The 16th edition of The World Economic Forum’s annual Global Risks Report was published on 19 January 2021 with a virtual conference introducing, in broad strokes, the major risk issues covered in the report by panelists:
Borge Brende, President, World Economic Forum
Saadia Zahidi, Managing Director, World Economic Forum
Carolina Klint, Risk Management Leader, Continental Europe, Marsh McLennan
Peter Giger, Group Chief Risk Officer, Zurich Insurance Group
Guillaume Barthe-Dejean, Director, Chairman’s Office, SK Group
Their presentations were stellar summaries of the insightful report and below are some key takeaways from the session.
Global Risks Headlines
Borge Brende opened with a sobering reminder that the past 15 editions of the report had been calling our attention to the risks of pandemics.
The current pandemic’s immediate risks are inequality and social fragmentation. From a longer-term perspective, climate change remains our biggest threat, followed by social cohesion erosion.
Saadia Zahidi elaborated on the main chapters of the Global Risks Report. Risks such as the growing digital divide, cybersecurity concerns, economic fallout, and deepening societal fractures would re-emerge as the other panelists’ focal subjects.
Therefore, our growth and recovery must create jobs and be inclusive and sustainable. Our recovery models must also build in investments specifically in global access to digital functions and upskilling for digital literacy.
Deep Dive on Key Risks
Carolina Klint highlighted “low frequency, high severity” risks such as the pandemic have renewed an appreciation of risk and necessitated businesses and governments to build resilience for such scenarios and empower leaders for quick decision-making.
She explained three risks of note:
Political — Misdirected stimulus packages threaten recovery. Businesses need to follow shifts in domestic policies, especially those that hamper foreign investments or disrupt supply.
Technological — Many organizations intensified their use of technology in response to the pandemic. They should consider their cyber exposure, assess the implications of new technology, and establish the necessary digital infrastructure to support operations.
Societal — Businesses now face increasing scrutiny from the public and have to take firmer and more actives stances on societal issues to avoid negative impacts to revenue, reputation, and access to talent pools.
Overall, businesses have recognized the importance of mental health and their ability to provide a safe and conducive work environment will be crucial for operations, revenue, reputation, and talent acquisition.
Peter Giger focused on one key topic:
Digital Divide — We need to bring digitalization’s benefits to all or risk deepening the gap in digital literacy and creating a digital underclass. This requires public spending and prudent policymaking. On the flip side, the rise of misinformation coupled with our digital dependency could further polarize societies.
While regulatory support could tackle this “infodemic”, it also risks internet restrictions, information censorship, and losses of personal freedoms.
Guillaume Barthe-Dejean focused on two challenges:
Economic fallout — Global debt is rising and we could be “sleepwalking” into a global sovereign debt crisis. The concern is compounded by central banks pumping liquidity and investors betting on a fast recovery despite the deterioration in public finances.
Social Cohesion — The pandemic had exacerbated pre-existing fractures such as the growing income inequality, unemployment, and access to public services. Some nations also experience growing distrust of governments, undermining the effectiveness of public policies in a time when governments need to take center-stage.
Public-Private Partnership — The private sector needs to plug the current funding gaps, and this can be done through technology too; this allows for smarter responses to the pandemic, which taught us that societies that digitized early tended to perform better.
Many questions from business leaders worldwide were addressed, and these are the few we found particularly insightful:
What are the panelists’ thoughts on global trade?
We know that the trading of goods is beneficial for resilience and we need to return to more openness especially for developing economies, and especially since the pandemic had caused long-term damage. Our recovery will likely not see the global economy return to its previous state of hyper-globalization since we are seeing the return of nationalism. A political-economical halfway house, hence, could be the remodeling of globalization to regionalism.
Does building resilience come at a cost?
Yes, there will be short-term costs, but the cost of inaction far outweighs the cost of action — akin to “building a dam before the flood”. Certainly, over the long-term, building resilience lowers overall costs. Therefore, we need to think of it as an investment, and should consider the development of technology with such a perspective too.
Climate change is a slow fire — how can we make this more urgent to encourage action?
Actually, climate change is a very pressing issue for many companies. They face constant pressure to take action and achieve certain “green” objectives or join related initiatives. Covid-19 has increased awareness of such “low frequency, high severity” events like climate change and stakeholders are pushing companies on this. Business leaders should note the growing focus on a “green recovery” and invest in this transition, leveraging the increasing government-provided incentives, rather than risking a disorderly transition under duress.
The report’s scope and depth make it a relevant reference to those in business, government, and other sectors, across all parts of the world. To get a more detailed understanding of the topics discussed in the conference, please refer to the Global Risks Report here.