The Global Risks Report
The Global Risks Report 2022 produced by the World Economic Forum identifies key risks resulting from current economic, societal, environmental and technological tensions. The key findings of the survey and the analysis are summarised here.
Produced in partnership with Marsh McLennan, SK Group and Zurich Insurance Group, the Global Risks Report analyses the results of the latest Global Risks Perception Survey (GRPS) which consults with “1,000 global experts and leaders”.
By its nature, the report makes a disturbing read. But its findings provide a useful view of global risks in 2022. The key findings broadly fall into these areas:
- Geo-economic and geo-political confrontations
- Environmental risk factors
- Societal concerns
- Economic recovery
- Digital systems and cyber security threats
- Migration concerns
- Risks in space
Geo-economic and geo-political confrontations
As the current crisis involving Ukraine and Russia is so graphically demonstrating, geo-economic and geo-political confrontations are considered as critical threats to the world in the medium to long term and one of the most potentially severe risks over the next decade.
Environmental risk factors
When looking forward to the next ten years, environmental risks are the most concerning to the respondents, as well as the most potentially damaging to people and our planet, with climate action failure, extreme weather, and biodiversity loss ranking as the top three most severe risks.
The report noted: “Climate change is already manifesting rapidly in the form of droughts, fires, floods, resource scarcity and species loss, among other impacts. In 2020, multiple cities around the world experienced extreme temperatures not seen for years.”
However, there is a lack of faith in the world’s ability to contain climate change “not least because of the societal fractures and economic risks that have deepened”.
There’s a general view that the COVID-19 lockdown restrictions must have impacted positively on global warming. But this wasn’t necessarily the case as the report pointed out: “While COVID-19 lockdowns saw a global dip in greenhouse gas (GHG) emissions, upward trajectories soon resumed: the GHG emission rate rose faster in 2020 than the average over the last decade.”
The report highlighted the difficulties in reducing carbon: “Countries continuing down the path of reliance on carbon-intensive sectors risk losing competitive advantage through a higher cost of carbon, reduced resilience, failure to keep up with technological innovation and limited leverage in trade agreements.”
The report continued: “Yet shifting away from carbon-intense industries, which currently employ millions of workers, will trigger economic volatility, deepen unemployment and increase societal and geopolitical tensions. Adopting hasty environmental policies will also have unintended consequences for nature –there are still many unknown risks from deploying untested biotechnical and geoengineering technologies – while lack of public support for land use transitions or new pricing schemes will create political complications that further slow action.”
In this area, the report concluded: “A transition that fails to account for societal implications will exacerbate inequalities within and between countries, heightening geo-political frictions.”
Through the COVID-19 pandemic, the three societal risk factors identified as having deteriorated the most by the Global Risks Perception Survey are: social cohesion erosion, livelihood crises and mental health deterioration, and these are considered among some of the most significant threats to the world in respect political frontiers.
Divergent economic recovery
According to the report: “The economic fallout from the pandemic is compounding and widening digital, education and skills gaps that risk splitting the world into divergent trajectories. In some countries, rapid vaccine rollout, successful digital transformations and new growth opportunities could mean a return to pre-pandemic trends in the short term and the possibility of a more resilient outlook over a longer horizon. But many other countries will be held back by low rates of vaccination, continued acute stress on health systems, digital divides and stagnant job markets. These divergences will complicate the international collaboration needed to address the worsening impacts of climate change, manage migration flows and combat dangerous cyber-risks.”
The report continued: “Debt crises were identified as an imminent threat to the world for the next two years, but GRPS respondents believe they will reach their most critical point in three to five years. Government stimulus was vital to protect incomes, preserve jobs and keep businesses afloat, but debt burdens are now high and public budgets will continue to be stretched after the pandemic, just when they are needed for financing green transitions.”
