(2018)EconomicSurveyIreland2018,availableat:http://www.oecd.org/ireland/economic-survey-ireland.htm
7 https://www.gov.ie/en/publication/e97608-uk-eu-exit-an-expo-sure-analysis-of-sectors-of-the-irish-economy/
cisionsuntilgreaterclarityemerges.ThereisaneedtomaintainafocusonenhancingIreland’scompetitivenessasaresultoftheincreasinglycompetitivemarketforinterna-tionalinvestment,andasotherEUMemberStatescompetetoattractforeigninvest-mentlookingforaccesstotheEUmarket.
3.2. Loss of competitiveness StrongeconomicgrowthrecordedoverthelastnumberofyearshasenabledtheIrisheconomytomovefromastageofrecoverytoamorematurestageintheeconomiccycle.Importantlygrowthintheeconomyhasbeenbroad-basedinrecentyears,withbothdomesticdemandandnetexportsmakingpositivecontributionstogrowth.AsoutlinedintheStabilityProgrammeUpdate2019,stronggrowthintheeconomyisex-pectedtocontinueoverthecomingyears,withGDPforecasttogrowby3.9percentthisyearand3.3percentin20208. Indeed, arguably,thebestindicationoftherecoveryintheeconomyhasbeeninthelabourmar-ket,with2.28millionpeoplenowworkingintheeconomy,thehighestlevelever.Inparallel,theunemploymentratehasfallenfromapeakof16percentinearly2012to5.6percentinFebruary2019.
Againstthebackgroundofrobusteconom-icgrowth,improvementsinthecountry’scompetitivenesshavealsobeenatthecornerstoneoftherecoveryintheIrisheconomy.Since2008,theCentralBank’srealharmonisedcompetitivenessindica-torhasimprovedbyapproximately21percent.Therestorationofcompetitivenesshasbeenhard-wonthroughimprovementsinproductivity,alongwithwageandpricemoderation.ImportantlyforIreland’scom-petitivenesshowever,therobustgrowth
8 DepartmentofFinance,April2019,StabilityProgrammeUpdate2019;Available:https://assets.gov.ie/8305/88ffede238074f2cb88f-c996854a12b3.pdf
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intheeconomyhasnotyetgivenrisetoinflationarypressure.InJanuary2019,an-nualinflationasmeasuredbytheHarmon-isedIndexofConsumerPriceswasatjust0.8percent,havingaveraged0.7percentthroughout2018.Thisfollowsfiveconsecu-tiveyearsofinflationbelow1percent.
Despitethepositiveeconomicgrowthoutlookhowever,wemustremaincognisantofthedomesticrisksoureconomyfacesinrelationtooverheatingpressures,whichmayemergequicklyasthelabourmarkettightensandwhich,coupledwithchallengesaroundinfrastructureconstraintsandhous-ing,couldgiverisetorelatedriskstoourcompetitivenessincludingintermsoflabourcosts,prices,andinfrastructure.EstimatespublishedbytheDepartmentofFinanceinBudget2019,inrelationtothe‘supplyside’oftheeconomyindicatethattheeconomyoperatedmarginallybelowitspotentiallevelin2018(asmallnegative‘outputgap’).
TheNationalDevelopmentPlanandFutureJobsIrelandrecognisethatstrengtheningourresearch,developmentandinnovationcapacityiscentraltosustainingandbuildingcompetitiveness.IrelandisnotontracktoreachtheInnovation2020researchintensi-tytargetof2.5%ofGNPwithinthetime-frameset.Ourcurrentrateisjust1.62%(asatApril2019).InsufficientlevelsofpublicandprivateinvestmentinR&DcouldposearisktoIreland’scompetitiveness.
Thereisanelevatedriskthattheeconomywilllikelyreachandexceeditssustainablelevelofproductioninthecomingyears,withapositiveoutputgapemerging.Thisisconsistentwithaneconomyapproach-ingfullemployment,andprojectionsofasignificantincreaseinhousingsupplyinthecomingyears.Theunemploymentratecontinuestofall,andisnowwellbelowtheeuro-areaaverage.However,thedownward
trendhasbeenlevellingoffsincemid-2018,suggestingthelabourmarketisapproach-ingfullcapacity.Thisresonateswithrecenttrendsinbroadermeasuresofunemploy-mentsuchasthepotentialadditionallabourforceaswellasthenon-employmentindex.Labourcostshaverisennotablyinthelastyearwithaveragehourlytotallabourcostupby3.2%inyeartoQ42018.TheCSOpreliminaryestimatesindicatethataverageweeklyearningsroseby4.1percentannu-allyandby9.7%inthelastfiveyearstoQ42018.
TheIrishFiscalAdvisoryCouncil,alongwithotherdomesticandinternationalcommen-tators9,haswarnedthatwhilesignificantoverheatingisnotyetevident,itremainsarealisticriskforthedomesticeconomy,andsignificantoverheatingpressurescouldbuildupifafaster-than-expectedpick-upinhousingconstructionmaterialises10. In additiontothegeneralriskofoverheating,morespecificissuessuchastheeconom-icimpactsofconstructioncostinflation,includingrisinglabourcostsassociatedwithatighteninglabourmarket,andtheconse-quentimpactonvalueformoneybothfortheStateintermsofitscapitalprogrammes,aswellasfortheindividualconsumer,canbeidentified.
Theriskofoverheating,whichtheGov-ernmentisacutelyawareofandremainscognisantofatalltimes,isexacerbatedbythefactthat,despitetheadvancedstageoftheeconomiccycle,thereareinfrastructureshortagesinseveralcriticalareasincludinghousingaswellaspublicinfrastructuresuchastransportandwater,amongothers.Thisiswhyfromapolicyperspective,continued
9CentralBank,OCED(http://www.oecd.org/eco/outlook/eco-nomic-forecast-summary-ireland-oecd-economic-outlook.pdf),andECBPresidentMarioDraghi(https://www.oireachtas.ie/en/debates/debate/joint_committee_on_finance_public_expenditure_and_re-form_and_taoiseach/2018-11-08/2/)
10https://www.fiscalcouncil.ie/wp-content/uploads/2018/11/Fis-cal-Assessment-Report-November-2018-Final.pdf
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vigilanceisrequiredtoensuretaxandrev-enueremainsonasustainablefootingandthatpro-cyclicalbudgetarydecisionsareavoided.Inaddition,prudentfiscalpolicywillneedtobebalancedagainsttheneedtoaddressexistingcapacityconstraintsandthepotentiallysignificantnegativeimpactsofinternationalshocksinthiscurrentperi-odofglobaluncertainty.
Finally,anotherissuewhichtheGovern-mentisveryconsciousofandwhichitisac-tivelytryingtoaddressisinrelationtothecostandavailabilityofbusinessinsuranceinparticularforsmallerfirms.
3.3. Public Expenditure Pressures
Followingonfromtheperiodoffiscalconsolidationintheyears2008to2014,ithasbeenpossibletoonceagainincreaseexpenditureonthedeliveryofpublicser-vices.Budgetssincethenhavesetaboutincreasingexpenditureinkeypriorityareaswhile also ensuring the viability of the publicfinances.TheenhancedengagementwiththeOireachtas,particularlytheSelectCommitteeonBudgetaryOversight,hasalsoassistedinformulatingBudgetswhilereachingbroadconsensusonkeypriorities.
Astheeconomicrecoverycontinues,theexpectations,fromarangeofsources,thatadditionalresourceswillbemadeavailabletomeetgrowingdemandsfornewservicesandserviceimprovementsmaynotbeconsistentwiththeavailableresourcesbothintheshortandmediumterm.Thisrequiresacontinuedfocusontheeffectivenessandsustainabilityofpublicexpenditureandabroad understanding of the need to en-surethatpublicexpenditureincreasesareaffordablebothtodayandoverthelongerterm,andthatcostover-runsandaddition-
alexpenditureiscontrolled.Atthisstageoftheeconomiccycle,emergingspendingpressuresmustbecloselymonitoredandcontrolled,toensurethatourpublicfinanc-esremainsustainableandstable,andtoen-surewecanrespondtothechallengesaris-ingfromtherisksdiscussedthroughoutthisReport.TheIrishFiscalAdvisoryCouncil,forexample,intheirNovember2018FiscalAssessmentReport,warnedthat“repeatedfailures to prevent unbudgeted spending increaseshaveleftthepublicfinancesmoreexposedtoadverseshocks”.
PublicServicesaredeliveredthroughtheworkofpublicservants.Consequently,thepublicservicepaybillisanimportantelementofoverallpublicexpenditure.Ex-pectationsinrelationtoincreasesinpublicservicepayneedtobemanagedwithinthecontextofensuringsustainablepublicfinancesandeffectivedeliveryofservices.
Further,Ireland’spublicdebt,andthepotentialforrisinginterestrates,marketvolatility,Brexit-relatedmattersandotherfactorstoimpactonthecostofservicingourpublicdebt,couldhaveconsequentimpactsontheappropriatefiscalstancefortheeconomy.Sustainabilitymetricsshowthatalthoughdeclining,publicindebted-nessremainshighinIreland.Thesemetricsincludetheabsolutelevelofdebt,debtinterestpaymentsasashareofrevenueanddebt to GNI*.
TheUK’sdeparturefromtheEUwillhavesignificantimpactsforsectoralpolicy,publicexpenditureandthewidereconomy.DedicatedmeasurestoprepareforBrexitwereannouncedinBudgets2017,2018and2019,toensurethatIrelandisinthebestpossiblepositiontorespondtothechallengesthatBrexitwillbring.However,theextentoftheimpactsandthenatureofriskswilldependonthebasisonwhichthe
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UKdepartstheEU.Giventhisriskintheexternalenvironment,itisallthemoreim-portantthatexpenditurepressuresarisingfromotherareas,includingdemographicgrowth,capitalinvestmentneedsandpublicdemandsforincreasedservices,areman-aged,withunplannedadditionalexpendi-turecontrolledtoensuresustainabilityovertheeconomiccycle.
3.4. Global Slowdown, including changes to international trading environment
Ireland,asahighlyopen,export-focussedeconomyisparticularlysensitivetoaslow-downinworldtradeandoveralleconomicgrowth.AdverseexternaldevelopmentscouldimpacttheIrisheconomythroughnumerouschannels,includingthroughex-changeratefluctuations,reduceddemandforexports,increasedpublicandprivatesectorborrowingcosts,anddeterioratingconsumerandmarketsentiment.Inaddi-tion,increasedtariffandnon-tariffbarrierscouldcreatebarrierstotradethatwouldadverselyaffecttheexportsofIrishfirmsandMNCsoperatinginIreland.
Theoutlookfortheglobaleconomyhasbeenworseningsincethesecondhalfof2018.Thelatesteconomicdata,highfrequencyindicatorsandeconomicfore-castsallpointtothepaceofglobalgrowthslowing.TheIMFrecentlywarnednationalgovernmentstoprepareforan‘economicstorm’asglobalgrowthlevelsundershootexpectations.TheIMFreferenced‘tradetensionsandtariffescalation,financialtightening,uncertaintysurroundingBrexitandanacceleratedChineseslowdown’asthefourkeyfactorsunderminingglobaleconomicgrowth11.Inaddition,theECBre-
11 https://www.worldgovernmentsummit.org/events/annual-gather-ing/session-detail/a-conversation-with-christine-lagarde
centlycutitseuroareagrowthprojectionsfor201912,signifyingincreaseduncertaintyregardingtheoveralleconomicoutlook.Similarly,theWorldBankpredictsglobalgrowthtobemoderateaseconomicslackdissipates,monetarypolicyaccommodationinadvancedeconomiesisremoved,andglobaltradegraduallyslows,andtheOECDsuggestthatglobalGDPgrowththoughstrong,haspeaked.
Asasmallopeneconomy,andoneinwhichmulti-nationalcorporationsplayanim-portantrole,Irelandishighlyexposedtochangesinglobaleconomicandtradingconditions.TheEuroAreaaccountsforthelargestproportionofIreland’strade.Some29percentofourgoodsandservicesexportsweredestinedfortheEuroAreain2017,comparedto15percentofgoodsandservicesexportsdestinedfortheUKin2017.Havingoutperformedexpectationsin2017,growthintheEuroAreahasmod-erated.TheEuropeanCommission’slatestforecastsshowtheEuroAreagrowthratein2019willbealmosthalftheratein2017,reflectinggrowinguncertainties.
Momentuminkeyeconomiesisslowing.Severaladvancedeconomies,suchasJapanandGermany,experiencedcontractionsinthethirdquarterof2018.TheItalianeconomyfellintoatechnicalrecession(twoconsecutivequartersofeconomiccontrac-tion)inthesecondhalfof2018.ThepaceofgrowthintheChineseeconomyhasalsoslowed.UKeconomicgrowthremainsmodest,asuncertaintysurroundingBrexitcontinues.
Furthermore,escalatingtradeconflictsarenegativelyaffectingthegrowthoutlookinallcountries.Thereareclearindicationsthattradetensionsarebeginningtoim-
12 https://www.reuters.com/article/us-ecb-policy-forecasts/ecb-cuts-growth-inflation-forecasts-idUSKCN1QO1O9
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pactgrowthwithtradevolumes,industrialproductionandmanufacturingpurchasingmanagersindex(PMIs)declining.Leadingindicatorsarealsoacauseforconcern.TheUSyieldcurve,whichhasgoodsignallingproperties,ispointingtoaslowdownintheUSeconomy.Similarly,theOECD’sCom-positeLeadingIndicatorspointtomoderat-inggrowthintheUK,theEuroAreainclud-ingGermany,FranceandItaly,andintheOECDareaasawhole.Whilstthereisacyclicaldownturninworlddemand,someofwhichisrelatedtocoun-try-specificidiosyncraticfactors(e.g.carindustryinGermany,tradetensionsetc.),therearealsolonger-termstructuralfac-torsatplaywhichhaveresultedinalmostnoexpansioninglobalisationoverthelastdecade.
