A wave of conflict and geo-economic tensions has resulted in some deeply related global risks, as highlighted in the World Economic Forum’s Global Risk Report 2023. We are currently in a low-growth and low-cooperation era, with risks of tough trade-offs that would erode climate action, human development, and future resilience.
With insights from various experts and policymakers worldwide, the report gives us some escalating risks over the decade, examining how competition for vital resources such as food and minerals may play out in alternate futures.
1. Global Economic and Commercial Pressures
There will be a likely economic era with more risks of stagnation, divergence, and distress. The likelihood is that businesses may face a turbulent year marked by continued inflationary pressures, supply chain disruptions, and rising geoeconomics tensions. There has been a return to the older risks, which mainly include inflation, the cost of living crisis, widespread social unrest, geopolitical confrontation, and the specter of nuclear warfare.
The most visible of these has been the aftermath of COVID-19 and the ongoing war in Ukraine, resulting in skyrocketing inflation and rapid normalization of monetary policies. These issues commenced a low-growth, low-investment era.
We may face a time when governments and central banks could face stubborn inflationary pressures in the next two years. Some of this issue is being felt in the US and Europe, with banks like SVB, FRB, and Credit Suisse being at the forefront of the recent onslaught.
2. Digital, Tech, and Cyber
There is still roaming but constant concern for businesses and governments, which is a risk that comes with cybersecurity. The surge of several developments of new technologies, like quantum computing, results in a shift of cyber risk exposures for most businesses. We face a period in which we will most likely have yielding advancements in AI, computing, and biotechnology. These advances may provide partial solutions to various emerging crises for countries that can afford them.
Despite significant progress in cybersecurity protocols, businesses must remain vigilant and resilient against emergent threats. The most common factor is that there will be attempts to disrupt critical technology-enabled resources and services. Such attacks may target critical sectors globally, including agriculture and water, financial systems, public security, transport, and communication infrastructure.
3. Climate and Biodiversity
There is a set-up for a risky trade-off in climate mitigation and adaptation efforts.
An intrinsic connection exists between climate change and nature with human health and business productivity. When climate change accelerates, businesses will most likely face greater scrutiny to adapt to new regulatory environments and consumer demands.
Additionally, nature loss and climate change have an intrinsic relationship, as one-sided failure will cascade into the other. Additionally, without proper policy change or investment, the interplay between climate change may likely accelerate ecosystem collapse, which later threatens food supply and livelihood in climate-vulnerable economies.
4. Cost of Living
Another factor is directly affected by environmental and societal crises driven by underlying geopolitical and economic trends. The cost of living crisis is the most severe global risk over the next two years, peaking in the short term. Over the next decade, biodiversity loss and ecosystem collapse are among the fastest-deteriorating global risks.
Some risks that would ensure that this risk runs in both the short and long term include geoeconomics confrontation, erosion of social cohesion, and societal polarization.
5. Health and Well-Being
There is the likelihood of some common infectious disease outbreaks against the background of chronic disease risks pushing exhausted healthcare systems to the brink. Financial pressures, chronic healthcare capacity issues, and intensifying climate conditions come into the mix as the biggest threats to human health.
As such, businesses should expect to evaluate their ESG plans, risk mitigation strategies, and benefit schemes to support workers.
6. The Risk of Multi-Domain Conflicts
Geopolitical fragmentation will likely drive geoeconomics warfare and heighten the risk of multi-domain conflicts. A constant factor is arising between global powers, with economic warfare becoming a norm. There will be a likelihood of economic policies arising defensively, building self-sufficiency and sovereignty from rival powers, but will likely see an increase in offensive deployments, which will constrain the rise of others.
When there is the trumping of economics, there may be a rise in inefficient production and rising prices, which may become more likely.
7. Food, Fuel, and Cost Crises
There is a likelihood of fuel, food, and cost crises that may exacerbate societal vulnerability while declining investments in human development erode future resilience. Severe risks may impact 2023, including an energy supply crisis, rising inflation, and a food supply crisis. The cost-of-living crisis is already being felt. There have been some financial cushions by countries that can afford it.
There is the likelihood of some growing economic pressure, already being felt, mostly in the middle-income bracket. Associated social unrest and political instability may induce some pain in such markets.
We may experience some lagging in advances to improve this, which may be due to electing less-centric leaders and political polarization between economic superpowers.
Final Thoughts
We are experiencing newly emerging or rapidly accelerating risks to the natural ecosystem, human health, security, digital rights, and economic stability, which can turn into crises and catastrophes in the coming years. Also, a low-growth, low-investment, and low-cooperation era could further undermine resilience and the ability to manage future shocks.
Most of the risks described by the World Economic Forum’s Global Risk Report 2023 are close to a tipping point. It is a time for us to be careful and act collectively and decisively, aiming to change the world to be more stable and inclusive.