World Economic Forum reveals most urgent risks of 2019 | Insurance Business America
Rising political and geo-economic tensions are damaging international relations and hindering collective will to tackle dominant global risks like environmental degradation, climate change and cyber threats. According to the World Economic Forum’s Global Risks Report 2019, which was published today, worsening international relations and a darkening economic outlook are the most urgent risks in 2019 – and 90% of experts think tensions are only going to heighten this year.
The Global Risks Report, which draws upon the results of the annual Global Risks Perception Survey of approximately 1,000 experts and decision-makers, warns that economic growth will likely be stinted in 2019 because of increasing trade disputes and geo-economic tensions. Furthermore, 85% of respondents said they expect 2019 to see increased risks of “political confrontations between major powers,” which will further hinder international cooperation.
Børge Brende, president of the World Economic Forum, has argued that it’s more important than ever to patch up and improve the architecture of international cooperation. He said: “We simply do not have the gunpowder to deal with the kind of slowdown that current dynamics might lead us towards. What we need now is coordinated, concerted action to sustain growth and to tackle the grave threats facing our world today.”
In the Global Risks Report, risks are ranked in terms of likelihood, impact, interconnections and trends. The top risks for 2019 by likelihood (in order) are: extreme weather events (floods, storms etc.); failure of climate change mitigation and adaption; major natural disasters (earthquake, tsunami etc.); massive incident of data fraud/theft; and large-scale cyberattacks. Meanwhile the top risks by impact (in order) are: weapons of mass destruction; failure of climate change mitigation and adaption; extreme weather events; water crises; and major natural disasters.
“The top risks have not changed dramatically […] environmental risks dominate the top of the chart,” commented Barry Franklin, head of risk for Zurich North America. “Three of the top five risks in terms of likelihood over the next 10 years, and four of the top five risks in terms of the potential impact over the next decade are related to the environment. That makes a lot of sense when you look at some of the trends identified in the report in terms of climate change and the interdependency climate-related risks. There’s an increasing concern about a failure of climate change mitigation and adaption, which is fair when you think about the risks associated with extreme weather events.
“People are increasingly concerned that we’re either not doing enough as a collective body to combat climate change, or, what we are doing isn’t having enough of an effect fast enough. Regardless of what the view is on causes of climate change or how we can collectively bend the will of different players to conform to things like the Paris Accord, we need to prepare ourselves as countries, as companies, and as individuals, to deal with the outcomes. There’s a lot that individual companies can do to help make themselves more resilient as opposed to waiting for some silver bullet solution to come from the global leadership community.”
Zurich Insurance Group chief risk officer, Alison Martin, said it was “no surprise” that all five of the key environmental risks – biodiversity loss, extreme weather events, failure of climate change mitigation and adaptation, man-made disasters, and natural disasters – feature as major concerns in 2019.
She said: “To effectively respond to climate change requires a significant increase in infrastructure to adapt to this new environment and transition to a low-carbon economy. By 2040, the investment gap in global infrastructure is forecast to reach US$18 trillion against a projected requirement of US$97 trillion. Against this backdrop, we strongly recommend that businesses develop a climate resilience adaptation strategy and act on it now.”
John Drzik, president of global risk and digital, Marsh, mirrored Martin’s comments around investing in global infrastructure. He said economic progress is being hampered by the “persistent underfunding of critical infrastructure” around the world and that shortfalls in investment in critical infrastructure are leaving businesses and communities vulnerable to natural catastrophes, cyberattacks, and other social, environmental and health-related risks.
“Allocating resources to infrastructure investment, in part through new incentives for public-private partnerships, is vital for building and strengthening the physical foundations and digital networks that will enable societies to grow and thrive,” Drzik added.
One risk that simply cannot be ignored today is cyber. The Global Risk Report suggests cyber and technological threats are the most significant blind spots we face today and that we still don’t fully appreciate the vulnerability of networked societies.
“Companies are starting to recognize that cyber risk is not going away,” Franklin told Insurance Business. “They’re doing their best to understand the risk and to protect themselves by implementing technology and cybersecurity protocols, and also training their people because we all know that the biggest cybersecurity risk walks around on two legs. Getting people to recognize the importance of cyber risk and the steps they need to take to prevent bad actors from getting access to their systems is really important.
“I would encourage companies to digest this report and think deeply about how these trends and risks impact them. Even if they’re operating in only one location, no-one is ever insulated from these risks. Everybody can learn something from this report.”