InaEuropeancontext,theslowdowncanbeseentobeexacerbatedbyspecificeuroareavulnerabilities,forexample,Italianborrowingcostsremainelevatedandaweakereuroareaoutlookcombinedwithapossibleglobaleconomicdownturncouldpresentfurtherchallengeswithcontagiontotheeuroarearemainingasignificantrisk.TheconclusionofQuantitativeEasing(intermsofnetbondpurchases)willbringanend to a prolonged period of low interest rates,presentingamorechallengingfund-ingenvironmentintheyearsahead.Quan-titativetighteningmayalsofilterthroughtotherealeconomyvis-à-vishigherSMEborrowingcostsormortgageinterestrates,placingadditionalpressureonanalreadyhighlyindebtedhouseholdsectorintheIrishcontext.
Inadditiontothis,aslowdownintheUSandChineseeconomies,furtherintensifica-tionoftradetensionsandacontinuedmovetowardsprotectionistpolicies,increasingglobalindebtedness,changingglobalfinan-cialconditions,andthetimingandnature
ofBrexit,amongstotheruncertainties,poseriskstotheglobaleconomicoutlookgoingforward.
Asmentioned,thisslowingworldgrowthmomentumhasimportantimplicationsforIreland’seconomy.SensitivityanalysisintheBudget2019EconomicandFiscalOutlookshowsthatanexternalshockof1percentinworlddemandwouldreducethelevelofoutputbyaround0.3percentinthefirstyearandbyaround1.0percentafter5yearsrelativetoabaselineprojec-tion.Thisdecelerationwouldbereflectedinthelabourmarketandfiscalbalances.Thisunderlinestheimportanceofimprovingtheresilienceoftheeconomybybuildingfiscalbuffers,maintainingappropriatecontrolonexpenditure,andfocussingoncompetitive-ness.
Overall,recentexternaldevelopmentssuggestthattherehasbeenanoticeabledecelerationinglobaleconomicactivity,partlydrivenbyadversetradepolicydevel-opmentsinsomeofIreland’skeytradingpartners.
3.5. International tax changes
Ireland’scorporationtaxregimeisamajorfactorincreatingfavourableconditionsinwhichIrish-basedenterprisesoperate,aswellasinensuringastableenvironment,transparencyandpredictabilityforinwardinvestment.ItremainsanimportantpartofIreland’swidercompetitivenessofferingtosupport enterprises based in Ireland invest, innovateandcompeteinternationally13. However,thehighdependenceofIreland’soutputandvalueaddedonForeignDirectInvestment(FDI)presentsavulnerabilityintermsofhowanchoredforeignmultina-
13NationalCompetitivenessCouncil(2017)Ireland’sCompetitive-nessChallenge2017
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TaxPractices.TheGovernmentpublishedanIndependentReviewoftheCorporationTaxCode14in2017andcarriedoutacon-sultationontheimplementationofsomeofitsrecommendations15.TheDepartmentofFinancepublisheditsCorporationTaxRoadmapinSeptember2018whichlaysoutthenextstepsinIreland’songoingworkoncorporatetaxreform.WorkisalsoprogressingonthetranspositionoftheAnti-TaxAvoidanceDirectives(ATADs),withControlledForeignCompany(CFC)rulesandanewExitTaxintroducedinFinanceAct2018,andapublicconsultationcon-ductedinearly2019onimplementationoftheATADanti-hybridandinterestlimitationmeasures.
ItisimportantthatIreland’staxofferingremainscompetitiveforfirmsseekinganEUbaseforoperations,andtoattractanddevelopknowledge-basedinvestmentrelatedtoR&DandIP.Astheinternation-altaxenvironmentischangingrapidly,maintainingagoodreputationhasbecomeincreasinglyimportantforthesustainabilityofcorporationtaxpolicyhereinIreland16. In thiscontext,andinparallelwithdomesticreformsandrestructuring,itisessentialthattheGovernmentremainsproactiveintheongoinginternationaleffortstoco-ordinatetaxstandards.
3.6. Reliance on multinational corporations and sectoral concentration
AsdiscussedinpreviousNationalRiskAs-sessments,Ireland’seconomyandemploy-mentareheavilyinfluencedbyarelatively
14 https://www.gov.ie/en/publication/fa53d4-review-of-irelands-corporation-tax-code/
15 https://www.gov.ie/en/consultation/47e576-consulta-tion-on-coffey-review/
16NationalCompetitivenessCouncil(2017)Ireland’sCompeti-tivenessChallenge2017;http://www.competitiveness.ie/News-Events/2017/Competitiveness%20Challenge%202017.pdf
tionalsaretotheIrisheconomy,whichisfurthercomplicatedbytheongoingprocessofinternationaltaxreform.
Irelandhasplayedanactiveroleinimple-mentinginternationaltaxreformsthroughtheBEPSproject,andisamongstthecountrieswhohaveadoptedearlythecoun-try-by-countryreportingforlargefirms.Inaddition,UStaxreformshouldleadtosomebehaviouralchangeandshouldeliminatetheabilityforUScompaniestopayverylowtaxratesontheirglobalprofits.Neverthe-less,thereisastrongnarrativethatlargefirmscontinuetohavetheabilitytooperatewithinajurisdictionwithoutpayinganap-propriateamountoftax.Workoninterna-tionaltaxreformcontinueswithadditionalproposalsunderdiscussionatEUandOECDlevelastohowdigitalcompaniesaretaxed.WhileanEUleveldigitaltaxappearslesslikely,theproposalscurrentlyunderdiscus-sionatOECDhavewidenedtoencompassthebroadereconomy.Ultimately,anyre-formwhichseekstoallocategreatertaxingrightstousersorcustomerlocationposeschallengesforsmallcountrieslikeIreland.
Irelandhastakensignificantactionsoncorporatetaxoverrecentyearsandhasintroducedmeasures,bothdomesticallyandaspartofthewiderinternationaleffort,toaddresstaxevasionandavoidance.TheOECD’sBEPSproject,andtherelatedDirectivesagreedatEUlevel,haveagaindemonstratedthatco-operative,multi-lat-eralagreementsarethemosteffectivemeanstofacilitateinternationaltradeandcounteractcross-bordertaxevasion.Chang-estoIrishcorporatetaxresidencyrulesim-plementedin2014and2015havereducedopportunitiesforaggressivetaxplanning.TheIrishKnowledgeDevelopmentBox,introducedin2015,hasbeenapprovedbytheCodeofConductonBusinessTaxationGroupandtheOECDForumonHarmful
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experiencedadeclineinproductivityinrecentyears.Thenarrowbaseofenterpris-esinhighvalue-addedsectors,andwithinsectors,thereforedisguisesthemajorityofunderperformingfirmswhereproductivitygrowthisstagnantorfalling.Theresearchsuggeststhatthetop10percentoffirmsaccountfor87percentofvalue-addedinmanufacturingand94percentinser-vices;thishighlightsIreland’sexposuretofirm-specificshocks.
ThehighdependenceofIreland’soutputand value added on FDI presents a vulner-abilityintermsofhowanchoredforeignmultinationalsaretotheIrisheconomy.Manyoftheforeign-ownedenterprisesthatoperateintheIrisheconomytodayhavealong-standingandsubstantiveinvestmentinIreland.However,Ireland’srelationshipwithFDIislikelytobecomplicatedbytheongo-ingprocessofinternationaltaxreformandrisinganti-globalisationandprotectionistsentiments,inparticularintheUSandUK(thetwolargestsourcesofFDIinIreland),asdiscussedabove.ThesedevelopmentspresentarisktothesustainabilityofFDIinIreland,andhighlighttheincreasingexpo-sureoftheIrishpublicfinancestopotential-lyvolatilecorporatetaxreceipts.
TherearemanyreasonswhyfirmschoosetoinvestinIreland.However,theEU’sDigitaltaxproposalsforacommonconsol-idatedcorporatetaxbaseandthecurrentdiscussionsforfurtherBEPSreformatOECDhavethepotentialtosignificantlyimpactforeigninvestmentflowsinfuture.Asmentionedabove,theemergenceoftheprospectofatradewarbetweentheworld’slargesteconomiescoulddisruptglobaltradeandinvestmentflows,whichwouldsignifi-cantlyimpactIrelandasasmallopenecon-omyhighlydependentonforeigntradeandinvestment.Inaddition,thenarrowportfolioofMNCs
smallnumberofmultinationalcorporations(MNCs),concentratedinafewenterprisesectors.WhilemultinationalinvestmenthasbeentransformativefortheIrisheconomy,thisalsocreatesaparticularvulnerabilitytochangesinIreland’sattractivenessasalocationforthosecompanies,aswellastosector-specificchangesorrisks.
Foreign-ownedmulti-nationalcorporations(MNC’s)areconcentratedinIreland’smostcompetitiveexportsectors,suchasmodernmanufacturingandICT,andaccountforadisproportionatelylargeshareofoutput,value-addedandproductivity17.ThemostrecentavailableCSOdataindicatesthatasmallnumberof‘foreign-ownedMNCdom-inated’sectors18accountedfor39percentoftotalGrossValueAdded(GVA)in201719. Whileononehand,thisevidenceshowshowsuccessfulIrelandhasbeenatattract-ingandretainingFDI,ontheotheritseemstocorrespondwithmuchmoremodestperformanceamongstIrish-ownedfirmsinthesamesectors.
DespiteseveraldecadesofFDI-ledgrowthinIreland,thereareprevailingandincreas-inggapsinGVA,productivity(GVAperemployee)andwagesbyownership,withforeign-owned enterprises generally seeing muchhigherandincreasingproductivityandwages,relativetoIrish-ownedenterprises.Indeed,despiteIreland’sstrongproductivityperformanceinaninternationalcontext,researchbytheNationalCompetitivenessCouncil20showsthatmostbusinesseshave
17Dept.Finance,PatternsofFirmLevelProductivityinIre-land,March2018,seelink:https://www.gov.ie/en/publica-tion/975f17-patterns-of-firm-level-productivity-in-ireland/
18Theterm‘foreign-ownedMNEdominated’sector–usedfrequentlyinthepaper–referstoagroupofsubsectorswhereforeign-ownedMNEscreatemorethan85percentofthesectorturnover.
19Seelink:https://www.cso.ie/en/releasesandpublications/er/gvafm/grossvalueaddedforforeign-ownedmultinationalenterprisesan-dothersectorsannualresultsfor2017/
20NationalCompetitivenessCouncil,ProductivityStatement2018,seelink:http://www.competitiveness.ie/Publications/2018/NCC-Productivity-Statement-2018.html
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verymuchconsistentwithdatafromtheRevenueCommissioners,whichshowthattradingprofits(excludingbalancingcharges)increasedby€63billion(66.5percent)between2014and2016(latestavailabledata).
Whilecorporationtaxincomevolatilityhasbeenpositivetodate,inascenariowhereeconomicgrowthslowsoradverseinter-nationaltaxand/ortradedevelopmentsreducecorporatetaxincome,Ireland’scur-rentfinancescouldencounterdifficulties.Inthiscontext,thereisariskoftheStatebecomingdependentonvolatilesourcesofnationalincome.
maygiverisetonegativespill-overeffectstoothersectorsofthelabourmarket.Industrysectorsthataredominatedbyforeign-ownedenterprisesexhibitedthehighestaverageearningsin2018,andthesesectorsalsodisplayedthehighestshareofnon-Irishworkersinrecentyears.Thereisthepotentialofcrowdingoutofemploy-mentinothersectorsasmorepersonsseekemploymentopportunitiesinMNC-domi-natedsectors.Asthesefirmsaretypicallylocatedwithinasmallnumberofurbanareas,thisriskcouldgiverisetoincreasingpressuresinrentalmarketsandthewiderconstructionsector.Highconcentrationmayalsodampencompetitionandinnova-tion.
ItisworthnotingthatIrishcorporationtaxishighlyconcentrated,withthetop10pay-erscontributingcloseto40percentofthistax.Reflectingthelargenumberofsmallandmicroenterprisesintheeconomy,75percentofcorporationtaxpayerspaidanamountlessthanorequalto€20,000;theseaccountforslightlylessthan2percentoftotalnetcorporationtaxreceipts.Therisingshareofcorporationtaxreceiptswithinoveralltaxation(circa19percentoftotalrevenuein2018)andtheconcentrationofreceiptswithinasmallnumberoffirmspos-esasignificantrisktothepublicfinances21.
The2018performanceofthecorporationtaxheadingwasexceptionallystrongwhichinturnhelpedtooffsetunder-performanc-esinotherheadings.Abouttwofifthsofthisfinalcorporationtaxover-performancewasnotanticipatedonBudgetdaywhichunderscorestheinherentvolatilityofthistaxheadingineitherdirection.However,itshouldbenotedthesurgeincorpora-tiontaxreceiptsfrom2015onwardshasoccurredintandemwithasurgeincor-porationprofitabilitysincethen.Thisis
21DepartmentofFinance,AnnualTaxationReport,February2019
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4. Draft Social Risks
4.1. Capacity of Higher and Further Education System 4.2. Skilled Labour Shortages 4.3. An Ageing Population including Pensions and Health System Challenges 4.4. Impact of Social Media on Public Debate 4.5. Social Cohesion including Perceptions of Rural and Regional Imbalances 4.6. Migration and Integration
4.1. Capacity of Higher and Further Education System Anadequatelyresourced,flexible,responsiveandalignedHigherEducation(HE)andFurtherEducation&Trainingsystemhasakeyroletoplay in sustaining enterprise growth in Ireland. Skillsaretheglobalcurrencyof21stcenturyeconomies,andmanycountriesareplacingamajorfocusontalentdevelopmentandinvest-mentineducationandtraining.Researchcom-missionedbytheIrishUniversitiesAssociation(IUA),andpublishedinApril20191, found that theIrisheconomybenefittedby€8.9billionlastyearfromIreland’ssevenuniversities,withtheuniversitiesgenerating€386millionperannuminexportearningsand€1.5billioninR&Dimpacts.
