The environment and cyber threats are the greatest risks to businesses and will have a major impact on them this year, according to the Global Risks Report 2018 published by the World Economic Forum.
The report, issued annually in January, shares the perspectives of global experts and decision-makers on the key risks facing the world, which were canvassed from 1,000 of these respondents in a Global Risks Perception Survey (GRPS).
Extreme weather most prominent risk
Among the 30 global risks the experts were asked to prioritise for likelihood and impact, all five environmental risks – extreme weather; biodiversity loss and ecosystem collapse; major natural disasters; man-made environmental disasters; and failure of climate-change mitigation and adaptation – were ranked highly on both dimensions. Extreme weather events were seen as the single most prominent risk.
Ms Alison Martin, Group Chief Risk Officer, Zurich Insurance Group commented: "Extreme weather events were ranked again as a top global risk by likelihood and impact. Environmental risks, together with a growing vulnerability to other risks, are now seriously threatening the foundation of most of our commons. Unfortunately we currently observe a “too-little-too-late” response by governments and organisations to key trends such as climate change. It’s not yet too late to shape a more resilient tomorrow, but we need to act with a stronger sense of urgency in order to avoid potential system collapse."
The GRPS also found that cyber threats are growing in prominence, with large-scale cyberattacks now ranked third in terms of likelihood, while rising cyber-dependency is ranked as the second most significant driver shaping the global risks landscape over the next 10 years.
Mr John Drzik, President of Global Risk and Digital, Marsh said: “Geopolitical friction is contributing to a surge in the scale and sophistication of cyberattacks. At the same time cyber exposure is growing as firms are becoming more dependent on technology. While cyber risk management is improving, business and government need to invest far more in resilience efforts if we are to prevent the same bulging ‘protection’ gap between economic and insured losses that we see for natural catastrophes.”
Deteriorating geopolitical landscape
Asked about the trajectory of risks in 2018, 59% of the responses cited an intensification of risks, compared with 7% pointing to declining risks. A deteriorating political landscape is partly to blame for the pessimistic outlook this year. Over 90% expect political or economic confrontations between major powers to worsen, while nearly four out of five expect an increase in risks associated with war involving major powers.Economic risks feature less prominently this year, creating concern among experts that the improvement in global GDP growth rates may lead to complacency about persistent structural risks in the global economic and financial systems. Even so, inequality is ranked third among the underlying risk drivers, and the most frequently cited interconnection of risks is that between adverse consequences of technological advances and high structural unemployment or under-employment.
Top five global risks in terms of likelihood
- Extreme weather events.
- Natural disasters.
- Data fraud or theft.
- Failure of climate-change mitigation and adaptation
This year’s Global Risks Report also presented 10 “what-if” scenarios, not as predictions, but as food for thought to assess potential future shocks that may cause rapid and radical disruptions
· Grim reaping: Simultaneous breadbasket failures threaten sufficiency of global food supply
· A tangled web: Artificial intelligence “weeds” proliferate, choking performance of the internet
· The death of trade: Trade wars cascade and multilateral institutions are too weak to respond
· Democracy buckles: New waves of populism threaten social order in one or more mature democracies
· Precision extinction: AI-piloted drone ships take illegal fishing to new – and even more unsustainable – levels
· Into the abyss: Another financial crisis overwhelms policy responses and triggers period of chaos
· Inequality ingested: Bioengineering and cognition-enhancing drugs entrench gulf between haves and have-nots
· War without rules: State-on-state conflict escalates unpredictably in the absence of agreed cyberwarfare rules
· Identity geopolitics: Amid geopolitical flux, national identity becomes a growing source of tension around contested borders
· Walled off: Cyberattacks, protectionism and regulatory divergence leads to balkanization of the internet
The Global Risks Report 2018 was developed with support from the WEF’s Global Risks Advisory Board and ongoing collaboration with Strategic Partners Marsh & McLennan Companies and Zurich Insurance Group and its academic advisers at the Oxford Martin School (University of Oxford), the National University of Singapore and the Wharton Risk Management and Decision Processes Center (University of Pennsylvania).