Pandemics have consistently scored highly on the long-term risk ranking of the World Economic Forum (WEF). But with pandemics now firmly in the current risk category, WEF’s Global Risks Report 2021 throws light on other risks on the horizon – risks that may not be as unrealistic as once thought.
Plotting risks on a timeline, the report puts infectious diseases, employment crises, digital inequality and youth disillusionment as clear and present dangers expected within 0-2 years. Economic and technological risks, which may take several years to materialise – such as asset bubble bursts, IT infrastructure breakdown, price instability and debt crises – fall within the 3-5 year medium-risk pipeline. Long term concerns – within a 5-10 year window – include weapons of mass destruction, state collapse, biodiversity loss and adverse technological advances.
According to the report, the top five risks by likelihood over the next 10 years are listed as extreme weather events, failure of climate change mitigation and adaptation, human-made environmental damage and disasters, infectious diseases, and major biodiversity loss and ecosystem collapse. The top five risks ranked by severity of impact over the next 10 years are infectious diseases, failure of climate change mitigation and adaptation, weapons of mass destruction, major biodiversity loss and ecosystem collapse, and natural resource crises.
“In 2020, the risk of a global pandemic became reality, something this report has been highlighting since 2006,” said Saadia Zahidi, managing director at the World Economic Forum. “We know how difficult it is for governments, business and other stakeholders to address such long-term risks, but the lesson here is for all of us to recognise that ignoring them doesn’t make them less likely to happen. As governments, businesses and societies begin to emerge from the pandemic, they must now urgently shape new economic and social systems that improve our collective resilience and capacity to respond to shocks while reducing inequality, improving health and protecting the planet.”
The knock-on effects of the Covid-19 pandemic are expected to be far-reaching and may further impede the global co-operation needed to address long-term challenges such as environmental degradation. For example, the gap between the “haves” and the “have nots” is at risk of widening, a trend which will particularly affect young people worldwide. “Financial, digital and reputational pressures resulting from Covid-19 also threaten to leave behind many companies and their workforces in the markets of the future,” the report added. And an “increasingly tense and fragile” geopolitical outlook will further hinder the global recovery.
Carolina Klint, risk management leader in Continental Europe for Marsh – partner for the report – noted that the geopolitical landscape continues to be shaped by U.S.-China rivalry, with other nations having to navigate ratcheting tensions. “This has constrained opportunities for countries who may lack superpower status, but still play influential roles in international relations, to create meaningful multilateral partnerships and tackle important global challenges.”
She noted that although some partnerships have been strengthened in 2020, notably the signing of the Regional Comprehensive Economic Partnership between 15 Asia-Pacific countries and upgrades to ties between the EU and ASEAN to a “strategic partnership”, concerns still persist on critical global risks. “Progress in important areas most in need of multilateral co-operation — such as trade, security, health and, notably, technology governance and climate change — remains at risk of being seriously impeded,” Klint said.
The report also looks to draw lessons from the responses to the pandemic, with a view to improving global resilience going forward. These lessons include formulating analytical frameworks, fostering risk champions, building trust through clear and consistent communication, and creating new forms of partnership.
“The acceleration of the digital transformation promises large benefits, such as for example the creation of almost 100 million new jobs by 2025. At the same time however, digitalisation may displace some 85 million jobs, and since 60% of adults still lack basic digital skills the risk is the deepening of existing inequalities,” said Peter Giger, group chief risk officer, Zurich Insurance Group, a partner to the report.
A postscript to the report makes sobering reading as well. The Global Future Council has listed nine frontier risks, described as potential shocks that are less well known but would have huge impacts if manifested. Topping the list is an accidental war, where an inter-state skirmish escalates to war as governments fail to control action in the absence of accurate information. Linked is the risk of anarchic uprising, where young activists, fed up with corruption, inequality and suffering, mobilise against elites. Then there is the risk of the collapse of an established democracy, where democracy turns authoritarian through the progressive hollowing out of the body of law. The risk of the deployment of small-scale nuclear weapons is also ranked.
In terms of technology risks, “brain-machine interface exploited” is noted, where companies, governments or individuals utilise burgeoning “mind-reading” technology to extract data from individuals for commercial or repressive purposes.
On the medical front, gene editing for human enhancement and neurochemical control are both cited, while on the climate front there is the risk of geomagnetic disruption, where a rapid reversal of the Earth’s geomagnetic poles generates destabilising consequences for the biosphere and human activity. Lastly, there is the frontier risk of a permafrost melt that releases ancient microorganisms, which could lead to the release of an ancient virus, unknown in modern science, into the air, soil, and water systems.
In the middle of the battle against Covid-19, these extreme frontier risks may not be as far-fetched as they seem.
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