Ireland’sHigherEducationInstitutions(HEIs)havebeencentraltodifferentiatingIreland’stalentpoolinaninternationalcontext,sup-portingtheestablishmentofasuccessfulentrepreneurshipecosystem,growingindige-nousmultinationalenterprises,andcontinuedattractivenessforforeigndirectinvestment.Ensuringthisalignmentbetweenenterpriseskillsneedsandgraduateoutputhelpsdrivein-firmproductivity,innovationandultimatelythecompetitivenessoftheIrisheconomy.
AnydiminutioninresourcesfortheHEsector
1 IndeconInternationalEconomicConsultants;https://saveourspark.ie/wp-content/uploads/2019/04/Delivering_for_Ireland_An_Impact_As-sessment_of_Irish_Universities_2019.pdf
would,however,poseachallengetothiscontinuedrole,placingasitwouldastrainonthesector’spotentialtorespondwithflexibilityandagilitytotheevolvingskillsneedsoftheeconomy-includingtotherequiredscale-aswellasthesupportingroleplayedbyIndustry-Academiacollabora-tionindrivingtheinnovationofindigenousand foreign-owned enterprises, and in turn theabilityofIrish-basedfirmstocompeteinoverseasmarkets.
Recentyearshaveseenaworryingdown-wardtrendofIrishuniversitiesinglobalrankings,attributedmainlytopost-reces-sionunder-investmentinthesector,andanincreaseinstudentenrolmentnumbers2. Therehasalsobeenasignificantincreaseinthenumberofstudentsenrollingforauniversityeducation,withover120,000studentsenrollingin2017,up40percentfrom20083.
Notwithstandingthatsignificantprogresshasbeenmadeinrecentbudgetsinin-creasinginvestmentinHEaswellasotherdevelopmentssuchasanewHumanCap-
2 Itshouldbenotedthatwhilerankingscanimpactoninternationalperceptionsofuniversities,theyrepresentaperceptionofqualityinthesectoronly.
3 AsperHigherEducationAuthoritystatistics,availableat:https://hea.ie/statistics-archive/
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participationratehasremainedbroadlyflatsince2011andisatthesamelevelastheparticipationrateintheearly2000s.Inaddition,whilesourcinginternationaltalentwillalsobenecessarytoaddresscapacityconstraintsintheshortterm,inthepost-re-cessionworlditislikelytobemoredifficulttoattractforeigntalent.Irelandmustcom-petewithothercountriestoattractbothhighandintermediatelevelskilledlabour.
RisksaroundskillsshortagesintheareaofDigital/ICTareparticularlypertinent.Theavailabilityofappropriateskillsfordevel-oping,implementingandusingICT,aswellasgeneralDigitalskills,areanimportantconditionforthecompetitivenessandinnovationcapabilityoftheIrisheconomy.ThestrongEuropeancompetitionforskills,especiallyinaregionwherethereisfreemovementoflabour,makesitimportantforIrelandtodevelop,attractandretaintherighthighlevel,andintermediatelevelDigitalandICTskillstosatisfythedemandacrosstheIrisheconomy.ItislikewiseimperativeforIrelandtobeabletocontin-uetoattractandservetheR&Dactivities,hightechmanufacturingandglobalservicescompaniesthatareimportantforIreland’seconomicgrowth.
Theeducationandtrainingsystem,encom-passingboththeHEsectorandFurtherEducationandTrainingSector,willplayakeyroleinaddressingexistingandemergingskillsneeds,providingeducation,trainingandskillsdevelopmentopportunitiestonewentrantsaswellasongoingupskillingandreskillingofexistinglabourmarketparticipants.Inadditiontotheriskstojobsfromautomation,thenewdigitalworldofworkwillalsocreatejobsnoteventhoughtoftoday.Weneedtoensureoureducationandtrainingsystemissufficientlyadaptable,andappropriatelyresourced,tomeettheneeds of the future.
italInitiative4,thereisariskaroundfailingtosustaintheselevelsofre-investmentinfuturebudgetarycycles,toensurethequalityoftheHEsectorismaintained,andtoaccommodatethestrongdemographicgrowththatispredicted.Recentlypublishedstatisticsestimatethatdemandforthirdlevelplaceswillincreaseeachyearupto2030,risingfromthebaselevelof184,000(in2017)topeakatover220,000studentsby2030.Thecontinuedre-investmentinHE,combinedwiththedevelopmentofalonger-termsustainablefundingmodel,willbenecessaryinordertocontinuetosupportthegrowthandqualityofourHEsystemintheyearsahead.
TheDepartmentofEducationandSkillsiscurrentlyengagedinaprocesstoidentifyamoresustainablefundingmodelforHEintheyearstocome,includinganeconomicanalysisofthethreepolicyoptionsidenti-fiedbytheExpertGrouponFutureFundingin2016.ThisanalysiswillassisttheJointOireachtasCommitteeonEducationandSkillsintryingtobuildpoliticalconsensusaroundthemostappropriatefuturefundingmodelforhighereducation.
4.2. Skilled Labour Shortages Astheeconomycontinuestoexpand,in-creasingtheparticipationrateandsourcingskilledinternationaltalentwillbeimportantsupplementsnecessaryinthecontextofgrowinglabourmarketdemandaswellasexistingskillsshortagesinspecificareas.DespiteIreland’srecoveryinthelabourmarket,theparticipationrateremainsbelowits2007peaklevel5andinfact,theoverall
4 Budget2019alsoannouncedanewHumanCapitalInitiativethatwillinvolveinvestmentof€300millioninhighereducationoverthe5yearperiodfrom2020to2024,with€60millionbeingmadeavailableineachofthoseyears.
5 ESRIQuarterlyEconomicCommentary,Winter2018.Seelink:https://www.esri.ie/system/files/media/file-uploads/2018-12/QEC2018WIN.pdf
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continuetogrow8.Thesecondisthatthedependencyratio-i.e.,theratioofper-sons under 15 and 65 and over to persons ofworkingage(15-64)-willincreaseintothefuture,intheabsenceofimprobablylargeimmigrationofpeopleofworkingage,whichwillimpactonareassuchasedu-cation,childincomesupports,healthcare,long-termcare,transport,employment,housingandpensionprovision.Eachofthesewillbeanareaofacuteconcernbutpensions,andchallengesforthehealthsys-temmaybeamongthemostserious.
TheEuropeanCommissionestimatesthatpension-relatedexpenditurewillincreaseby4percentageofGDPpointsby2070,whentakingonlydemographicfactorsintoaccount9.WhileIrelandhasacomparativelyyoungpopulationrelativetootherEuro-peancountries,itneverthelessfacesthesamelongertermageingchallenges.AkeychallengeinthisregardisthesustainabilityandcoverageofpensionsinIreland.Statepensionsaccountforthesinglelargestblockofsocialwelfareexpenditure,andtheIrishpensionsystemfacesanumberofveryseriousdemographic,adequacyandsustainabilitychallenges.Thetaskoffinancingincreasingpensionspendingwillfalltoadiminishingshareofthepopulationasprojectionsindicatetheratioofpeo-pleofworkingagetoeverypersonagedoverStatepensionagewillreducefromitscurrentrateof4.9:1to2.3:1overthenext40years.ThispresentssignificantfundingchallengeswiththeSocialInsuranceFundforecasttoaccumulateapotentialdeficitofupto€335bn10overthenextfiftyyears.
8 TheCentralStatisticsOfficeestimatesthatthenumberofpeopleagedover65willalmosttrebleto1.45millionpeoplebetween2011and2046.
9 EuropeanCommission(2019)EuropeanSemesterCountryReportIreland.Availablehere:https://ec.europa.eu/info/sites/info/files/file_import/2019-european-semester-country-report-ireland_en.pdf
10 DepartmentofEmploymentAffairsandSocialProtection2017ActuarialReviewoftheSocialInsuranceFund2015.Availablehere:http://www.welfare.ie/en/downloads/actrev311215.pdf
Continuedinvestmenttodeveloptalentandskillstomeetemergingskillsneedsisthere-foreimportant.ThisisparticularlyevidentintermsofthefullimplementationofProjectIreland2040,toensureadditionaleconomiccostsarenotincurredfromcapacityissuesinthiscontext.Thereisaneedtocontinuecooperationbetweenprovidersandem-ployers to ensure that training is addressing emergingskillsneeds.
4.3. An Ageing Population includ-ing pensions and health system challenges
Irelandfacessignificantrisksintermsofanageingpopulation.Theshareofpopulationaged65andoverisprojectedtoincreasefromoneineighttooneinsixby2030,andthenumberofpeopleaged85andoverisprojectedtoalmostdouble6. Older agecohortstendtobethehighestusersofmosthealthandsocialservicesandhavemorecomplexcareneeds.TheresultsfromCensus2016showthatIreland’spopulationincreasedfrom4.588millionin2011to4.762millionin2016.Thenaturalpopula-tionincreasewas196,100withnetoutwardmigrationestimatedat22,5007.Planningfordemographicchangesinthepopulationsoresourcesandservicescanbedirectedwhereneededisdifficult,andtheuncertain-tiesassociatedwithBrexitwillonlyaccen-tuatethisproblem.
Notwithstandingtheuncertaintiesassociat-edwithpopulationprojections,tworelatedissuesarehighlyprobable.Thefirstisthatthenumberofpeopleagedover65will
6 ESRI,2017.Availablehere:https://www.esri.ie/system/files?file=-media/file-uploads/2018-02/RS67.pdf
7 CentralStatisticsOffice(2016)Census2016SummaryResults–Part1(Dublin:CSO).
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ofpeopleinolderagecohortswillcreatesignificantadditionaldemandforarangeofhealthandsocialcareservices,includingnursinghomecare,homecare,andmedi-cines.
Inthecontextofthehealthsystem,IrishhealthexpenditureremainswellabovetheOECDaverage,notwithstandingouryoungpopulation13.AccordingtotheEuropeanCommission’s2018AgeingReport,long-termcareexpenditurewillseeanincreaseby1.9percentagepointsofIrishGDPbetween2016and2070,withanincreaseof1percentagepointofGDPforhealthcarespending,bothaboveEUaverageexpendi-ture growth.
Futurehealthcaredemandandthecostofhealthcareprovisionwillbeimpactedbyavarietyoffactorsincludingdemographics;increasingincidenceofnon-communicablediseases(i.e.heartdisease,stroke,diabetes,cancer,chroniclungdisease,anddemen-tia);lifestyleriskfactors;changestomodesofhealthcaredelivery(e.g.ambulatoryemergencycarereducingadmissionsfromEmergencyDepartments,shifttodaycasesurgery);availabilityofnewdrugsandothertechnologicaldevelopments;changesinthesocio-economicstructureofthepopulation(educationlevel,income,employment)andchangesinpeople’sexpectationsofhealthservices;proportionofthepopulationwithprivatehealthinsurance;andsupply-in-duceddemand(e.g.additionalfundingallocatedtoserviceprovision).
Themajorchronicdiseasesofcardiovas-culardisease,cancer,diabetesandchroniclungdiseasealreadyaccountforasignif-icantproportionofhealthcareactivity,including40percentofhospitaladmissions
13 HousesoftheOireachtas(2017)IrishHealthExpenditure:thecomparativecontext,availableat:https://www.oireachtas.ie/parliament/media/housesoftheoireachtas/libraryresearch/lrsnotes/Irish-health-expenditure---the-comparative-context.pdf
NotwithstandingthegradualincreaseinStatepensionagefrom65in2010to68in2028,itisestimatedthatthenumberofpersons at State pension age and older will morethandoublefrom586,000in2015,to1,402,000by2055.
Inaddition,Irelandalsohasaverylowlevelofprivatepensioncoverage,withapprox-imatelyonly35percentoftheprivatesector-employedpopulationcoveredbyasupplementarypension.Thissuggeststhatahighpercentageoftheworkingpopulationis not saving enough, or is not saving at all, forretirement,reflectingasignificantriskbothintermsofthefundingandsustain-ability of pensions in Ireland.
Ariskalsoexistsinhowourworkplaceswilladaptandsupportolderpeopletocontin-ueparticipatingintheworkforce.Whilstasignificantnumberofpeoplefeelretirementcomestooearlyandwishtocontinuetowork,itislikelythatthiscohortmayrequirespecificsupportoradaptions.Olderpeoplemaywishtoreducelevelsofresponsibilityorworkpatternsintheirroles,andthiswillrequirean“AgeFriendly”approachbyem-ployerstoutiliseandenablethiscohortef-fectively.Employedpeopleover50arelesslikelytoavailoforhaveaccesstolifelonglearningopportunities;lessthanoneintenpeople(8.0percent)aged50+participateininformaleducationandtraining11.Re-ducedopportunitytomaintainandincreaseskillslevelswillalsoreducethelikelihoodofolderpeoplestayingintheworkforcebe-yondthetraditionalretirementage.Whiletheemploymentrateforadultsaged50-64hasincreasedintheyears2014-2016,theemploymentratefor65+remainseven12.
Thesignificantincreaseinthenumber
11 Healthy&PositiveAgeingInitiative–PositiveAgeingNationalIndicatorsReport(2016)
12 Healthy&PositiveAgeingInitiative–PositiveAgeingNationalIndicatorsReport(2016)
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of how billions of people around the globe connectandcommunicate.Whilesocialme-diaplatformsoffermanybenefits,therela-tivelackofoversightofbothsocialmediausersandtheirdatahasledtoagreaterriskofthespreadingofdisinformationorso-called‘fakenews’,withassociatedchalleng-esforandrisksaroundregulatorysystemsreadilyapparent.Thetargetingofsocialme-diauserswithpoliticaladvertisementsandsponsorednewsstoriestoinfluencetheirbeliefs,opinionsandpossiblyvotinginten-tions,forexample,isofconsiderablecon-cern.Balancedandrepresentativediscourseand debate is vital to ensure the integrity of anyreferendumorelectoralprocess.Thereisalsoariskthatthemultiplicityofinforma-tionplatformscouldleadtomorepolarisedsocietalviewpoints.
