The latest WEF Global Risks Report predicts an increasingly volatile world with multiple shocks to come, so anticipating and managing risk has never been more important, says Clare B Marshall.
This year’s World Economic Forum’s Global Risks Report sits against a myriad of world events and strategic risks, recently referred to in the UK’s FT newspaper as “polycrisis”, or as Collins defines, “the simultaneous occurrence of several catastrophic events”.
As a world dis-jointed, picking up the pieces after a global pandemic, the need is clear: “a rigorous approach to foresight and preparedness is called for…to chart a path…to a more prosperous world” (Global Risks Report 2023).
But how prepared, in reality, can we truly be?
In business, we increasingly understand the important role of resilience. We understand that it is how we respond to risk and crises (whether anticipated or unknown) that is key to a sustained future.
In light of this, responses to the WEF survey informing the Global Risks Report provide further insight and interesting reading for businesses. For example, 69% of respondents believe that within the next two years the outlook for the world will be “consistently volatile across economies and industries with multiple shocks accentuating divergent trajectories”. In comparison, only 2% expected to see “renewed stability with a revival of global resilience”.
Over half of the respondents contributing to this 18th edition of the report came from the private sector, providing an interesting benchmark and risk barometer for businesses of all shapes and sizes.
Painting a sombre picture, the report sets out to help guide strategic risk management thinking for the years ahead, with its findings reinforcing how risk remains dynamic in business. Events from the last year alone, including Russia’s invasion of Ukraine and recent attempts by a far-right group to overthrow the German government, may be considered implausible by many global organisations. Yet they happen.
Businesses can’t be prepared for all eventualities, but we can put in place measures to aid a smooth response.
At number one in the list of risks set to make a severe impact within the next two years – and new to the report this year – is the cost-of-living crisis.
Coupled with uncertainty and instability linked to a cost-of-living crisis, erosion of social cohesion, societal polarisation and geo-economic confrontation rank high in the top ten, at three and five respectively, compounded by the food, energy and health crisis in many countries.
Natural disasters, extreme weather events and failure to mitigate climate change (unsurprisingly) feature in the top five risk impacts – topics which continue to cause concern and which form the key areas of focus in both short term and the ten-year view of severe risk impact.
Widespread cyber-crime and cyber security continue to require attention. With new entry points and renewed geopolitical risk, the rise of cyber-crime or attack is expected, as the nature and face of war and conflict continues to evolve. Taking no action to protect against these risks could see gross reputational damage for business and other consequential impacts.
How these global risks all interconnect and provide a line of sight is well documented and presented in a range of illustrations produced as part of the report findings.
On the horizon
The report suggests a ‘turbulent’ decade to come, steered by a generation of leaders with little experience of recession, trade wars and geopolitical and economic risk. And this coupled with new leaders tasked with navigating an era of “low growth, low investment”.
Whilst technology will bring advances in some countries, the divide will grow in emerging markets. The likelihood of misinformation and disinformation, a new risk added this year, will grow as new technologies make dissemination of information around the globe quicker and easier.
Stitching the pieces together
Being presented with such a polymath of risk can create feelings of despair for business leaders. But there are many positives to take from the WEF report. Examples include recognition of the innovation displayed by industry during the Covid-10 pandemic, in areas such as the vaccine development, roll out and distribution.
The global food crisis, intensified in part by the invasion of Ukraine, is forcing government and countries to rethink agricultural farming, technology, the supply chain and imports of food across borders.
One of the key messages from the report was a call to action for businesses and policy makers to “adopt a dual vision that more effectively balances current crisis management with a longer-term lens”. Thereby encouraging a shift from risk management to strategic business resilience.
But there continues to be significant inequalities around the world, an imbalance of basic needs, energy and resources.
As a long-time proponent of collaboration, I was encouraged to read a key response to these huge strategic risks and impacts on society where the team behind the Global Risks Report 2023 point to collaboration and climate change as “the ultimate team sport”. In managing global risk for all, the ‘team spirit’ ethos needs to be championed. As Saadia Zahidi, managing director at the World Economic Forum, stated so clearly: “Cooperation is the only way forward”.
In the world of business, collaboration alongside diversification and inclusion of people, markets and skills are critical to managing risk. Strong communication – based on knowledge sharing and true transparency – is also essential. Combining efforts, sharing resources, opening markets, encouraging inclusivity (in all respects) and, quite simply, talking, as we tackle these challenges.
Together, we can navigate the ‘knowns’, as well as the ‘unknowns’. Together, we can create opportunities emerging from risk – embracing the blue birds – and achieve resilience for people and planet. Together, we face a greater chance of creating a more joined-up world.
Clare B Marshall is a partner at business consultancy 2MPy (www.2mpy.com) and discipline head for risk at the FIDIC Academy.