Traditional risks return to the top of annual WEF list

Traditional risks return to the top of annual WEF list
Image by taldav68 | Bigstockphoto

The WEF has issued its annual report on the world’s top short/long-term risks. Here’s what’s on the list and why you should care (especially about geopolitics).

The annual World Economic Forum in Davos wraps up today. The conference seems to be getting back to normal after the COVID era. Last year, the event was (abnormally) in May, and was very much dominated by the Ukraine war. The 2023 meeting gathered a record number of leaders from governments, businesses, and civil society to discuss the state of the world and priorities for the year ahead

This year, WEF has again published its Global Risks Report 2023. The Report divides risks mainly into two categories: those that are acute during the next two years, and those that are important in the next 10 years. The Report also lists some future scenarios.

The Davos conference is traditionally a kind of club of the global elite who get together and talk about big global issues, the economy, and politics. It has also received quite a lot of criticism about how elitist the event has become. In recent years, the organizers have tried to diversify its participants – for example, by having more women, inviting startups and people who aren’t just government leaders or corporate representatives, such as activists like Greta Thunberg. And of course President Donald Trump was also an outlier there some years ago.

Top risks

It is clear that geopolitics has become more important for businesses. Many companies and investors tend to underestimate political and security policy risks. It’s almost as if many companies think they can make business in a vacuum of politics and global affairs. This makes these kinds of events more important: business leaders must also know and acknowledge what’s going on in politics and global affairs. It is evident now in both business and politics that no one can be isolated – the world is a global network where everything is somehow interconnected.

The Global Risks Report 2023 outlines the following top five risks for the next two years:

  1. Cost-of-living crisis
  2. Natural disasters and extreme weather
  3. Geoeconomic confrontation
  4. Failure to mitigate climate change
  5. Erosion of social cohesion and societal polarization.

We can say it is also a return of many traditional risks, like inflation, trade wars and divided societies. Climate-related risks have been on the risk agenda for a few years, but those traditional risks have really made a fast return to the top.

The top five risks for the period of the next 10 years are:

  1. Failure to mitigate climate change
  2. Failure of climate-change adaptation
  3. Natural disasters and extreme weather
  4. Biodiversity loss and ecosystem collapse
  5. Large-scale involuntary migration.

Cost-of-living and geopolitical crises

When we look at the top risks, it is quite interesting to see that living costs, geoeconomics confrontation (i.e., trade wars, but also other conflicts between countries) and social unrest are seen mainly as a short-term problem, while climate change dominates the longer term risk list (geopolitical risks are #9 on the 10-year list). This either means that people who have answered the surveys and collected the report think the climate-related risks are so huge that they overwhelm all other risks, or they are quite optimistic that they can handle all other risks.

Anyway, the report says that cost-of-living and geopolitical crises will very much dominate our short-term view. Both of these also have several consequences that can create other problems, like stronger polarization in societies, business restrictions to protect citizens(including protectionism and price control), a growing divergence between rich and poor countries, and increasing sovereign debts and interest costs.

The report mentions that the recent uptick in military expenditure and proliferation of new technologies to a wider range of actors could drive a global arms race in emerging technologies. This also means many new technologies (including AI, quantum computing and biotechnology) are also more linked to national interests and security. That could mean more national funding in key areas, but it could also result in political restrictions on who can use them and where.

Health-related risks

Beyond the economic considerations, geopolitics, and climate-change risks, one important category is risks related to health and diseases. COVID was a reminder of the risks posed by global pandemics. New global pandemics are, of course, a potential risk. But the Report highlights some other growing challenges related to our health. For example, there has been a noticeable shift towards non-communicable diseases over the past decade, linked to population growth and aging alongside lagging coverage by health systems.

There are also health-related risks linked to climate change, e.g., disrupted access to safe water and sanitation, and increased waterborne diseases due to floods. Other climate change-related health risks include increasing the number of months suitable for transmission of existing diseases such as malaria and dengue fever; exacerbating malnutrition as food insecurity grows and increased levels of carbon dioxide in the atmosphere result in nutrient deficiencies in plants; and even accelerated uptake of heavy minerals, which have been linked to cancer, diabetes, heart disease and impaired growth.

Technology and privacy risks

New technologies also bring new dimensions for conflicts. Examples include cybersecurity, information wars and weapons in space. Furthermore, quantum computing, AI and robotics also offer new models to develop weapons and open new battlefields. This doesn’t mean only national risks, but also new risks for individuals. They may also enable newer forms of asymmetric warfare, allowing smaller powers and individuals to have a greater impact at a national and global level.

Privacy is one important theme in the report. The proliferation of data-collecting devices and data-dependent AI technologies could open pathways to new forms of control over individual autonomy. The report mentions that larger data sets and more sophisticated analysis also heighten the risk of the misuse of personal information through legitimate legal mechanisms, weakening the human right to privacy even in democratic and strongly regulated regimes.

As a solution, the report mentions the right to privacy as it applies to information about individuals, and incorporates two key elements: the right not to be observed and the right to control the flow of information when observed.

Future scenarios

The future scenario part focuses especially on how countries are able to cooperate on climate change and access to natural resources. Natural resources include basic necessities like water, food, and energy. It also includes several important metals and minerals that are critical for many technologies and production. It requires global cooperation to use them effectively, but they can also be reasons for local or global conflicts.

The WEF Report of 2023 is a good summary of the risk landscape at the moment, and it definitely provides topics for many important discussions for business leaders, politicians and anyone who tries to manage risk and find solutions for them.

Sometimes these visions might sound like an elitist debate if they fail to see the impact on ordinary people’s lives, but at the same time we also need these higher-level visions to see the big picture.

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