Large-scaledisinformation15or‘fakenews’campaignsspreadonlinebymaliciousactorsareahighriskissueforsocietyglobally,includingIreland.Thereisinternationalconsensusthattheriskofpublicharmissubstantialwhenonlinedisinformationisdesignedtoinfluencepublicdebateonpoliticalissuesandattempttoinfluenceormanipulatetheoutcomeofelectoralprocesses.Amajordriverofthisriskisthatlargenumbersofcitizensnowgettheirnewsfromsocialmediaplatforms;thishasclearimplicationsforthegenerationandpotentialimpactofonlinedisinformationandhowitisrapidlydisseminated.Resultsofa2018EurobarometerSurveyindicatethatlevelsofawarenessoftheriskarehighinIreland-81percentofIrishinternetuserswerefoundtobeconcernedaboutdisinformationormisinformationonline
15DisinformationisdefinedbytheEUas:“…Verifiablyfalseormisleadinginformationthatiscreated,presentedanddisseminatedforeconomicgainortointentionallydeceivethepublic,andmaycausepublicharm.Publicharmcomprisesthreatstodemocraticpoliticalandpolicy-makingprocessesaswellaspublicgoodssuchastheprotectionofEUcitizens’health,theenvironmentorsecurity.Disinformationdoesnotincludereportingerrors,satireandparody,
orclearlyidentifiedpartisannewsandcommentary.”
and75percentofhospitalbeddays.Inad-dition,thepopulationwithlifelongdisabilitywhoareageingisalsoincreasing,leadingtoadditionaldemandforresidentialcareplaces,andtoincreasingcomplexityandcostofcareforthosereceivingdisabilityservices14.Some60percentofthoseagedover50reporthavingatleastonechroniccondition.Thelevelofmulti-morbidityisincreasingwith18percentofadultsover50havingtwoormorechronicconditions.Itisestimatedthatwithinthenextdecade,thenumberofadultswithchronicdiseaseswillincreasebyaround40percent,withrelativelymoreoftheconditionsaffectingthoseintheolderagegroups.Theeconomicburdenofhealthcareexpenditureinrelationtochronicdiseasesisconsiderable,notonlyforthehealthsystembutalsointermsoffamiliesandsocietyasaresultofreducedincome,earlyretirement,anincreasedreli-anceonsocialcareandwelfaresupportanddiminishedproductivityandabsenteeism.
Atthesametime,therearedifficultiesattractingandretainingsuitablyqualifiedhealthcareworkerstomeetdemand.Ourworkforceisageing,with21percentaged55yearsorover.TheEuropeanCommissionhasestimatedapotentialshortfall,withintheEU,ofaround1millionhealthworkersby2020.Globaldevelopmentsintechnol-ogywillalsoimpactonourworkforcewithunpredictableconsequences,includingthepotentialfornewrolesandskilldevelop-mentbutalsotheautomationandredun-dancyofotherroles.
4.4. Impact of Social Media on Public Debate
Socialmediahasbecomeanintegralpart
14 WorkingGroup1,TransformingLives(2018)ReportonFutureNeedforDisabilityServices.DepartmentofHealth.https://health.gov.ie/wp-content/uploads/2018/06/Working-Group-1-Report-on-future-need-for-disability-services.pdf
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assessthephenomenonofdisinformation,andadjustpolicyobjectivesinlightofitsevolution.
RecognitionatanEUlevelofthesignif-icantthreatofonlinedisinformationtodemocracyisalsoclear,asevidencedbyvariouscountermeasuresbeingprogressed,includinganActionPlanagainstDisinfor-mation,launchedinDecember2018,whichsetsoutmeasurestotackledisinformationinacoordinatedapproachamongtheEUinstitutionsandincooperationwithMem-berStates.MeasuresincludeaRapidAlertSystem(RAS)–aninformation-sharingmechanismondisinformationactivities;anEU-widevoluntaryCodeofPracticeonDis-information;andsupportinganindependentnetworkoffact-checkers,medialiteracyinitiativesandtoolstopromotequalityjournalism.
Inthecontextofdataprotection,thedisclosureofharvestingofthirdpartydataanditsuseintargetingcertaingroupsandcohorts,aswellasongoinginvestigationsandcommentaryinboththeUSandUKaroundelectionmanipulationbythirdpar-ties(includingforeignactors),underlinetheneedbothforgreaterprotectionofcitizens’privacyrights,andgreatertransparencyfromorganizationsonhowtheyareusinganypersonaldatatheycollect.TheGeneralDataProtectionRegulation(GDPR),whichcameintoeffectacrosstheEuropeanUnionin2018,isdesignedtoachievethesegoals.Inaddition,theDataProtectionAct2018includesaprovisiontolimitthescopeofanyprocessingofpersonaldatarevealingpoliticalopinionstopreventmisuse.
Thesewiderconcernsalsoraisebroad-erquestionsaroundthesustainabilityoftraditionalmedia,whichhavebeenviewedhithertoascustodiansofthepublicinterest,
duringthepre-electionperiod16.
Asignificantnumberofrecentelectioncam-paignsacrossEuropeandelsewherehavebeencharacterisedbysubstantivereportsofapparentdeliberateattemptstomanip-ulateoutcomesusingavarietyofdifferentmeansincludingonlinedisinformation.Incertainjurisdictions,officialinvestigationsintosuchallegedactivitiesremainongoing.
Irelandisalsovulnerabletothisrisk,aswasseen,forexample,duringthereferenduminMay2018ontheThirty-sixthAmendmentoftheConstitutionBill2018.TheTrans-parentReferendumInitiative(TRI)17 built a public,searchabledatabaseofpoliticaladsbeing targeted at Irish voters related to the referendumandinformationonthesocialmediaaccountspromotingthem,andfoundthatadsfromuntraceablegroupswereusedto‘misleadvoters,discreditpoliticalfiguresandgroups,mimicofficialorneutralinfor-mationsources,gathervoterdataandsharedisturbingimages’.18InitsfirstpublishedRe-port,theInterdepartmentalGroup(IDG)ontheSecurityofIreland’sElectoralProcessandDisinformationfoundthatwhileriskstotheelectoralprocessinIrelandarerelative-lylow,takingintoaccountthemitigatingfactorsalreadyinplace,amoresubstantialriskisposedbythespreadofdisinforma-tiononlineandtheriskofcyber-attacksontheelectoralsystem.ThisisinlinewithEUfindingsandrecentinternationalexperi-ence.Giventherapidpaceoftechnologicalchange,itisthereforeimportantthatpolicyresponsesarecomprehensive,continuously
16SpecialEurobarometer477DemocracyandElections,EuropeanUnion,2018.p.56;http://ec.europa.eu/commfrontoffice/publi-copinion/index.cfm/survey/getsurveydetail/instruments/special/surveyky/2198
17TheTRIisavolunteer-led,civicinitiativethatwasestablishedtoadvocateforincreasedtransparencyofdigitaladvertisingduringelectoralcampaignsinIreland.Seehttp://tref.ie/
18 PolicyProposalsforregulatingonlineadvertising-TransparentReferendumInitiative–June2018https://docs.google.com/docu-ment/d/1zGdjWuilY9gms7NkHjYRXyYbR7Vdn3OzBeCGrg8uRvQ/edit
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befurtherexacerbatedbytheroleofsocialmediainpublicdebate,discussedfurtherinSection6.3.Conversely,inthecontextofsocialmedia,thereispotentialforanin-creasingsenseofisolationandexclusionforthosewhomaynothavethenecessaryre-sourcesorskillsintermsofaccesstosocialmediaandservicesdeliveredonline,againwitharuraldimensionintheIrishcontext.
InIreland,taxationandsocialtransferpolicieshavebeeneffectiveinoffsettingmarketincomeinequality.In2017,transfersreducedtheat-risk-of-povertyratefrom32.3percentto15.7percent,apovertyreductioneffectof51.4percent.IrelandisthebestperformingEUmemberstateinthisregard,underliningtheeffectivenessofsocialtransferpoliciesandtaxationinoffsettingincomeinequality21.Similarly,thequintileshareratio,i.e.theratiobetweentotalincomesreceivedbythetop20percentofearnerscomparedtothebottom20percentofearners,stoodat4.8in201722, slightlyabovethe2016figureof4.7.Thisfigureis,however,downfrom5.1in2012attheheightoftheeconomicdownturn.Inrecentyearstherehasbeensomeimprove-mentinmeasuresofpovertyandinequality,withtheGinicoefficient23 for disposable incomefallingbelowtheEUaveragein2015,andfallingfurtherin2016to29.3.Nonetheless,measuresofconsistentpover-tyremainedsubstantiallyabovethetargetssetfor2020.Migration,discussedinSection4.5below,canbeanotherfactorandpotentialchal-lengeinrelationtotheerosionofsocialco-hesion.Thecontinuedsuccessfulintegration
21 http://cso.ie/en/releasesandpublications/er/silc/surveyoninco-meandlivingconditions2016/
22 https://www.cso.ie/en/releasesandpublications/ep/p-silc/sur-veyonincomeandlivingconditionssilc2017/introductionandsummary-ofresults/
23 TheGinicoefficientmeasurestheextenttowhichthedistribu-tionofincomeamongindividualsorhouseholdswithinaneconomydeviatesfromaperfectlyequaldistribution.AGinicoefficientofzerorepresentsperfectequality.
andtheirrolebothinIrelandandglobally.Athriving,independentmediaisessentialtoahealthysociety,especiallyinthisincreasing-lyonlineera,whereriskstotraditionalprintmediaandtheiraudiencesandreadershiplevelsarebecomingincreasinglyapparent.
4.5. Social cohesion including Perceptions of Rural and Regional Imbalances
Therecentrecessionandtheconsequentneedtostabilisethepublicfinanceshasraisedconcerns,airedinothercountriesalso,aboutincomedistributionandinequal-ity.AccordingtotheOECD,growingin-comeinequalitycanhaveanegativeeffectonsocialcohesionandimpedeeconomicgrowth19.TheOECDhassaidthateconomicrecoverysince2010intheOECDareahasnotledtoinclusivegrowth,andhasnotreversedthetrendofincreasingincomeinequality20.
Asdiscussedabove(Section2.3),theglobaltrendofrisingpopulismandanti-estab-lishmentsentiment,evidentinFrance,Poland,HungaryandAustriaamongoth-ers,isfurthercontributingtorisksaroundthiserosionofsocialcohesionandtrustininstitutions.Thisinternationalpopulismcanbe seen as partly rooted in great divides, suchasthosebasedonage,geographyandwealth,aswellasaphenomenonofincreas-ingurbanisation.
Inlinewithdevelopmentsinothercoun-tries,weareseeingincreasingperceptionsofregionalandruralimbalancesinIreland.Issuesarisingfromgrowinginequality,cou-pledwithariseinpopulismandperceptionsofregionalorgeographicdifferences,may
19 OECD(2015)InitTogether:WhyLessInequalityBenefitsAll(Paris:OECD).
20 OECDIncomeInequalityUpdate(Paris:OECD)http://www.oecd.org/social/OECD2016-Income-Inequality-Update.pdfb
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laneousProvisions)Act201824.Anotherconsequenceoftherecentre-cessioninIrelandwasadamagingeffectonpublictrust.TheOECDnotesthatthedeclineofpeople’strustininstitutionsintheaftermathoftheglobalfinancialcrisishasbeena“keypolicyconcern”inrecentyears.Furthermore,lowerpublictrustininstitutionslimitsthecapacityofGovern-mentstoimplementtheirpolicies,andhasbeenlinkedtoincreasingdissatisfactionwithdemocracy.25Thereportalsoreflectstheextenttowhichthepopulationfeelsithasasayinwhatgovernmentdoes.Accord-ingtothereport,IrelandisbelowtheOECDaverageintermsofthepercentageoftheworking-agepopulationwhofeelthattheyhaveasayinwhatthegovernmentdoes26.
The2019EdelmanIrelandTrustBarome-terfindsthatthemediaistheleasttrustedinstitutioninIreland,mainlydrivenbya
24 TheEmployment(MiscellaneousProvisions)Act2018wassignedintolawon25December2018.
25 OECDHow’sLife2017https://read.oecd-ilibrary.org/economics/how-s-life-2017_how_life-2017-en#page186
26 OECDHow’sLife2017https://read.oecd-ilibrary.org/economics/how-s-life-2017_how_life-2017-en#page185
ofsecondandthirdgenerationimmigrantsinIrelandwillbeimportantinensuringthatriskdoesnotmaterialiseinanIrishcontext.Socialgroupsthatcontinuetobedispropor-tionatelyaffectedbypovertyincludejoblesshouseholds,thoselivinginsocialhousing(oftenassociatedwithspatialconcentrations)andlone-parenthouseholds(mainlyfe-male-headed)acrossthelifecycle,withchil-drenmorelikelytobeinpovertythanadults.Eurofound,OECD,ILO,NESCandtheESRIhaveallcommentedonthefactthatthekeyrouteoutofsocialexclusionissupportforindividualstobeinwork,andthatenhancedtrainingandeducationcanbebeneficialinachievingthis.Althoughthelabourmarkethasseensignificantrecoveryinrecentyears,risksremaininthisareaintermsofaccesstoandthequalityofwork.Accesstostableemploymentremainsakeychallenge,inparticularforyoungpeople,andtheuseoftemporaryandprecariousemploymentprac-ticesbyindustryalsoremainsarisk,althoughlegislationhasbeenintroducedtoaddressthisintheformoftheEmployment(Miscel-
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Figure 1: Gini coefficient Ireland versus EU, 2010-2016
Source:Eurostat
ampleincludingBrexit-relateddiscourseintheUK,andsimilartrendsintheUS,publicdiscourseinIrelandexhibitssignsthatthisperceptionexists,andthisriskmustthere-forebemanagedandmitigatedbyincreas-ingpublicawarenessthroughclear,positive,andevidence-basedmessaging.
