Risk awareness

Neil Eisberg | Editor

As a prelude to its rescheduled annual conference (22-26 May) in Davos-Klosters, Switzerland, the World Economic Forum has published its own analysis of risks facing the global community in 2022 and beyond.

The analysis has been compiled in collaboration with professional services firm Marsh McLennan; South Korea’s SK Group; and Zurich Insurance with academic advisers from Oxford Martin School at Oxford University, UK; the National University of Singapore; and the Wharton Risk Management and Decision Processes Center at the University of Pennsylvania, US.

As might be expected top of the list in this Global Risks Report 2022 (weforum.org/reports/global-risks-report-2022), is the climate crisis, followed by growing social divides, heightened cyber risks as well as the uneven global recovery due to the Covid-19 pandemic. The pandemic has impacted global health and economies to an almost unprecedented level and is still leading to restricted economic recovery.

This report, the 17th edition of its analysis, emphasises a general lack of optimism about the future. In this survey of global experts; only one in six is optimistic and only one in ten believes the global recovery will accelerate. The WEF believes the global economy will be 2.3% smaller in 2024, than it would have been without the pandemic. This will be exacerbated by rising energy and commodity prices, inflation and debt.

According to an analysis by another insurance group Swiss Re, the rising temperatures forecast in the climate crisis risk cutting the world economy by $23tn by 2050. Launching the WEF survey and its headlining of the climate crisis, WEF president Børge Brende noted the lack of a focus on implementation of climate control measures following the COP meeting in Glasgow in November 2021 and emphasised the effect that this lack of implementation is likely to have in solving the crisis. A critical aspect to implementation is monitoring and measurement – as Brende pointed out: ‘What you can measure, you can get done.’

As Peter Giger, Group Chief Risk Officer at Zurich Insurance, expressed it: ‘The climate crisis remains the biggest long-term threat facing humanity. Failure to act on climate change could shrink global GDP by one-sixth and the commitments taken at COP26 are still not enough to achieve the 1.5°C goal. It is not too late for governments and businesses to act on the risks they face and to drive innovative, determined and inclusive transition that protects economies and people.’ Giger doesn’t expect that it will be governments but rather stakeholder activities will drive the response to climate change.

Carolina Klint, Risk Management Leader, Continental Europe at Marsh, believes ‘the Covid pandemic has been a distraction from climate impacts’, despite the increasing incidence of drought, fires, floods, as well as scarcity of resources and loss of biodiversity.

There is also the impact of climate change on social cohesion to be considered. According to the report, erosion of social cohesion is a major short-term threat in 31 countries, including even some in Western Europe, due, for example, to disparities in Covid vaccine distribution, stagnant job markets, as well as wealth gaps, with 51m more people globally projected to live in extreme poverty, compared with before the pandemic.

Increasing digitalisation and a growing dependency on digital systems is also having an impact on social cohesion. Apart from an estimated 3.6bn people globally still not being linked to the internet, there are dramatically increasing threats to cyber security. In 2020, for example, WEF says malware and ransomware attacks increased by 358% and 435%, respectively. The WEF believes these attacks are outpacing societies’ ability to effectively prevent or respond to them.

‘With cyber threats now growing faster than our ability to eradicate them permanently, it is clear that neither resilience nor governance are possible without credible and sophisticated cyber risk management plans,’ adds Klint.

Linked to both the climate crisis and the threats to cybersecurity are space risks, says Klint, ‘particularly the risk to satellites on which we have become increasingly reliant, given the rise in geopolitical ambitions and tensions’. As well as monitoring the implementation of emissions reductions, satellites are believed to be a solution for linking individuals to the internet; however, growing militarisation and weaponisation represent a particular risk, along with the destabilising effect of new entrants into the satellite services market. With limited and outdated global governance to regulate space exploration and exploitation, risks are intensifying says the WEF.

Collaboration, whether between governments or businesses will be critical to addressing these risks, according to Saadia Zahidi, WEF Managing Director. ‘Global leaders must come together and adopt a coordinated and multi-stakeholder approach to tackle unrelenting global challenges and build resilience ahead of the next crisis,’ she said.

The WEF points out that most experts believe a global economic recovery will be volatile and uneven over the next three years. Leaders must therefore think outside the quarterly reporting cycle and create policies that manage risks and shape the agenda for the coming years.