A pandemic thriving on the hyper-connected nature of the world is making leaders rethink cross-border dependence. As the global economy heads towards a “synchronized slowdown” the global risks are signaling a future with unprecedented challenges. The World Economic Forum’s Global Risks Report chalks out a bleak picture that warrants immediate action with global collaboration. As per the 800 forum members (multi-stakeholders) who completed the Global Risks Perception Survey, these are the most imminent global risks:
- Economic Confrontations
- Domestic Political Polarization
- Extreme Heatwaves
- Destruction of Natural Eco-systems
- Cyberattacks: Infrastructure
Here’s an attempt to explore these risks and their impact on business and society under 5 broad categories.
Unsettled Geo-political Landscape
The world is in flux as a new balance of power is being forged by changing economic, technological and demographic forces. As a result of the impending uncertainty, international alliances have declined, and countries are increasingly adopting nationalist approach to pursue individual agendas. Considering that 40% of global GDP comes from US and China, the possibility of a fallout between the two has further aggravating the turmoil. Trade has become a weapon of contention rather than an accelerator of growth. IMFs growth expectation went down to 3% in 2019, lowest in a decade, while WTO projected growth in merchandise trade to slump to 1.2% in 2019 from 3.0% in 2018. It’s time for global stakeholders to look beyond immediate geostrategic advantage and focus on key priorities, else the opportunities for collaborative action might slip away.
Risks to social cohesion and economic stability
Increasing trade tensions are severely impacting economic growth globally. WTO has reported higher levels of trade restrictions resulting in reduction of trade volumes. According to IMF, this could slow down global growth by 0.8 percentage points in 2020. Public debt across G20 economies is expected to reach 95% of GDP by 2024. Investments remain low and FDI continues to be lower than it used to be prior to the 2008 – 2009 slump.
Stagnating economy is increasing financial inequality, which has been the root cause of several social upheavals across the world. In the third quarter of 2019, Hong Kong’s economy dwindled by 3.2% due to “local social incidents”. Restoring economic and social stability is key to mitigate global risks as without them financial resources and social support would soon wither.
Climate concerns and increased biodiversity loss
Global temperatures are rising at an alarming rate and might increase by 3°C by the end of this century which will bring about severe social, economic and environmental consequences. Food and water crisis will hit the world much earlier. Over 200 of world’s largest corporations estimated climate change to cost them nearly US$1 trillion in totality if timely action is not taken. Climate and related economic risks threaten a 2008-like systemic collapse, unless carbon emissions are reduced by 50% by 2030. Shifting to renewable energy is an impending need and can possibly grow the world economy by 1% every year until 2050, resulting in a total gain of over US$52 trillion. Accelerated biodiversity loss that we are currently experiencing will have dire consequences on humanity and established food and health systems.
Consequences of digital transformation
Over half of the world’s population is now present online, and approximately 1 million people enter the digital domain every day. Industry 4.0 technologies are already reshaping economies and societies. By 2030, Artificial Intelligence alone is expected to enhance global economic growth by 14%. With a complete takeover by digital, vulnerabilities increase manifold. Cyberattacks on infrastructure are already taking place and estimated to rise. IoT device attacks have increased by over 300% in the first six months of 2019. Cybercrime damages are expected to reach US$6 trillion by 2021. To combat organized cybercrimes, formulation of new cyberlaws is the need of the hour.
New pressures on health systems
Over the centuries health systems have progressed considerably but the benefits have not been equally distributed among the people of the world. Many backward countries are still reeling under diseases like polio, malaria, tuberculosis, etc. Non-communicable diseases like cardiovascular diseases and mental health have gained prime importance over infectious diseases. Over 700 million people are estimated to be suffering from mental disorder worldwide. Rising health care costs are another cause for concern. Collaborative multi-stakeholder action is the only way to mitigate these risks and build resiliency globally
Insights and data points of the above article have been taken from “The Global Risks Report 2020” by World Economic Forum.