Inaddition,andasmentionedaboveintheEconomicRiskssection,inthecontextoftheeconomicimpactsofBrexit,weknowthatsomesectorswillbeharderhitthanothers,andthatforthesesectors–theagri-foodandfisheries,andindigenousmanu-facturingsectors–theirregionalspreadismoreconcentratedinruralregions,whichhavehadacomparativelyslowerpost-crisisrecoverythantheDublinregion.Asdis-cussedinSection6.2onDisruptiveTech-nologies,astudybytheESRIfoundthatat a regional level, Dublin is the region at leastriskfromautomation(2percentathighrisk,mainlyinRetailandHospitalitysectors),whiletheMidlandsregion(5percentathighriskand64percentatmediumrisk)andBorderregion(5percentathighriskand62percentatmediumrisk)aretheregions’mostatrisk.Inaddition,actionsneededtoaddressclimatechangecouldpotentiallyimpactmoreadverselyonruralandregionalareasoverthecomingyears.ThedifferinglevelsofimpactfromBrexit,ClimateChange,andotherrisksonregional,ruralandGaeltachtareas,mustthereforeremaintotheforefrontaswetacklethesechallenges.
4.6. Migration and integration
Migrationhasbecomeoneofthemostcontentiousandcontestedissuesinpoliticaldebatesacrossmanycountriesinrecentyears.ItplayedasignificantroleintheUK’sreferendumonBrexit,ithasfuelledtheriseofextremenationalistpoliticalparties
distrustinsocialmedia(27percent)ratherthantraditionalmedia(67percent),how-evertrusthasrisenslightlysince2018.ThemosttrustedinstitutionsinIrelandareNGOs,whichalsosawamodestriseintrustsince2018.Globally,trustinemployershasrisento75percent,whichissharedbyIrishrespondentstothesurveyas69percentofIrishemployeeshavetrustintheiremploy-er.WhiletrustinGovernment,themedia,andNGOsrosebetween2018and2019,trustinbusinessdecreasedmarginally,andIrelandisamong20ofthe28countriessurveyed who displayed overall distrust in institutions.TheTrustBarometeralsohigh-lightsthat64percentofpeoplesurveyedinIrelandareworriedaboutfakenewsbeingusedasaweapon.Overall,theEdelmanreportnotesthatdistrustisatarecordhighglobally27.
Asmentioned,thereisanincreasedrisktosocialcohesion,andofunderminingtheworkdoneinrecentyearsinthisarea,shouldperceptionsofruralandregionalimbalancepersistorincrease.Inagrowingeconomy,therecanbeaperceptionthatruralandregionalareasarenotbenefittingequallyfromtheeconomicprosperitytakingplace,includingjobcreation.Therecanbeaperceptionofafocusonjobcreationwithincertaincities,andthereforethattherecoveryandbenefitismoreurbancentric,withinvestmentinlargerinfrastructureprojectslocatedintheseurbanareas,tothedetrimentofruralcommunities.Whetherthisperceptionisarealitycanbechal-lengedbyevidence.Howeverthepercep-tionitself,whichcanbestronglyfelt,canleadtoareducedconfidenceofruralandregional dwellers and entrepreneurs, and canthereforecontributetoanincreasedriskofreducedsocialcohesion.Inlinewithdevelopmentsinothercountries,forex-
27 Edelman2019TrustBarometerhttps://www.edelman.com/sites/g/files/aatuss191/files/2019-02/2019_Edelman_Trust_Barom-eter_Global_Report_2.pdf
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insomecountriesandithascausedothercountriestore-establishsomeformofbor-dercontrolswithinEurope.EventhoughIre-land’slocationinEuropemeansthattodateithasnotfeltadirectimpactfrommanyofthesepressures,thisshouldnotinducecomplacencyabouttheissuesthatmigra-tionandintegrationcangenerate,particu-larlyinthecontextofcontinuingpressuresfromtheMediterraneanandAfrica,andthesheervolumesseekingtomigrateintotheEU.
Inaddition,asmentionedinSection1.1above,BrexitintroducesnewpotentialrisksaroundimmigrationincludinganincreaseinillegalmovementofthirdcountrynationalsintoIrelandfromtheUK,aswellaslegaldivergencepossibilitiesinrelationtoasylummatters.AsBrexitevolvestheremayalsobesignificantlabourmarketimplicationsforIreland.Togiveoneexample,theexpansionoftheconstructionsectorinIrelandmayat-tractmanyEasternEuropeanConstructionworkerscurrentlybasedintheUK.ThishasbothpositiveandnegativeimplicationsforIreland,dependingonthescaleofimmigra-tionofsuchworkersfromtheUK.
Intermsofinternalintegrationrisks,Irelandhaschangedfromanethnicallyhomoge-neoussocietytoamuchmoremulti-ethniconeinslightlyoverageneration,atrans-formationreflectedinruralaswellasurbancommunities.Census2016showsthat810,406peopleor17.3percentofthepopulationwerebornoutsidetheState(thisfigureincludespeopleofIrishnationalitywhowerebornoutsidetheState,includ-inginNorthernIreland),andthat535,475peopleor11.6percentofthepopulationdonotholdIrishnationality28.Whilethisrepresentsasmalldecreaseonthe2011
28 CentralStatisticsOffice(2016)Census2016SummaryResults–Part1(Dublin:CSO).
Census29,itrepresentsanincreaseofalmost139percentinthenumberofpeoplewithoutIrishnationalitysince2002,thefirsttimetheCensusincludedaquestiononnationality30. This brings with it a need to be responsive tothechangingnatureofsociety,forexam-pleintermsoftheneedsofanowmultilin-gualsocietyandthepotentialforlanguagetobecomeabarrierinaccessingGovern-mentcommunicationsandservices.
Structuralrisks,includingbarrierstomi-grantsaccessingemploymentorprogress-ingwithintheworkplace,therebycreatingpotentialsocialexclusion,andincreasedincidencesofracismagainstmigrantcom-munities,havebeenidentifiedbynumeroussources.TheseincludereportsbytheEco-nomicandSocialResearchInstitute(ESRI)andtheEuropeanAgencyforFundamentalHumanRights(FRA),theMigrantIntegra-tionStrategyMonitoringandCoordinationCommittee,GovernmentDepartmentsandstakeholders.IrelandhasaMigrantInte-grationStrategy(2017-2020),ledbytheDepartmentofJusticeandEquality,whichdefinestheactionstobetakenonintegra-tionduringthatperiod.
TheincreaseintheimmigrantpopulationinIrelandhashappenedinaveryshorttimeand without any of the upheaval that has occurredinothercountrieswithsuchdra-maticmovementsofthepopulation.Failuretomaintainthislevelofcohesion,especiallyassecondandthirdgenerationmigrantcommunitiesemerge,representsasignifi-cantriskofnegativeconsequencessimilartothoseexperiencedbyothercountries.
29 The2011Censusshowedthat544,357people,or12percentofthepopulation,didnothaveIrishnationality
30 Inthe2002Census,224,261peoplewererecordedasnothavingIrishnationality.
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5. Draft Environmental Risks
5.1. Climate Change & Biodiversity 5.2. Ensuring an affordable, sustainable and diverse energy supply 5.3. Delivery of Public Infrastructure 5.4. Food safety 5.5. Supply and Affordability of Housing
5.1. Climate Change & Biodiversity
ObservationsshowthatIreland’sclimateischangingandtheobservedscaleandrateofchangeisconsistentwithregionalandglobaltrends.ThemostimmediateriskstoIrelandwhichcanbeinfluencedbyclimatechangearepredominantlythoseassociatedwithchangesinextremes,suchasfloods,precipitationandstorms.However,futureimpactsofclimatechangearealsopredictedtoincludesealevelrise;watershortagesinsummer;andadverseimpactsonwaterquality.Indeed,sealevelriseisalreadybeingobservedandisproject-edtocontinuetoriseintothefuture,whichwillincreasebothfloodanderosionrisktoourcoastalcommunitiesandinfrastructuralassets,aswellasthreatencoastalsqueezeofinter-tidalhabitats.Inaddition,itisprojectedthatthenumberofheavyrainfalldaysperyearmayincrease,whichcouldleadtoanincreaseinfloodingincidents.
TherearesignificantthreatstoIreland’sbiodiversity,withtheBiodiversityIndicatorSurveyfor2017statingthat91percentofourhabitatsdesignatedunderEUlaware“inad-equate”orof“bad”status1.Headlineresultsfromthe2018LivingPlanetReport,publishedbytheWorldWildlifeFund,revealthatEarthiscurrentlylosingbiodiversityatarateseenonlyduringmassextinctions.ThisrequiresIrelandtodevelopacomprehensiveseriesofmeasurestomaintainandwherenecessary
1 https://indicators.biodiversityireland.ie/
restorethesehabitats.AsaPartytotheUNConventiononBiologicalDiversity,IrelandisalsocommittedtoprepareActionPlanstowardstheachievementoftheConven-tion’stargets.ImplementationoftheNa-tionalBiodiversityPlan(2017-2021)willbeakeypartofaddressingtheserisks,andtheNationalDevelopmentPlanalsorecognisestheneedforincreasedfundingforbiodiver-sity.
Irish biodiversity is highly vulnerable to theimpactsofclimatechangeandhasalowadaptivecapacitycomparedtoothervulnerablesectors.ClimatechangehasmajorindirectimpactsonIrishbiodiversitythroughitsinteractionwithotherstressors,inparticularhabitatfragmentationandloss;over-exploitation;pollutionofair,waterandsoil;andspreadofinvasivespecies.
IntermsofClimateChangeMitigation,thereisaneconomicrationalefortakingearlyactiontomitigategreenhousegas(GHG)emissions,investinrenewableen-ergy,improveenergyefficiencyandimple-mentadaptationmeasurestotheeffectsofclimatechange.Thecostofinactionexceedsthecostofactionandthiscostdifferentialwillrisesteeplywithtime.Itwillbecriticaltotakeactiononclimatechange,assetoutintheNationalDevelopmentPlan,theNationalAdaptationFrameworkandthenewAllofGovernmentPlanonCli-mateDisruption,toavoidthreatstohumanhealth,economicdevelopment,property,
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infrastructureandecosystems,aswellasrepu-tationaldamage.
PotentialcoststotheexchequerincludethoseassociatedwithnotachievingcompliancewithourEUGHGemissionsandrenewableenergytargetsto2020and2030.Thereisarangeofeconomicrisksassociatedwithfailingtopricethecostofcarbonintooureconomicmodel.Providingappropriatelongtermpricesignalsonthecostofcarbonwillbeimportantinor-dertoinformmediumtolongterminvestmentdecisionsintheprivatesectorandtoencour-agebehaviouralchangeinbroadersociety.Itwillalsobecriticaltodefineourapproachtocarbonneutralityfortheagriculturesectorinawaythatsupportstheachievementofourcli-matetargetsanddecarbonisationgoalswhilerespectingsustainablefoodsecurityandtomakeinvestmentstodevelopnewandinno-vativeeconomicopportunities,forexampleinthebioeconomy.
Aswetransitiontoalowcarboneconomyandtraditionalindustriesandpracticesaredis-rupted,decouplingoureconomicgrowthfromcarbonemissionswillbecomeincreasinglycriticalinmaintainingourcompetitiveness.Itwillalsobeimportanttoplanforthesocietaldisruptioncausedbythistransitionandpre-pareretrainingandreskillingopportunitiestoensureindividualsandcommunitiescanmakethenecessarychanges.
Arelatedriskisfailingtoplanforsuccessandeconomicgrowthinthiscontext.Ireland’sgreenreputationcouldalsobeimpactedbyaclimate-changerelateddegradationinthequalityofournaturalenvironment.
Bothpoliticalandsocietalwillingnesstotacklethelonger-termrisksofclimatechangecouldpresentachallenge,assignificantup-frontinvestmentisrequired,whichmaynotyieldbenefitsformanydecades.Fundamentalbe-haviouralchangewillbenecessaryinthisre-
gard,fromthepublicandprivatesectorsaswellasthegeneralpublic,giventhatouref-fortstotackleclimatechangeeffectivelyarepredicatedonsignificantbuy-infromthesegroups.EngagementwiththesegroupscanbefacilitatedthroughinitiativessuchastheNationalDialogueonClimateAction.
5.2. Ensuring an affordable, sustainable and diverse energy supply
Ireland’ssituationasanislandonthepe-ripheryofEuroperendersitparticularlyvul-nerabletodisruptionstothesupplyorpriceofoil,gasorelectricitywhichwouldhavesignificanteconomic,socialandcompetitiveimpacts.Suchdisruptioncouldarisefromnaturaldisaster,economictrendsorgeo-politicalchange,suchasBrexit,disruptiontooilsuppliesintheMiddleEast,RussiansanctionimpactsongassuppliesandOPECcuts.
BrexitposesaparticularriskasIrelandim-portsthevastmajorityofitsenergyrequire-ments,oil,gasandtransportfuels,fromorviatheUK.ThepotentialimpactofBrexitontheSingleElectricityMarketisalsoofparticularnote.Thisprovidesanaddedimpetustoincreasetheuseofourrenew-ableresourcesandtodiversifyoursourcesofsupplybydevelopingfurtherelectricityinterconnectiontoneighbouringmarketsincludingFrance.
AsIrelandelectrifiesvitalservices,suchastransportandheating,whichwillbenec-essarytomeetclimatechangeobligations,thechallenges,developmentcostsandrisksaroundenergysecuritywillcontinuetoshiftandevolve.Withenergydemandincreasingfromagrowingpopulationandeconomy,thereisarealneedtoensurethatwecanbuildsocietalsupportandacceptanceto
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developappropriatelevelsofinfrastructuretoservicethisgrowth.
AlargeproportionofIreland’senergyneedsaremetthroughimports-circa66percentin2017.However,itisworthnotingthatindig-enousenergyproductionisincreasing-from12percentofthetotalprimaryenergysupplyin2015to34percentin2016.ThisisinpartduetothecomingonstreamofnaturalgasproductionfromtheCorribproject.Increasinglevelsofrenewableenergywillhelpoffsetourdependencyonimportedfossilfuels,intro-ducemorecertaintyintheenergyfuelmixandmoveIrelandtowarditsfuturerenewableen-ergytargetsassetoutintheNationalEnergyandClimatePlan(NECP).
