By Ella Larina
Climate risks dominate global concerns as the world enters the third year of the pandemic. According to the Global Risks Report 2022 by World Economic Forum, while the top long-term risks relate to climate, the top shorter-term global concerns include societal divides, livelihood crises and mental health deterioration.
Additionally, most experts believe a global economic recovery will be volatile and uneven over the next three years.
Now in its 17th edition, the report encourages leaders to think outside the quarterly reporting cycle and create policies that manage risks and shape the agenda for the coming years. It explores four areas of emerging risk: cybersecurity; competition in space; a disorderly climate transition; and migration pressures, each requiring global coordination for successful management.
In its Global Risks Report 2022, World Economic Forum shares the results of the latest Global Risks Perception Survey (GRPS) in the context of the current global outlook, followed by an analysis of growing divergences in the areas of climate transition, cybersecurity, mobility, and outer space. The report examines the tensions arising from such divergence, spillover effects, consequences for stakeholders, and shocks that could arise. The report concludes with reflections on resilience, drawing from the lessons of year two of the pandemic. The key findings of the survey and the analysis are below.
The report identifies economic stagnation as the most serious challenge persisting from the pandemic. The macroeconomic outlook remains weak, with the global economy expected to be 2.3% smaller by 2024 than it would have been without the pandemic. Commodity prices, inflation, and debt are rising in both the developed and developing worlds. The pandemic and its economic consequences continue to stifle countries’ ability to control the virus and facilitate a sustainable recovery. Along with labour market imbalances, protectionist policies and widening disparities in education and skills, the economic fallout from the pandemic risks splitting the world into divergent trajectories.
“Health and economic disruptions are compounding social cleavages. This is creating tensions at a time when collaboration within societies and among the international community will be fundamental to ensure a more even and rapid global recovery. Global leaders must come together and adopt a coordinated multistakeholder approach to tackle unrelenting global challenges and build resilience ahead of the next crisis,” said Saadia Zahidi, Managing Director, World Economic Forum.
Governments, businesses, and societies are facing increasing pressure to transition to net-zero economies. An aggressive and rapid transition would alleviate long-term environmental consequences but could have severe short-term impacts, such as putting millions of carbon-intense industry workers out of jobs or triggering societal and geopolitical tensions. By contrast, a slower but more orderly transition would prolong environmental degradation, structural fragilities and global inequalities. Divergent trajectories across countries and sectors are creating more barriers to collaboration and cooperation in both scenarios.
Carolina Klint, Risk Management Leader, Continental Europe, Marsh, said: “As companies recover from the pandemic, they are rightly sharpening their focus on organizational resilience and ESG credentials. 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. Similarly, organizations need to start understanding their space risks, particularly the risk to satellites on which we have become increasingly reliant, given the rise in geopolitical ambitions and tensions.”
“Social cohesion erosion”, “livelihood crises” and “mental health deterioration” are three of the five risks seen as the most concerning threats to the world in the next two years. This societal scarring compounds the challenges of national policymaking, limiting the political capital, focus from leaders, and public support needed to strengthen international cooperation on global challenges. The health of the planet, however, remains a constant concern. Environmental risks – in particular, “extreme weather” and “climate action failure” – appear as top risks in the short-, medium-and long-term outlooks. In the medium term, economic risks such as “debt crises” and “asset bubble burst” also emerge as governments struggle to balance fiscal priorities. In the longer-term horizon, geopolitical and technological risks are of concern too – including “geoeconomic confrontations”, “geopolitical resource contestation” and “cybersecurity failure”.
Peter Giger, Group Chief Risk Officer, Zurich Insurance Group, said: “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 an innovative, determined and inclusive transition that protects economies and people.”
The report closes with reflections on year two of the COVID-19 pandemic, yielding fresh insights on national-level resilience. The chapter also draws on the World Economic Forum’s communities of risk experts – the Chief Risk Officers Community and Global Future Council on Frontier Risks – to offer practical advice for implementing resilience for organizations.
The Global Risks Report series tracks global risks perceptions among risk experts and world leaders in business, government, and civil society. It examines risks across five categories: economic, environmental, geopolitical, societal, and technological. Every year the report also analyses key risks to explore further in deep-dive chapters – these could be risks that feature prominently on our survey, those for which warning signs are beginning to surface, or potential blind spots in risk perceptions.