Global risks in the face of social, environmental and technological change

01 March 2017 Consultancy.uk

Global risks related to key social, environmental and technological trends are creating an interconnected web that continues to sow considerable uncertainty for humanity going forward. Migration, climate change and weapons of mass destruction are expected to leave the riskiest mark on governments and businesses globally.

The world faces considerable uncertainties in the face of rapidly developing technologies, increasing income inequality, social polarisation and environmental degradation. In a new report from the World Economic Forum, in strategic partnership with Marsh & McLennan Companies and the Zurich Insurance Group, the current largest scale risks facing the world are explored. The 12th edition of the ‘Global Risk Report’ involved 745 ‘world leaders’ from, among others, business, academia, and NGOs.

Most likely risks 2017 and earlier

The respondents note some shift in their perceived risk likelihood going into 2017. The biggest risk cited is extreme weather events, followed by large scale involuntary migration, a feat which is taking hold of Europe. Major natural disasters come in third. Terrorism has again returned to the consciousness of respondents, with large-scale terrorist attacks taking the number four spot. The number five spot goes to massive incident of data fraud/theft.

The likelihood of interstate conflicts has decreased slightly, falling from fourth spot to ninth. Cyber attacks, estimated to create economic damages of $280 billion per year globallytakes the number six spot, while man-made environmental disasters comes in at number eight.

Most impactful risks 2017 and earlier

In terms of the impact of risks, the use of weapons of mass destruction takes the number one spot in 2017, up from second in 2016 and third in 2015. Extreme weather is the second most impactful risk, followed by a water crisis. Major environmental disasters comes in fourth this year, followed by failure of climate change mitigation and adaptation.

“Urgent action is needed among leaders to identify ways to overcome political or ideological differences and work together to solve critical challenges. The momentum of 2016 towards addressing climate change shows this is possible, and offers hope that collective action at the international level aimed at resetting other risks could also be achieved,” says Margareta Drzeniek-Hanouz, Head of Global Competitiveness and Risks at the World Economic Forum.

When considering the interconnected map of risks, the research notes three key trends underlying the dominant global risks. These trends are associated closely with human activity, and its structuring by a range of models, over the past decades.

The Global Risks Interconnections Map 2017

The first of the major trends relates to key social themes, from rising income inequality to increased polarisation on political and ideological lines, with key conditions, such as structural unemployment, underemployment and profound social unrest part of the wider web of interconnected risks.

The second major trend to arise from the study is the changing climate, and its potential effects on global stability. The failure of climate change mitigation and adapation has a knock-on impact on wider environmental systems, which in turn affect global stability. Protecting environmental stability, upon which social institutions and biodiversity depend, therefore remains a key theme for humanity going forward.

The third major theme noted by the research is that technology is advancing considerably faster than society is able to transform. Key questions remain about the inherent value of technology itself, whether it is a panacea for market failures or itself an expression of such failures, and the consequences of unabated and market driven technological development. Some of the technologies being developed have considerable risks, from social instability to opening Pandora's box. Progression, does not inherently mean, we progress.

“We live in disruptive times where technological progress also creates challenges. Without proper governance and re-skilling of workers, technology will eliminate jobs faster than it creates them. Governments can no longer provide historical levels of social protection and an anti-establishment narrative has gained traction, with new political leaders blaming globalization for society’s challenges, creating a vicious cycle in which lower economic growth will only amplify inequality. Cooperation is essential to avoid the further deterioration of government finances and the exacerbation of social unrest,” reflects Cecilia Reyes, Chief Risk Officer of Zurich Insurance Group.

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