Ensuringanenergysupplythatisnotonlyaffordable,sustainableanddiversebutalsosecurewillbeextremelyimportantaspres-sureincreasesontheworld’sresourcesduetoclimatechangeandincreasedenviron-mentalconcerns.Therearealsogeopoliticalimplicationscontributingtothisrisk,withinternationalrelationsandtensions,includingincreasedpressureonglobalfreetradeagree-ments,creatingdoubtoverthesecurityandpriceofenergysupply.
Inthelastfewyears,thepriceoffossilfuels,particularlyoil,havebeenmorevolatile,withinternationalpricesbeginningtoriseafteraperiodofsustainedlowprices.Thishasbeenpassedthroughtotheconsumerwithpriceincreasesevidentinthegas,electricityandtransportfuelsectors.
5.3. Delivery of Public Infrastruc-ture
IrelandwasagainthefastestgrowingeconomyintheEUin20182,anditspopulationiscon-
2 OnthebasisofGDP;https://www.cso.ie/en/releasesandpublications/er/na/quarterlynationalaccountsquarter42018/
tinuingtogrow,expandingby3.8percentovertheinter-censalperiod2011-2016.Thiscontext,coupledwithanunder-sup-plyofhousingandassociatedaffordabilityissues,atighteninglabourmarketandthecontinuedstrengthofeconomicgrowth,couldgiverisetooverheatingintheecono-my(seeSection2.4formorediscussiononrisksaroundoverheating).ThisbringswithittheriskofnegativeimpactsforIreland’scompetitivenessandvalueformoneyconcernsfortheStateintermsofcapitalprogrammes,aswellasfortheindividualconsumer.
Followingasignificantreductioninpubliccapitalexpenditureoverthecourseoftherecession,thelevelofcapitalexpenditurehasincreasedastheeconomyhasreturnedtogrowth,andthepublicfinancesrecov-ered.However,whileProjectIreland2040waslaunchedinFebruary2018,andsetoutboththe20-yearNationalPlanningFrame-work2040andadetailedcapitalinvest-mentplanfortheperiod2018to2027(theNationalDevelopmentPlan2018-2027),risksaroundcapacityconstraintswhichcouldprovechallengingforitsfullimple-mentationareapparent.Inparticular,risksintermsofbothinstitutionalcapacityandcapacityintheeconomyincludingskillsconstraintscanbeseen,withskillscon-straintsparticularlyevidentintheconstruc-tionsector.ThesechallengescouldhindertheimplementationanddeliveryofprojectsundertheNDPandNPF,withtheassoci-atedriskofcontributingtopriceinflationiftheseconstraintsarenotalleviatedinordertoensureinfrastructureconstraintsareaddressed in a sustainable way3.
By2040anadditionalonemillionpeoplewillliveinIreland,almostaquarterofwhom
3 Inresponse,theGovernmenthasestablishedtheConstructionSectorGroupwhichwillleadthedevelopmentofpoliciesandindus-trypracticeswhichcandriveanimprovementinproductivity,attractyoungpeopletopursuecareersintheconstructionsectorandhelptheindustrybecomemoreenvironmentallysustainable.
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willbeover65(doublethecurrentlevels).Anadditionaltwo-thirdsofamillionpeoplewillworkhere,andanadditionalhalfamillionhomeswillbeneededtoaccommodatethisgrowth.
Aplan-ledapproachtoinfrastructuralinvest-mentisthereforevital.Historically,constraintsonpublicfinancesandamarket-anddevel-oper-drivendevelopmentenvironmenthasresultedininfrastructurefollowing,ratherthandriving,changeanddevelopmentforthebenefitofsociety.Failingtorenewanden-hanceourinfrastructuralcapabilitiesthroughastrategicplanwillimpactoncompetitiveness,qualityoflifeandourabilitytomeetnewenvi-ronmentalchallenges.
Preparingforandmanagingprogressiveandsustainablegrowthrequirescarefulprepara-tionandplanningforallregions.Inaddition,decouplinggrowthfromaddingtoenviron-mentalpressuressuchasclimatechangeanddecliningbiodiversityiscritical.Inresponse,theNationalPlanningFrameworkwasdevel-opedinparallelwiththeNationalDevelop-mentPlan.Thestrategiescombinetopres-entamapforeffectivespatialplanningandstrategicinvestmentininfrastructure,whichwillallowIrelandtoaccommodateanticipat-edpopulationgrowthwhileensuringgrowthcontinuesinabalancedway.
TherisksandimplicationsofnotdeliveringontheobjectivesinProjectIreland2040areclear.Thedeliveryandmaintenanceofcom-petitively-pricedworld-classinfrastructure(e.g.energy;telecoms;transport;waterandenvironmentalservices)andrelatedservicesiscriticaltosupportcompetitiveness,whichinturndeterminesthesustainabilityoflivingstandards.Inadditiontothecapacityandskillsconstraintsoutlinedabove,theNationalCompetitivenessCouncil(NCC)quotesIMFestimateswhichshowthatanincreaseof1percentagepointofGDPininvestmentspend-
ingcanincreaseoutputbyapproximately0.4percentinthesameyearandby1.5percentfouryearsaftertheincreaseininvest-ment.4 Overall, in delivering upon the ob-jectivesofProjectIreland2040,itisimport-anttoensurethatefficiency,effectivenessandvalueformoneyremainatthecentreofprogrammeandprojectimplementation.
TheabilityoftheStateanditsagenciestodeliverinfrastructureprojectsontimeandonbudgetiscritical.WhileIrelandhasmademuchprogressindeliveringprojectsontimeandwithinbudgetoverrecentyears5, withprojectscominginonbudgetacrossmostsectors,itisclearthattherecentexperienceofcertainprojects,suchastheNationalChildren’sHospital,exceedingtheirinitialcostestimatesmustbedrawnupon,andlessonslearned,toensurethatthisriskisavoidedinfuture.Arangeofreformsarethereforebeingprogressed,includingtherevisionofthePublicSpendingCodeandthedevelopmentofthenextgenerationoftheCapitalWorksManagementFrame-work6intheOfficeofGovernmentPro-curementtoensurebetterprojectappraisalmechanisms,morethedeploymentofstrongercommercialskillsinthedeliveryofprojectsandbetterestimationandmanage-mentofprojectcosts.
Furthermore,inadditiontopotentialriskstocross-borderinfrastructureprojectsinthecontextofBrexit,impactsonroadinfra-
4 NationalCompetitivenessCouncil(2017)Ireland’sCompetitive-nessChallenge,availableat:https://dbei.gov.ie/en/Publications/Pub-lication-files/Irelands-Competitiveness-Challenge-2017.pdf
5Inparticular,recentyearshaveseenmajorprogressintheprofes-sionalismofprojectmanagementinthewatersector,motorwaysandpublictransportarea,withanormnowwell-establishedthatallsuchprojectsshouldcomeinontimeandonbudget.Reformsarecurrent-lybeingdevelopedwhicharedesignedtoextendthesamelevelsofdiscipline,professionalismandperformanceacrossthepubliccapitalprogrammemorebroadly.
6 TheCapitalWorksManagementFramework(CWMF)isastruc-turethathasbeendevelopedtodelivertheGovernment’sobjectivesinrelationtopublicsectorconstructionprocurementreform.Itconsistsofasuiteofbestpracticeguidance,standardcontractsandgenerictemplatedocuments.Allthedocumentsthatmakeuptheframeworkareavailableonline.
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structurefromanincreaseinsevereweatherevents, and unforeseen budgetary pressures onplannedcapitalfundingoverthecourseofProjectIreland2040,asignificantthreattodeliveryofProjectIreland2040isrisinglevelsoflitigationleadingtodelaysininfrastructuredelivery.Thereisalsoariskthatthegrowinginfluenceofsocialmediamaybecomearele-vantfactorinthecontextofoppositionofcit-izensandcommunitiestotheimplementationofinfrastructureprojects.Widercommunitieshaveinsomecasesopposedprojectsdespiterigorousplanning,environmentalassessmentandconsultationprocesses.Enhancedmech-anismstocreatebettercommunityownershipofandparticipationinrequiredinvestmentprojectsmaygosomewaytomitigatingthisoppositionbyallowingthosemostaffectedtobenefitmoredirectlyfromthedevelopmentofsuchinfrastructure.Ireland’sdevelopmentconsentsystemsneedtoberobustandeffi-cienttomaximisecertaintyandminimisedelayinconvertingcapitaltoprojectsthatdeliver.
5.4. Food safety Potentialrisksaroundfoodsafetyandani-maldiseaseclearlyrepresentbothahumanhealthriskand,asaconsequenceofthat,riskstointernationaltradeinIrishfood.Ourfoodsafetyandproductionstandards,whichincludeafavourableanimalhealthandwelfarestatus,arekeytoconsumerconfidenceinIrishfoodanddrinkproductsbothathomeandabroad.Whilethepossibilityoffoodcontam-inationoranoutbreakoffood-bornehumanillnessclearlyrepresentsarisktothehealthofcitizens,afoodsafetyincidentofIrishoriginoramajordiseaseoutbreakinfarmedanimalsinIrelandcouldalsojeopardiseinternationaltrade in Irish food.
Anysuchadverseincidentcouldleadtoim-mediateexclusionfromcertainmarketsanditcouldtakeaconsiderableperiodoftimeto
recoverconsumerconfidenceandmarketshare.Giventhevitalimportanceoftheagri-foodsector,anditshighdependenceonexports,thiswouldleadtosignificantimplicationsfortheIrisheconomy,partic-ularlyinruralareas.Theagri-foodsectorishighlyexportdependent.In2018,thevalueofagri-foodexportswasover€13.7billion,representingagrowthof74percentsince2009.41percentor€5.55billionofthisisexportedtotheUK,leavingthesectorpar-ticularlyexposedtorisksrelatedtoBrexit.
5.5. Supply and Affordability of Housing
OneofthemostcriticalchallengescurrentlyfacingtheStateisthesupplyofhousing.Housingsupply,bothsocialandprivate,isessentialforsocietalwell-beingandeconomicgrowth.However,housingandrelatedmarketshavedisplayedmarkedvol-atilityinrecentdecades,includingthepricecorrectionduringtherecessionyears,whichactedasasevereshocktotheconstructionsector,inadditiontowiderfiscal,consump-tion,creditmarketandothermacro-eco-nomicimpacts.
Thishasnegativelyaffectedthecountrybothsociallyandeconomicallywithchal-lengesintheprovisionofsocialhousinginthefaceofincreaseddemand,lackofaf-fordabilityforthoseonaverageincomes,anincreaseinhomelessness,andconstraintsoncompetitiveness.
Underlyinghousingdemandhasoutpacedactualsupplyinrecentyears,manifestinginstrongergrowthinhousepricesandrents,withsuchincreasesbeingrapidinDublinandotherurbanareascomparedwiththerestofthecountry.HousingundersupplyhasbeencompoundedbytherapidgrowthoftheIrisheconomyinrecentyearsresult-
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inginaffordabilityissuesandrentalpropertypricesrisingabovetheirpreviouspeaks.
Thelackofaffordableaccommodationhastranslatedtorisinglevelsofhomelessness,withsignificantsocialandfinancialcosts.Inadditiontotheincreasednumberofroughsleepersrecordedinrecentyears,homelessfamilieshavebeenlivingforlongperiodsoftimeinemergencyaccommodationwithconsiderableimpactsonfamilylife.Difficultiesaccessingaffordableaccommodationareamajorsourceofconcernformanypeople.
Thereisnowagrowingriskaroundtheissueofaffordabilityas,evenassupplyincreases,affordabilitypressurespersist.Thisisofpartic-ularconcerninIreland’scities.Thesepressuresmayfurtherexacerbatealreadyincreasingwagepressures,whichmaythenleadtoafur-therincreaseinhouseprices,whichcouldinturnresultincontinuingaffordabilitychalleng-es.Intermsofincreasingwagepressuresfromthepublicsector,suchrisksarelinkedwithincreasingexpectationsforpublicexpenditure,whichisdiscussedaboveinSection4.3.
Collectively,thesechallengespresentarisktothecontinuedrelativecompetitivenessoftheeconomy,withpotentiallyadverseimpactsonIreland’sabilitytocontinuetoattractForeignDirectInvestment(FDI),asavailabilityofhous-ingisakeyconcernforlargemulti-nationalsconsideringlocatinghere.
Currently,pressuresonthehousingmarkethaveledtoovercrowdingandloweringofqualityoflife.Theimmediatetaskistomoder-atepricemovementsandimproveaffordabilityinrentalandpurchasemarketsbyencouraginggreatersupplyofhousingintherightlocationsandincreasingthesupplyofsocialhousinginaplannedandsustainablemanner.
Increasingsupplytomeetdemandalsocarrieswithitrisksfortheconstructionindustryand
creditsector,whichisundergoingalengthyandasyetunfinishedrecovery.Alongertermtaskistodampenvolatilityandsup-pressthecyclicalnatureofhousingmarkets,sothatwehaveahousingsysteminwhichrealhousepricegrowth(andrents)donotdeviateforlengthyperiodsfromrealeco-nomicgrowth.WhiletheCSOstatisticsfor2018showthatsupplyofhousingisincreasinginlinewiththegoalsundertheGovernment’sRebuildingIrelandprogramme7, and there isstronggrowthinthesupplyofsocialhousingbylocalauthorities,overallhousingdemandisincreasingtoo,andinthecomingyearshousingshortagesarelikelytoactasaconstraintoneconomicactivityandcom-petitiveness,andreflectoneofthemostprominentrisksandchallengesfacingthecountry.
