International community failing on global challenges - WEF Global Risks Report
New forms of volatility and disruption are only beginning to become apparent, Marsh's Richard Smith-Bingham tells Airmic members.
Growing geopolitical tensions, domestic unrest and the prospect of aggressive trade wars may dominate news headlines, but it was environmental concerns that topped the bill again in this year's Global Risks Report, produced by the World Economic Forum in partnership with Marsh & McLennan and Zurich Insurance.
Marsh's Richard Smith-Bingham, who presented an Airmic webinar on the report in January, highlighted the running theme of a 'control paradox' - that in response to shifts in inequality and global power, government agendas have moved towards nationalistic objectives rather than globalisation.
This has resulted in a breakdown in cooperation between countries on global challenges, a clear demonstration being the United States' withdrawal from the Paris Agreement on climate change. "The new mantra is a trigger for new forms of volatility and disruption, which are only beginning to become apparent," Smith-Bingham said.
Deteriorating confidence
Having surveyed almost 1,000 risk experts from around the world, the WEF found that environmental risks accounted for three of the top five risks by likelihood and impact. These were extreme weather events, failure of climate change mitigation and adaptation and natural disasters. Rising sea levels could end up costing $14trn in damages annually by the year 2100, before taking into account the economic impact.
The report demonstrated how confidence in the health of the global economy has deteriorated over the past year, pointing to emerging markets weakening against the American dollar, global growth forecasts being downgraded and the hike in US interest rates.
A growing infrastructure financing gap is emerging in the developed and developing worlds, driven by unsustainable use, vulnerability to disasters, and rapid economic and population growth.
According to the WEF, global infrastructure spend needs to reach $97trn by 2040, two thirds of which should go on roads and electricity and half of which is needed in Asia. It forecasts, however, that infrastructure investment will only reach $79trn.
Smith-Bingham added: "It is worth remembering that infrastructure adequacy intersects with multiple global risk issues - economic stagnation, persistent inequality and therefore societal instability, carbon emissions, cyber-attacks and natural catastrophes as well."
Human capital risks
The WEF report also examined the state of individual wellbeing. Rising anxieties and concerns are driven by societal, technological and workplace stressors and organisations are encouraged to get on top of, and understand, human capital risks.
Seven hundred million people are affected by mental health problems, while psychological stress is connected to people feeling "a lack of control in the face of uncertainty". These emotional trends are connected to the wider global risks landscape, impacting national politics and social cohesion.
Watch the Airmic webinar with Richard Smith-Bingham here.
In view of the popularity of this subject, Richard will be hosting a further live edition of this webinar on 7 March. Register for the webinar here.
Read the World Economic Forum Global Risks Report 2019 here.