Pandemic a lesson in ignoring long-term risks - World Economic Forum Global Risks Report
Lasting effects of the Covid-19 pandemic pose a long-term risk to the global cooperation needed to address the long-term challenges such as environmental degradation and social fragmentation, according to the World Economic Forum’s Global Risks Report 2021.
The report, published on 19 January, said 2020 was a demonstration of the catastrophic effect of ignoring long-term risks. Its preface highlighted the report’s warnings, going back to 2006, that a “lethal flu, its spread facilitated by global travel patterns and uncontained by insufficient warning mechanisms, would present an acute threat”.
The WEF, supported by its strategic partners Marsh & McLennan, Zurich Insurance Group and SK Group, however, is quick to look to the future and medium- and long-term risks associated with the pandemic.
“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,” said Saadia Zahidi, managing director at the WEF.
Carolina Klint, risk management leader for Continental Europe at Marsh added that the economic and societal fallout from COVID-19 will change the way organisations interact with clients and colleagues even after vaccine rollouts.
“As businesses transform their workplaces, new vulnerabilities are emerging,” Ms Klint said. “Rapid digitalization is exponentially increasing cyber exposures, supply chain disruption is radically altering business models, and a rise in serious health issues has accompanied employees’ shift to remote working.
“Every business will need to strengthen and constantly review their risk mitigation strategies if they are to improve their resilience to future shocks.”
Environmental risks, both by impact and likelihood, again dominate the Global Risks Report. Extreme weather, climate action failure, human environmental damage and biodiversity loss all feature high.
“The biggest long-term risk remains a failure to act on climate change,” said Peter Giger, group chief risk officer at Zurich Insurance Group. “There is no vaccine against climate risks, so post-pandemic recovery plans must focus on growth aligning with sustainability agendas to build back better.”
Technological risks, including digital power concentration, digital inequality, cybersecurity failure and IT infrastructure breakdown are all prominent in the top 10 of risks by likelihood or impact.
“The acceleration of the digital transformation promises large benefits, such as for example the creation of almost 100 million new jobs by 2025,” added Mr Giger. “At the same time however, digitalization may displace some 85 million jobs, and since 60% of adults still lack basic digital skills the risk is the deepening of existing inequalities.”
The Global Risks Report 2021 was developed by the World Economic Forum’s Global Risks Advisory Board. The Forum collaborates with strategic partners Marsh & McLennan, SK Group and Zurich Insurance Group and 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).
To read the full report, click here.
Airmic will be running an Airmic LIVE session 4 February at 11am focussing on the 2021 report hosted by Richard Smith-Bingham of Marsh & McLennan