ThepotentialeffectsofBrexit8, in what-everformitoccurs,arealsolikelytohaveanimpact,withrisksincludingconstraintsontheavailabilityofconstructionmateri-als,impactsonavailabilityofconstructionworkers,impactsonconstructiontimelinesandpotentiallyahigherdemandforhous-ing.TheDepartmentofHousing,Planning&LocalGovernmentcontinuestomonitorthesituationinthisregardandpreparationstomitigatetheeffectsofBrexitcontinue.
7 http://rebuildingireland.ie/
8 https://data.oireachtas.ie/ie/oireachtas/committee/dail/32/joint_committee_on_housing_planning_and_local_government/re-ports/2019/2019-02-07_examining-the-potential-impacts-of-brex-it-on-ireland-s-housing-market_en.pdf
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6. Draft Technological Risks
6.1. Cyber Security 6.2. Impact of Disruptive technology trends on jobs and the economy 6.3. Anti-Microbial Resistance 6.4. Major Pandemics 6.5. Nuclear contamination
6.1. Cyber Security Disruption to critical information infrastructure
Cybersecuritymattersbecausetheextenttowhichsocietyreliesondigitaltechnologyisnowsoall-encompassingthatthistechnologycannolongerbeviewedasbeingataremovefromeverydaylife.Almostallaspectsofourliveshaveadigitaldimension,andtheubiquityofconnecteddevices-the“InternetofThings”(IoT)-hasbroughttrulymassivebenefitstooursocietybuthasalsoopenedupanumberofnewandunpredictablethreatvectors,andawiderangeofsignificantrisksforkeynation-alinfrastructureincludingenergy,transport,telecomssystemsandfinancialsystems.WithIrelandpositioningitselfasatechnologicalsocietywithagrowingdependenceononlineservices1,theimpactofanattackorincidentontheprovisionofservices,andontherepu-tationofbusinessesandthepublicserviceissignificant.
Europolcurrentlyjudgestheriskofcyber-ter-rorismtobeoneofhighpotentialbutlowprobability,thoughtheprobabilitymaybeincreasing.ThisisanissueofgrowingconcernatEUandinternationallevelsreflectingtheimportanceofcontinuingtobuildourexper-tiseandcapacityincybersecuritytoenableustoaddressthesethreatseffectively.
1 Suchasbuild-to-shareandfinancialmanagementSharedServicesprojectswhichrequirenetworkconnectivity,andcloud-basedserviceswhichrequireconnectivityfromanexternalprovider
Inaddition,criminalenterprisesoperatingindifferentpartsoftheworldhavegrowingcapabilitiesintermsoflaunchingdisruptivecyber-attacksandalsoholdingentitiestoransomwheretheysucceedinencryptingbusinessandpersonaldata.Tworecentincidentshighlightthecontinuedthreatofcyber-attacks.OnaEuropeanfront,thedataofhundredsofGermanpoliticians’wasleakedfromregional,nationalandEuropeanparliamentsattheendof2018.Thiscameonfootofalonglineofpreviousattacksonpoliticians,militariesandseveralembassies.Morelocally,thedataofalmost3,500usersoftheLuaswebsitewashackedatthebe-ginningof2019.AccordingtotheEuropeanUnionAgencyforNetworkandInformationSecurity(ENISA)ThreatLandscapeReportfor2018,thethreatofmalwareremainsasthetopcyberthreat,withthethreatofweb-basedattacksandphishingincreasing.Thisindicatesthatthethreatofphishingat-tacks,andotherattacks,maybecomemorefocussed,personalisedandstrategicallytargeted.
ThepossibilityofsuchattacksareincreasedbyrisksincludingtheriseofArtificialIn-telligence(AI)inthecontextofopenplat-formswhichhaveputthesesystemsintothehandsofeveryone,includingmaliciousactors;therisksaroundcriminalsandexter-nalattackersby-passingsecuritymeasuresbyattackingtheauthorisedusersofthesystems;andrisksthroughpersonaltech-
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nology,i.e.asdevicesbecomemoreusefulforusersweriskexposuretoriskthroughtheirowndevicesinteractingwithoursystems.
Theriskoffurtherattacksremains,attackswhichcouldhaveseriouseffectsontheeconomyandonthecohesionofsocietyingeneral2.Thepotentialimpactontheprovisionofserviceshasthepotentialtoleadtocivilunrestinadditiontosignificantdisruptionforcitizens3,whileprolongedorrepeatedinci-dentsriskcreatingabacklashagainstdigiti-zation,withfurthereconomicconsequencesandreputationaldamagetobusinessesandthepublicservice.RelatedtothisistheriskofCyber-activismwherecivilunrestorprotestisexpressedthroughdisruptivepracticesonpublicbodiesorcriticalinfrastructure.
Cyberspaceisanintegralpartoftherules-basedinternationalorder.Thebestguaranteefor a future with an open, free and stable internetisacommonunderstandingamongnationsthatexistinginternationallaw,normsandprinciplesforstatebehaviourontheinternationalstagealsoapplyincyberspace.Toprotectnationalinterests,mitigaterisks,andenhancethesecurityofInternetusers,thereisaneedforcontinuedcyberdiplomacybetweencountries.ThefocusoftheEUisthegovernanceandapplicationofinternationallawincyberspace,includingprotectingthefreeandopenInternet,reducingcybercrime,buildingcapacityinthirdworldcountries,en-hancinginternationalstability,andprotectingthedigitaleconomy.
2 Forexample,theFirstReportoftheInter-departmentalGrouponSecurityofIreland’sElectoralProcessandDisinformationidentifiestheprimarycyber-relatedriskstothesecurityoftheelectoralprocessasDestabilisationEvents,ManipulationoftheElectoralRegister,andDataExfiltration;Seemorehere:https://www.gov.ie/en/news/37e936-government-publishes-first-report-of-the-interdepartmental-group-on-/
3 Forexample,anyattackthataffectstheavailabilityofcashsuchasatBanks,PostOfficesorATMswillrestrictaccesstocashforsocietyanddependingonthedowntimecouldhaveseriouseffectsonthosedepen-dentonSocialProtectionPaymentsandtheeconomyingeneral.
Wehaveseenactivitybynon-stateactorswhoarereadyandwillingtomoveintofillavoidignoredbystates.Thesecurityandresilienceofcyberspacecanonlybefullyachievedthroughcollaborationandcoop-erationwithvariousactors,includingnationstatesandtheprivatesector.
Data fraud and theft
Asmentionedabove,theinternetisakeyenablinginfrastructureforeconomicgrowthand prosperity. Side-by-side with its in-creasingimportance,however,hasbeenagrowthinattemptedcyber-attacks,duetothehighvalueofpersonalandcorporatedata.Althoughtherehavebeensignificantimprovementsinbuildingresiliencetoat-tacks,thiscontinuestobeagrowingchal-lenge for businesses and individuals, and societyingeneral,includinginregardtotheprotectionofgovernmentdigitalassets.
Immediaterisksforbusinessesandindivid-ualsincludethelossortheftofpersonalorbusinessinformation,oreventhede-structionofpropertyorcriticalrecordslikemedicalrecords.Theimpersonationofindi-vidualsinordertomakefraudulenttrans-actionsisamajorissueinvolvingbillionsofeuroglobally.Significantdatabreacheshavebeen reported over the past several years byanumberofmultinationalcompanies.
AnychallengetothequalityofIreland’sdataregulationenvironment,whichhasbeenacriticalfactorinthecontinuingex-pansionandgrowthofthedigitaleconomyinIreland,createsariskofbusinessdisrup-tionaswellasreputationaldamage.Irelandhasthepotentialtoleveragethesignificantexpertisethatexistsinourprivatesector,aswellasinformation-sharingandcooperationwithagenciesinothercountries,inordertoaddressthisrisk.
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Thepublicserviceisalsoamajorcollectorandprocessorofdata.Aspecificriskisthetarget-ingofpublicservicedatarepositoriesandthetheft,exfiltration,denialofaccessto,orcom-promisingof,thatdata.Asuccessfulincidentwouldhavetheimmediateeffectofreducingconfidenceinpublicserviceadministrationandtheuseoftechnologyforpublicservices.
TheGeneralDataProtectionRegulation(GDPR),whichcameintoforceinMay2018,isaregulationtostrengthenandunifydatapro-tectionwithintheEU.Itwillgivetherighttoapersonwhohassufferedmaterialornon-ma-terialdamagetoseekcompensationfromadatacontroller.Asignificantdatabreachcouldresultinsignifi-cantcompensationpaymentsbeingmade.
Thechallengesdiscussedabovearejustsomeofthemanyformsthatcybercrimemaytake.Thecyberdimensiontoconventionalcrimebringswithitsignificantdemandsintermsofthetoolsneededtogatherevidence,identifyperpetratorsandundertakepreventioninitia-tives.Attacksonthedatastoredoncomputersorthesystemsthemselvesisanotheraspectofcybercrimethatposesbothlawenforcementissuesandinsomecases,Statesecurityissues.Theinternationaldimensiontoinvestigatingcybercrimebringswithitmanychallengesintermsofinternationalcooperationandjuris-diction.Therearefurtherchallengesfacedbylawenforcementagenciesincludinglossofdata,encryption,virtualcurrencies,lossoflocation,theneedforexpeditedmeasures,managingonlineinvestigations,andmanagingpublic-privatecooperation,amongstmanymore.
6.2. Disruptive technology trends
Disruptivetechnologytrendsarecontinuouslybringingnewwaysofconductingbusiness,manufacturingproductsandmakingdecisions
whichcoulddisrupttraditionalmethodsandleadtosignificantjobshiftsandlossesinaffectedsectorsandroles.Legislativeandregulatorychallengesmaycomewithadvancesindigitaltechnologies,aswellasthreatstocurrentformsofemployment.Thespeedofadoptionoftechnologicaladvancesisseeingtheemergenceofnewglobalbusinessmodels,products,markets,sectorsandactivities;aswellasdisruptingwaysofworkingandimpactingonskillsneeds.
A2018OECDstudy(NedelkoskaandQuintini)suggeststhat14percentofjobsinOECDmembercountrieshaveahighprobabilityofbeingautomated.Itshouldbenotedthatalternativemodelsandmeasure-menttoolshavebeenusedinotherstudiesinthisareawhichhavegeneratedsignifi-cantlyhigherestimatesofjoblossesarisingfromautomation.Inaddition,andasmen-tionedinSection4.2aboveindiscussingSkilledLabourShortages,whiletheimpactofautomationonjobsisexpectedtovarybetweencountriesandregions,theOECDhavefoundthatonaverageasmuchastwooutofeveryfivejobscouldbesignificantlyimpactedbyautomationoverthenexttwodecades4.Automationislikelytoreplacesomejobs,re-shapeothersbutalsocreatenewones.Therefore,inthecomingyearsitwillbecriticalthatworkerscanacquiretheskillsnecessarytotransitionsuccessfullyastechnologytransformstheworldofwork,includinginthecontextoftheFETSectorintermsofdevelopingintermediatelevelskills.
IntermsofregionalimpactsinIreland,theExpertGrouponFutureSkillsNeeds
4 JobCreationandLocalEconomicDevelopment2018,Pre-paringfortheFutureofWork,seelink:https://read.oecd-ilibrary.org/employment/job-creation-and-local-economic-develop-ment-2018_9789264305342-en
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(EGFSN)publishedareport5inDecember2018,whichfoundthatDublinistheleastatriskfromautomation(2percentathighrisk,mainlyinRetailandHospitalitysectors),whiletheMidlandsregion(5percentathighriskand64percentatmediumrisk)andBorderregion(5percentathighriskand62percentatmediumrisk)aretheregions’mostatrisk.GiventhelikelyimpactofBrexitontheseregions,andwithunemploymentalreadyhigher than average in these two regions, this isparticularlychallenging,especiallyinlightofconcernsofruralandregionalimbalanceexpressedearlierintheReport(Section4.4).
Inaddition,arecentUCCstudy6identifiesthetownsinIrelandthataremostatriskfromjobautomation7.Thereportfindsthattheauto-mationriskfortownsismainlyexplainedbypopulationdifferences,educationlevels,agedemographics,thepro-portionofcreativeoccupationsinthetown,thetownsize,anddifferencesinthetypesofindustriesacrosstowns.TheresultssuggestthatthepatternofjobriskfromautomationacrossIrelanddemandspolicythatisnotone-size-fits-all,butratheralocalised,place-based,bottom-upapproachtopolicyintervention.Thereportfoundwidedifferencesbetweentheaveragenumbersofjobsathighriskofautomationacrosstowns,fromalowof26percenttoahighof58percent.Inadditiontheanalysisfoundthatmany‘athighrisk’townshave‘atlowrisk’nearbytownsandmany‘atlowrisk’townshave‘athighrisk’neighbours.Theanalysisalsofoundthattherearesomeconcentrationsof‘atlowerrisk’townsandseparately,concentrationsof‘athigherrisk’towns.Forexample,intheDublincityregion,Malahide,SkerriesandDonabateareallatlowerriskofautomation.TheReportpointed
5 EGFSN(2018)‘DigitalTransformation:AssessingtheImpactofDigital-isationonIreland’sWorkforce’Availablehere:http://www.skillsireland.ie/Publications/2018/Digital-Transformation.pdf
6 https://www.ucc.ie/en/media/projectsandcentres/srerc/SRERCWP2019-1_upload.pdf
7 Acrossthe200townswhichhaveapopulationof1,500ormoreusingdatafromthe2016census
outthattownsexposedtoagricultureandmanufacturingshouldbekeyconcernsastheyarelikelytobethetownsmostdis-ruptedbyfutureautomation.Itnotesthatmakingskillsdevelopmentandeducationmorefinanciallyaccessibleandremotelypossiblewillhelptocurb‘braindrain’andunlocklocalcompetenciesinperipheraltowns.
