Cost of living crisis and extreme weather events were the highlighted global risks mentioned in the recently released World Economic Forum's (WEF) 18th annual Global Risks Report.
Supply-driven inflation, economic downturn, geoeconomic warfare and loss of social cohesion were other major key threats faced by businesses and governments in the immediate term and coming years.
As 2023 begins, the world is facing a set of risks that feel both wholly new and eerily familiar. We have seen a return of older risks – inflation, cost-of-living crises, trade wars, capital outflows from emerging markets, widespread social unrest, geopolitical confrontation and the spectre of nuclear warfare.
You can read the full report HERE.
Last year's Global Risks Report warned that a divergent economic recovery from the COVID-19 pandemic risked deepening divisions at a time when collaboration was urgently required to address looming global challenges.
Global risks ranked by severity over next two years:
- Cost-of-living crisis
- Natural disasters and extreme weather events
- Geoeconomic confrontation
- Failure to mitigate climate change
- Erosion of social cohesion and societal polarization
- Large-scale environmental damage incidents
- Failure of climate change adaptation
- Widespread cybercrime and cyber insecurity
- Natural resource crises
- Large-scale involuntary migration
Global risks ranked by severity over next 10 years:
- Failure to mitigate climate change
- Failure of climate-change adaptation
- Natural disasters and extreme weather events
- Biodiversity loss and ecosystem collapse
- Large-scale involuntary migration
- Natural resource crises
- Erosion of social cohesion and societal polarization
- Widespread cybercrime and cyber insecurity
- Geoeconomic confrontation
- Large-scale environmental damage incidents
The report is a research centrepiece for Marsh McLennan, and is produced each year in partnership with the World Economic Forum and Zurich Insurance Group. It gathers insights from more than 1,300 risk experts and 12,500 business leaders from around the world, including the Pacific.
The research outlines four principles of preparedness that are important for government and business entities to implement for better handling of future risks.
1. Improving risk identification and foresight
Enhanced risk identification and foresight can be a key enabler for strategic decision-making, agenda-setting and resilience measures. The first task of foresight is to identify future developments, risks and opportunities. Another step to enhance risk foresight is to explore dynamics of change, to map interconnections between risks, including dependencies between critical systems. The need for a systemic view of and approach to global risks is reflected in the rising call for the appointment of national risk and resilience officers.
2. Rethinking future risks
For better planning and preparedness, institutions must de-anchor risk prioritisation from shorter-term incentives. Business leaders and policymakers need to embrace complexity and adopt a dual vision that more effectively balances current crisis management with a longer-term lens.
3. Investing in multi-domain, cross-sector risk preparedness
Actions taken to address current challenges should, at a minimum, avoid exacerbating future risks. As global risks become more intertwined, preparedness also needs to become more of a shared responsibility between sectors, with local and national governments, business and civil society each playing to their strengths.
4. Re-building and strengthening global risk preparedness cooperation
Greater collaboration across industries and between countries, in terms of coordinated funding, research and data sharing, is critical to help identify weak signals of emerging threats at both national and global level. In a complex risks outlook, there must be a better balance between national preparedness and global cooperation. We need to act together, to shape a pathway out of cascading crises and build collective preparedness to the next global shock, whatever form it might take.
Risk outlook: failure to act projected as long term risks
Cost of living crisis tops the list for global risks projected for next two years. However, failure to act and mitigate risks related to climate change takes up major space in list of projected risks for next 10 years.
To discuss the risk outlook for your local government talk to your LGIS Account Manager.