- The Global Risks Report reveals the top risks requiring urgent global action.
- Past years have seen a lack of mobilization on risk areas perceived to be long-term or abstract, but the pandemic has shown just how much the cost of inaction far outweighs the cost of action.
Connect risk to strategy
Risk analysis shapes decisions, creates forecasts and reveals the policy gaps requiring action. It’s why the World Economic Forum sets the agenda for the year with the launch of the Global Risks Report every January.
Now in its 17th edition, the report encourages leaders to think outside the quarterly reporting cycle and create policies that “connect risk to strategy”.
Risk or reality?
In 2020, the seemingly obscure risk of a pandemic became a reality.
In 2021, cyber risks reached new milestones with the highest average cost of a data breach in almost two decades. At the same time, floods, fires and weather-related disasters dominated headlines. Climate continued to shift from the abstract to an urgent risk category.
This year, the pandemic has refocused the lens on risk, and leaders are more acutely aware of the consequences of (mis)managing public perceptions of risk.
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The interconnectedness of risks – from climate threats to cyber threats – is more real in the light of the parallel crises we have experienced during the pandemic. Economic woes, sustainability setbacks, societal anxieties and technology scares have jostled for attention alongside the health crisis.
Carolina Klint, Risk Management Leader, Europe, Marsh McLennan, emphasizes, “This risk environment is incredibly interconnected and we have to take a very holistic view of the emerging risk landscape.”
Young people are increasingly critical of government inaction. A survey of 10,000 people between the ages of 16 and 25 highlights climate anxiety, with 75% of respondents describing the future as “frightening”.
It’s not just the young who are worried. A series of surveys put to the global public throughout 2021 demonstrates rising concerns about personal health and safety, financial and health worries, loss of trust in governing institutions and more.
And a recent consumer index shows that there’s a sense that the personal fragility experienced by individuals has led to a “shift from a more passive concern to active caretaking, driven by the desire to protect ourselves, our communities and the security of the planet.”
Risks 2022 – the headlines
This year’s report is dominated by environmental risks. Climate action failure, extreme weather events, and biodiversity loss and ecosystem collapse were considered the top three of the top 10 global risks by severity over the next 10 years.
Respondents also report a general sense of foreboding about the future. Less than 16% are ‘optimistic’ or ‘positive’ about the outlook for the world.
Beyond environmental concerns, other top risks include livelihood crises, the erosion of social cohesion, and an uneven pandemic recovery. The report warns that the risks of growing social gaps will continue to be exacerbated by the pandemic, and experts caution that the global economic recovery will likely be uneven and potentially volatile over the coming years.
The economic fallout of the pandemic and diverging recoveries also continue to threaten cooperation on other global challenges – at a time when climate and environmental risks loom large.
Our growing dependence on digital systems – which has only intensified in the past two years – has heightened the risks posed by digital or cybersecurity threats.
And finally the commercialization of space, with a growing risk of collisions between satellites and space junk, threaten a “cascading effect” on critical services down on Earth.
Risks by the numbers
- 1,000 – Global leaders in business, government and civil society took part in the Global Risks Perception Survey.
- 17th – This year is the 17th edition of the Global Risks Report.
- 5 of 10 – 5 of the top 10 global risks are all climate or environment related.
- Third – Societal risks make up a third of the global top 10.
- 6 – Infectious diseases come lower down in the global top 10 at number six.
- 77% – Say international efforts to mitigate climate change have “not started” or are in “early development”.
- 84% – Are ‘concerned’ or ‘worried’ about the risks outlook and global divergence.
The cost of inaction
Peter Giger, Group Chief Risk Officer, Zurich Insurance Group, explains that “Humans are not good in the boiling frog scenario, which is climate change, they’re much better in the fight or flight scenario, which has been the pandemic.”
And yet in 2006, the Global Risks Report sounded the alarm on pandemics and other health-related risks, warning that a “lethal flu, its spread facilitated by global travel patterns and uncontained by insufficient warning mechanisms, would present an acute threat.” Fast forward to 2020, and the world was unprepared.
So stakeholders might take heed when Saadia Zahidi, Managing Director and Head of the Centre for the New Society and Economy at the World Economic Forum, calls for leaders to “overcome our divisions and come together to face longterm global risks”.
She warns that “immediate concerns will limit the attention and political capital that some governments worldwide will allocate to longer-term issues”, but that “cooperation is needed to resolve conflicts, protect refugees and address humanitarian emergencies” – among other challenges.
As the curtain lifts on the Davos Agenda 2022, Borge Brende, President of the World Economic Forum, invites swift and decisive mobilization on the state of the world. He offers a powerful reminder that “Our planet is on fire and we have to deal with it – this is a risk we know, we are not faced with a blind spot”, and calls for “more private-public cooperation” to address inequality and nature challenges.
Finally, he cautions, “risk reports show the cost of inaction far outweighing the cost of action” and suggests that while “we’re moving in the right direction… we’re not moving fast enough.”