Whilenosectorwillbeimmunetotheimpactofdisruptivetechnology,jobsandfunctionsthatrequiregreaterdegreesofcognition,subjectivethoughtandpersonalinteractionwillbesomewhatcushioned.Theacquisitionofnewskillsisvitaltokeeppacewithadvancesintechnology.Similarly,theavailabilityoftherightskillsisakeyen-ablerofenterpriseperformanceandgrowth.Jobsasweknowthemareundergoingaprocessofchangewiththeskillsrequiredwithmanyjobschangingsignificantly.Nu-merousacademicstudiesandreportshaveidentifiedthatre-skilling/up-skillingoftheworkforceisarequirementofthefutureasjobsbecomeincreasinglydigitalised.Thusitisessentialthattheworkforceisequippedwiththerequisiteskillstofullyunlockthebenefitsofthedigitaleconomy.
Inaddition,therearerisksassociatedwithdisruptivetechnologiesaroundfailingtocommunicatethevaluethattheycanprovideingrowingtheeconomy,andfailingtocapitaliseoneconomicopportunities,andfailingtodeploytheminpublicsectorrapidlytoprovideconcurrence(andensurevalueformoney)withtheprivatesector.Failingtoassessandmitigatetheadversesocietal,workplaceandsocialimpactofdisruptivetechnologiesonthelivesofourcitizens,associatedregulatorychallenges,andfailingtoadequatelyplanforemploy-mentshifts,arealsoriskstobeconsideredand addressed at an early point.
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Technologicaladvanceswillalsoleadtonewjobsbeingcreated,aswellaseconomicben-efitsassociatedwithmoreefficientwaysofdoingbusiness.AccordingtoPwCanalysis,smartautomationhasthepotentialtoadd$15trilliontoglobalGDPby2030.How-ever,thereisariskthatthesenewjobswillbelessdependentonhumanlabour,orwillrequiresignificantre-skilling.Thescaleofthere-skillingproblemisbecomingakeypriorityfortheEuropeanCommission,asithasbeensuggestedthatinthenearfuture,90percentofexistingjobswillrequiresomedegreeofdigitalskills.Whilethispresentsbothoppor-tunitiesandthreatstheresearchgenerallyin-dicatesthat,acrossallcountries,workerswithalowerlevelofeducationareatthehighestriskofdisplacement.Asartificialintelligence(AI)continuestodevelopitcouldalsobethatinthefuturehigherskilledoccupationsmayfacehigherriskofautomationthanthecur-rentstateoftechnologyimplies.WhilethisisnotariskuniquetoIreland,itrequiresactionsacrossarangeofareasincludingasignificantincreaseinourdeliveryoflifelonglearningandskillsdevelopmentaswellastheneedforcontinuedinvestmentinthedigitaleconomyandR&D,andappropriatesocialsafetynetmeasures.
IrelandhasparticipatedinthecreationandagreementoftheEUCoordinatedPlanontheDevelopmentandUseofArtificialIntelligencewhichwaspublishedbytheEuropeanCom-missioninDecember2018.ThePlansetsoutaframeworkofissues,togetherwithsuggest-edinitiatives,whichneedtobeaddressedbyMemberStatesinordertoenabletheEUtocompetegloballyinthefieldofAI.ThePlanalsospeakstotheneedtoensurethatAIsolutionsareethicallysound,makingsurethattheyarefreefrombiasandunintendedconsequences.IrelandiscurrentlydevelopingaNationalArtificialIntelligenceStrategytoalignwithEU-relatedinitiatives.TheGovern-mentalsoestablished,underProjectIreland
2040,ofa€500millionchallenge-basedDisruptiveTechnologiesInnovationFund,reflectingtheimportanceofaction,andinvestmentinthisarea.
6.3. Anti-Microbial Resistance
Anti-microbialresistance(AMR)isanin-creasingconcernacrosstheglobe,withtheWorldHealthOrganisation(WHO)describ-ingitas“acrisisthatmustbemanagedwiththeutmosturgency”8.Antimicrobialshavebeenessentialfortheprovisionofmodernmedicalcaresincethe1940s,substantial-lyreducingmortalityandmorbidityfrominfectiousdiseasesandcomplications.Theseadvancesarenowbeingputatriskbyasignificantriseintheprevalenceofbacteriathatareresistanttooneormoreantimicrobials,withknock-onconsequencesforhumanhealthaswellastheeconomyintermsofmoreexpensivetreatmentcostsandlostproductivity.
TheWorldEconomicForum’sGlobalRisksReportfor20189includedareflectionontheevolutionofthisriskontheworldstage.ThisquotedresearchfromtheWorldBank,theUKGovernmentandtheWellcomeTrustestimatingAMRwouldexertadragonglobalGDPofbetween1.1percentand3.8percentbetweennowand2050,aswellascosting$100trillionandkilling10millionpeople over that period. That report also notedthatresistancetoeventhestrongestantibioticscontinuestospread,astheyareincreasinglyusedtocombatdiseasesresistanttoweakerantibiotics.Itnotesthatresearchconductedin2017demonstratedthatbacteriaresistanttocolistin,the“anti-bioticoflastresort”,hadspreadthroughouttheworldwithin18monthsoftheresistant
8 WEFGlobalRisksReport2018http://reports.weforum.org/glob-al-risks-2018/anti-microbial-resistance/
9 https://www.weforum.org/reports/the-global-risks-report-2018
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strainfirstemerging.Additionally,theOECDpredictthatresistancetosecondandthird-lineantibiotics,whicharealastlineofdefenceintreatinginfections,isexpectedtoincreaseby70percentacrossOECDcountriesby2030,overtheanti-microbialresistancerateseenin200510.
Theextensiveuse,misuseandoveruseofantimicrobialsinhumanhealthhasincreasing-lyraisedlevelsofantimicrobialresistanceinawiderangeofpathogensinallcountriesandinpatientsofallagegroups.Intheanimalpop-ulation,therateofdevelopmentandspreadofantimicrobialresistancehasalsoincreased.Theincreasingglobaldemandforaffordablefood,andinparticularanimalprotein,hasledtointensificationincertainanimalsectors,whichcanresultinhigherpotentialrisksofdiseaseoutbreaks.Thereforeastrongrelianceonavailabilityofeffectiveantimicrobialstotreatdiseaseandprotectanimalwelfarehasoccurred.
Therearealsoincreasingconcernsabouttheroletheenvironmentmayplayinthespreadofclinicallyrelevantantimicrobialresistance.Environmentalregulatorsmonitorandcontrolsomeofthepossiblepathwaysresponsibleforthereleaseofantimicrobialsintotheenviron-ment,e.g.throughwatercontaminationandagriculturalrun-off.Howeveragreaterunder-standingofmanyofthekeyissuesinrelationtotheenvironmentalrolewillfurtherenhancethedeliveryofenvironmentalprotectionfromAMR.Theriseinantimicrobialresistanceisthusoneofthegreatestpotentialthreatstohumanhealthatglobal,Europeanandnationallevelswithseriousconsequencesforpublichealth,animalhealthandwelfare.Giventhatthenaturalresponsesofmicrobestotheuseofantimicrobialsisresistance,theythereforeneed to be used as prudently as possible to retaintheirefficacy.
10 OECDStemmingtheTideReport,October2018.https://read.oecd-ilibrary.org/social-issues-migration-health/stemming-the-superbug-tide_9789264307599-en#page18
6.4. Major Pandemics
Everyfewyearsanewpathogenemerges.Thevastmajorityarevectorborneand,asaresult,arenotasignificantriskinIreland.
PandemicinfluenzawasdeterminedasthereasonableworstcasescenariointheIrishcontext.Theinfluenzavirusmutatescontinuouslyandtherehavebeen12pandemicinfluenzassince1895,themostrecentofwhichwasin2009.Historicalevidenceshowsthatsuchpandemicshavethepotentialtocausedeathandillnessonasignificantscaleandtodisruptnormalsocialandeconomicactivity.Advanceplan-ningandpreparednessarecriticaltohelpmitigatetheimpactofapandemic.Whenthenextpandemicoccurs,itwillrequireawhole-of-governmentresponsetoensurethatthreattopublichealthanddisruptionofservicesandsocietyareminimised.
TheInternationalHealthRegulations(IHR)(2005),togetherwithDecisionno.1086/2013/EU,providesthelegalframe-workforthetimelyandeffectiveman-agementofabroadrangeofseriousandpotentiallyinternationalpublichealthrisksand events. Through these, Ireland is rep-resentedontheEUHealthSecurityCom-mittee,andtheDepartmentofHealthandtheHealthServiceExecutivemaintainclosecontactwiththeEuropeanCentreforDis-easePreventionandControlandtheWorldHealthOrganisation.Theseclosecontactsareusedtomonitor,predictandmitigatethespreadandimpactofpandemicinfluen-za,andotherinfectiousdiseases.
6.5. Nuclear contamination
Contaminationasaresultoffalloutfromanuclearaccidentisariskthathastobeacknowledged,despitethelowprobability
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associatedwiththisforIreland.Obviousriskstopublichealthandwell-beingarise,aswellasthepotentialfornegativeeconomicimpact.Thisissignificant,inparticularinrelationtopotentialreputationalrisktotheagriculturalsector.ThereisariskofconsumerresistancetoevenminisculelevelsofradioactivityinthefoodchainandIreland’scompetitorsportray-ingIreland’sfoodproductsasunsafe,werecontaminationtooccur.
ApaperpublishedbytheEconomicandSocialResearchInstitute(ESRI)examinedthepo-tentialcosttotheIrisheconomyofanumberofscenariosinvolvingvaryinglevelsofcon-tamination11.Whilestressingtheverylowriskofanuclearaccidentandwithoutmeasuringthelikelihoodofanyparticularscenario,thestudyassessedpotentialcoststoIrelandinfourhypotheticalscenarios:costsrangedfrom€4.1billioninascenariowithnocontamina-tionwherelossesarereputational,throughto€115billion,wherehighlevelsofradioactivecontaminationwouldnecessitateaprolongedperiodoffoodcontrolsandagricultureprotec-tiveactions.Thepaperalsoestimatesthatin-directlossesintheIrisheconomywouldrangefrom€287millioninascenariowherelossesarereputational,to€44billioninascenariowithhighlevelsofcontamination.
TheintersectionsofthisriskwithFoodSafetyarehighlightedintheESRIpaperwhereitisstatedthatmeatanddairyproduceaccountfor57percentofthelostvalue,wherelossesarepurelyreputational.Inthemostextremescenariodealingwithhighlevelsofcontamina-tion,thetotalvalueoflossofexportmarketsissome€84bn,withmeat,dairyandseafoodproduceaccountingforover€50bn.
Inviewofthepotentiallycatastrophichuman-itarianconsequencesofanucleardetonation,
11 ESRIDisastercostassessment:Acasestudyofthepotentialeco-nomicimpactofanuclearaccidentaffectingIreland:https://www.esri.ie/events/disaster-cost-assessment-a-case-study-of-the-potential-econom-ic-impact-of-a-nuclear-accident-affecting-ireland
itwillremainimportanttocontinueinter-nationalengagementrelatingtonuclearsafety,aswellasonnucleardisarmamentandnon-proliferation.
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Annex 1. Government Task Force on Emergency Planning – National Risk Assessment for Ireland 2017
ThisNationalRiskAssessmentcomplementsthedetailedriskassessmentworkcarriedoutbytheGovernmentTaskForceonEmergencyPlanning,chairedbytheMinisterwithre-sponsibilityforDefence,whichisconductedinthecontextoftheStrategicEmergencyManagementNationalStructuresandFrame-workapprovedbyGovernmentin2017andIreland’sreportingcommitmentsundertheEUCivilProtectionMechanism(UCPM).ThroughtheOfficeofEmergencyPlanning,undertheDepartmentofDefence,athreeyearNationalRiskAssessmentprocessandmethodologyisapplied,whichfocusesonrisksrelatingtopotentialcivilemergenciesatnationallevel.
TheWhitePaperonDefence(2015)setsouttheGovernment’scommitmenttomain-tainandfurtherdeveloparobuststrategicemergencymanagementframework,andtheGovernmentTaskForce(GTF)onEmergencyPlanningconductsacyclicalprocessofhazardanalysisandriskassessmentasanessentialstepintheprocessofidentifyingthechalleng-esthatmayhavetobeaddressedbysociety,particularlyinthecontextofemergencyman-agement.
TheGTFriskassessmentprocesswasfirstcar-riedoutin2012andledtothepublicationofthefirstNationalRiskAssessmentforIreland2012,whichwasacceptedbytheEuropeanCommissionasmeetingtherequirementsoftheUnionCivilProtectionMechanism(UCPM).Followingareviewin2016bytheOfficeofEmergencyPlanningandDublinCityUniversityBusinessSchool,theGTFincorpo-ratedanumberofmethodologicalchangestothisprocess,whichweredesignedtoreflectcurrentriskmanagementstandardsandinter-nationalgoodpractice.
ThisledtotheproductionofafurtherNationalRiskAssessmentforIreland2017,whichconsideredspecificrisksrelatingtopotentialcivilemergenciesatnationallevelandwasadoptedbytheGTFinMarch2017andwassubsequentlynotedbyGovern-ment,submittedtotheEUCommissionandpublishedatwww.emergencyplanning.ie.
TheNationalRiskAssessmentforIreland2017hasspecificallyidentifiedtwentykeynationalrisksthatwillbeusedtoguidefuturemitigation,planningandpreparationactivitiesatnationalandregionallevelandwillhelpinformfutureassessmentsofriskmanagementcapabilities.Floodingremainsoneofthehighestlikelihood/impactrisksonthisNationalRiskMatrix2017,withInfectiousDisease,FoodContamination,NuclearIncidents(abroad),DisruptiontoEnergySuppliesandNetworkandinforma-tionSecurity/CyberIncidentshighlightedashavingpotentiallythehighestimpactonIreland.
InlinewithgoodpracticeandtheUCPMrequirements,whicharecurrentlyunderreview,theaimistorepeatthisprocessatthreeyearlyintervalssoastocapturenewandemergingthreatsandchangingtrends.TherevisedUCPMandthesubsequentGuidelinesbeingdevelopedwillrequirePar-ticipatingStatestoreportontheirNationalRiskAssessmentsandRiskManagementCapabilityAssessmentsagainbytheendof2020.
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