Digital systems and cyber security threats
The report documents the growing dependency on digital systems which has been intensified by COVID-19 : “Over the last 18 months, industries have undergone rapid digitalization, workers have shifted to remote working where possible, and platforms and devices facilitating this change have proliferated.” The report goes on to highlight how cybersecurity threats are growing: “In 2020, malware and ransomware attacks increased by 358% and 435% respectively – and are outpacing societies’ ability to effectively prevent or respond to them. Lower barriers to entry for cyberthreat actors, more aggressive attack methods, a dearth of cybersecurity professionals and patchwork governance mechanisms are all aggravating the risk.”
The report also noted the intangible risks linked with cyber security, such as disinformation and lack of digital safety which can impact on public trust in digital systems and cooperation between nations: “As attacks become more severe and broadly impactful, already sharp tensions between governments impacted by cybercrime and governments complicit in their commission will rise as cybersecurity becomes another wedge for divergence – rather than cooperation – among nation-states.”
The report also notes that: “Digital inequality is seen as an imminent threat to the world as 3 billion people remain offline.”
The report covers the topic of migration: “Growing insecurity resulting from economic hardship, intensifying impacts of climate change and political instability are already forcing millions to leave their homes in search of a better future abroad. “Involuntary migration is a top long-term concern for GRPS respondents, while 60% of them see “migration and refugees” as an area where international mitigation efforts have “not started” or are in “early development”.
The report continued: “In 2020, there were over 34 million people displaced abroad globally from conflict alone – a historical high. However, in many countries, the lingering effects of the pandemic, increased economic protectionism and new labour market dynamics are resulting in higher barriers to entry for migrants who might seek opportunity or refuge.”
Risk in space
The report also highlighted that while humans have been exploring space for decades: “Recent years have witnessed increased activity, not only creating new opportunities but also signalling an emerging realm of risk, particularly with growing militarization and weaponization in the arena. New commercial satellite market entrants are disrupting incumbents’ traditional influence over the global space commons in delivering satellite services, notably internet-related communications. A greater number and range of actors operating in space could generate frictions if space exploration and exploitation are not responsibly managed. With limited and outdated global governance in place to regulate space alongside diverging national-level policies, risks are intensifying.”
From Insights to Practice
As well as reporting on the results of the Global Risks Perception Survey, the World Economic Forum (WEF) has also worked with two of its principal risk communities, the Chief Risk Officers Community and the Global Future Council on Frontier Risks, to identify five practical lessons to improve organisational practice for resilience for 2022. These are:
- Ground analyses in delivery requirements.
This guidance suggests it’s not always useful to begin risk analysis with specific risks, but with the possible failures or damage that could impact core business goals: “Working back from these undesirable outcomes makes for a more open assessment of current practices.” This brings a better understanding of the tools and processes that might need to be introduced or enhanced.
- Appreciate vulnerabilities within the broader ecosystem
Organisations are encouraged to examine the broader ecosystem in which they operate as well as their own critical assets and operations: “They should examine their resilience to shortfalls, outages and delays of the third-party assets and services on which they depend, and the tolerances of those who depend on them.”
- Embrace a diversity of resilience strategies
A variety of ways to mitigate crises rather than a single approach is advocated. These could include just-in-case reliability; just-in-time efficiency; back-ups and redundancies; adjusting operational processes to adapt quickly. Additionally, the guidance suggests: “Supportive employee behaviours are as vital as structural measures, especially when empowered by good leadership and effective communication.”
- Connect resilience efforts with other goals.
The guidance points out that many organisational environmental, social and governance (ESG) goals support resilience goals and could be aligned. “For example, shortening supply chains can advance net zero strategies as well as reduce exposure to adverse geoeconomics developments, while strong community relations may help recovery initiatives in the event of a disaster.”
- Consider resilience to be a journey not a destination
The guidance concludes that: “Organisations with leading resilience programmes learn from stress-testing exercises and actual crises to emerge stronger, more supple and better prepared. They are alert to changing circumstances that may demonstrate elevated risks, vigilant in challenging themselves about blind spots and shortcomings that require additional action and eager to adapt response strategies to better achieve critical goals.”
Editor, City Security magazine