World enters critical period of risks in 2018: WEF

PHOTO

Experts are preparing for another year of heightened risk, said a new report by the World Economic Forum (WEF), cautioning that people are struggling to keep up with the accelerating pace of change.

The prospect of strong economic growth in 2018 presents leaders with a golden opportunity to address signs of severe weakness in many of the complex systems that underpin our world, such as societies, economies, international relations and the environment, added the Global Risks Report 2018.

The report – which every January shares the perspectives of global experts and decision-makers on the most significant risks that face the world – highlights numerous areas where we are pushing systems to the brink, from extinction-level rates of biodiversity loss to mounting concerns about the possibility of new wars.

Fifty-nine per cent of those surveyed in WEF’s annual Global Risks Perception Survey (GRPS) pointed to an intensification of risks, compared with 7 per cent pointing to declining risks.

A deteriorating geopolitical landscape is partly to blame for the pessimistic outlook in 2018, with 93 per cent of respondents saying they expect political or economic confrontations between major powers to worsen and nearly 80 per cent expecting an increase in risks associated with war involving major powers.

However, as in 2017, the environment was by far the greatest concern raised by experts. Among the 30 global risks the experts were asked to prioritize in terms of likelihood and impact, all five environmental risks – extreme weather; biodiversity loss and ecosystem collapse; major natural disasters; man-made environmental disasters; and failure of climate-change mitigation and adaptation – were ranked highly on both dimensions. Extreme weather events were seen as the single most prominent risk.

“A widening economic recovery presents us with an opportunity that we cannot afford to squander, to tackle the fractures that we have allowed to weaken the world’s institutions, societies and environment. We must take seriously the risk of a global systems breakdown. Together we have the resources and the new scientific and technological knowledge to prevent this. Above all, the challenge is to find the will and momentum to work together for a shared future,” said Professor Klaus Schwab, founder and executive chairman, World Economic Forum.

According to the GRPS, cyber threats are growing in prominence, with large-scale cyberattacks now ranked third in terms of likelihood, while rising cyber-dependency is ranked as the second most significant driver shaping the global risks landscape over the next 10 years.

Economic risks, on the other hand, feature less prominently this year, leading some experts to worry that the improvement in global GDP growth rates may lead to complacency about persistent structural risks in the global economic and financial systems. Even so, inequality is ranked third among the underlying risk drivers, and the most frequently cited interconnection of risks is that between adverse consequences of technological advances and high structural unemployment or under-employment.

John Drzik, president of Global Risk and Digital, Marsh said: “Geopolitical friction is contributing to a surge in the scale and sophistication of cyber-attacks. At the same time cyber exposure is growing as firms are becoming more dependent on technology. While cyber risk management is improving, business and government need to invest far more in resilience efforts if we are to prevent the same bulging ‘protection’ gap between economic and insured losses that we see for natural catastrophes.”

“Future Shocks”

The growing complexity and interconnectedness of our global systems can lead to feedback loops, threshold effects and cascading disruptions. Sudden and dramatic breakdowns – future shocks – become more likely. In this year’s Global Risks Report we present 10 short “what-if” scenarios, not as predictions but as food for thought to encourage world leaders to assess the potential future shocks that might rapidly and radically disrupt their worlds:

• Grim reaping: Simultaneous breadbasket failures threaten sufficiency of global food supply

• A tangled web: Artificial intelligence “weeds” proliferate, choking performance of the internet

• The death of trade: Trade wars cascade and multilateral institutions are too weak to respond

• Democracy buckles: New waves of populism threaten social order in one or more mature democracies

• Precision extinction: AI-piloted drone ships take illegal fishing to new – and even more unsustainable – levels

• Into the abyss: Another financial crisis overwhelms policy responses and triggers period of chaos

• Inequality ingested: Bioengineering and cognition-enhancing drugs entrench gulf between haves and have-nots

• War without rules: State-on-state conflict escalates unpredictably in the absence of agreed cyber warfare rules

• Identity geopolitics: Amid geopolitical flux, national identity becomes a growing source of tension around contested borders

• Walled off: Cyberattacks, protectionism and regulatory divergence leads to balkanization of the internet

Alison Martin, group chief risk officer, Zurich Insurance Group said: "Extreme weather events were ranked again as the number one global risk by likelihood and impact. Environmental risks, together with a growing vulnerability to other risks, are now seriously threatening the foundation of most of our commons.

“Unfortunately we currently observe a ‘too-little-too-late’ response by governments and organisations to key trends such as climate change. It’s not yet too late to build a more resilient tomorrow, but we need to act with a stronger sense of urgency in order to avoid potential system collapse." – TradeArabia News Service