Rising geopolitical tensions named the most urgent risk in 2019, report says
Following intensifying political tensions, effects of climate change are the second biggest risk.
Released last week, the 14th annual World Economic Forum Global Risks Report portrays a dark outlook on international economic and political relations. The report names these rising tensions as the most urgent risk in 2019 as 90% of experts say they expect further economic confrontation between major powers in 2019.
The report incorporates the results of the annual Global Risks Perception Survey of approximately 1,000 experts and decision-makers. This year’s results point to a deterioration in economic and geopolitical conditions. Trade disputes worsened rapidly in 2018 and the report warns that growth in 2019 will be held back by continuing geo-economic tensions, with 88% of respondents expecting further erosion of multilateral trading rules and agreements.
#2: Climate change
Environment-related risks dominated the results of the report’s Global Risks Perception Survey, accounting for three of the top five risks by likelihood and four by impact. Following “extreme weather events” in the list of top global risks by likelihood are “failure of climate change mitigation and adaption” at number two and “major natural disasters” at number three. The list of top global risks by impact includes “failure of climate change mitigation and adaption” (no. 2), “extreme weather events” (no. 3), “water crises” (no. 4) and “major natural disasters” (no. 5).
Related: Firms tally climate risk
The most frequently cited risk interconnection was the pairing of “failure of climate change mitigation and adaptation” and “extreme weather events.”
“Leaders worldwide are beginning to acknowledge the connection between extreme weather and climate change,” said Barry Franklin, Head of Risk for Zurich North America. “This is a good first step, but it means that business leaders face two very different scenarios in managing risks.”
Getting proactive about climate change
Those scenarios are outlined in a 2018 report produced by Zurich: Managing the impacts of climate change: risk management responses. One scenario is based on the failure to act on climate change, resulting in a steady rise in temperature and rising physical risk. The other scenario assumes that effective measures are taken to reduce carbon emissions, consistent with the main aim of the Paris Agreement, but carries a number of transition risks with it.
Franklin says that businesses should develop and act upon a climate resilience adaptation strategy, which includes the following steps: Identify the broad business and strategic risks; develop a granular view of the risks involved; and develop a mitigation strategy involving insurance and resilience.
Ultimately, the Global Risks Report reminds us that we need to maintain a bird’s-eye view when managing risk, Franklin said.
“The findings confirm that the increased interconnectivity, complexity and potential impact of risks are here to stay, and that caring for a business means considering everything that could affect it,” Franklin said. “If business leaders don’t look at risk holistically, they won’t be prepared to respond to the connected risks of extreme weather, climate change, infrastructure failure, cyber attacks and many others that can directly threaten their very survival.”
Breaking down the lists
To break down growing global economic and political issues, the Global Risk Report separates identified risks into lists by their severity and likelihood in order to identify their final ranking order.
Top 5 Risks by Likelihood
- Extreme weather events (e.g. floods, storms, etc.)
- Failure of climate-change mitigation and adaptation
- Major natural disasters (e.g. earthquake, tsunami, volcanic eruption, geomagnetic storms)
- Massive incident of data fraud/theft
- Large-scale cyberattacks
Top 5 Risks by Impact
- Weapons of mass destruction
- Failure of climate-change mitigation and adaptation
- Extreme weather events (e.g. floods, storms, etc.)
- Water crises
- Major natural disasters (e.g. earthquake, tsunami, volcanic eruption, geomagnetic storms)
Top 5 Risk Interconnections
- Extreme weather events + failure of climate-change mitigation and adaptation
- Large-scale cyberattacks + breakdown of critical information infrastructure and networks
- High structural unemployment or underemployment + adverse consequences of technological advances
- High structural unemployment or underemployment + profound social instability
- Massive incident of data fraud/theft + large-scale cyberattacks
- Failure of regional or global governance + interstate conflict with regional consequences
Top 5 Trends
- Changing climate
- Rising cyber dependency
- Increasing polarization of societies
- Rising income and wealth disparity
- Increasing national sentiment