By Vanessa Pereira and Henrique Luz
O Risk Report[1] Recently published Global Risk Report 2021 provides a broad perspective on the main threats that could affect global prosperity this year and the next decade.
The report is a qualitative and quantitative study of global risks resulting from a multisectoral process carried out in partnership with members of the business, academic and public sector communities.
Its development this year was led by strategic partners Marsh & McLennan Group, insurer Zurich Insurance Group, SK Group, and academic partners National University of Singapore, “Oxford Martin School” at the University of Oxford, Center for Decision Processing and Management Wharton Risk from the University of Pennsylvania, plus insights from a broad range of public and private sector experts.
The Global Risks Report 2021 presents the results of the latest Global Risk Perception Survey (GRPS), followed by analysis of social, economic growth and industrial divisions, their interconnections and their implications for the human capacity to solve major global risks through cohesion social and global cooperation.
In short, this year's report focuses on the risks and consequences of increasing inequalities and the fragmentation of society. In some cases, disparities in health outcomes, technology, or workforce opportunities are the direct result of dynamics created by the pandemic. In others, existing social divisions have amplified, straining weak safety nets and economic structures.
Risks that became reality
The study highlighted that the 2006 report alerted the international community about possible impacts arising from a pandemic and other health-related risks. At the time it was highlighted that a lethal flu, with its spread facilitated by global travel patterns and not contained by insufficient warning mechanisms, would represent an acute threat to humanity.
As a prognosis, he pointed out that the impacts arising from the supposed pandemic would affect “serious impairment of travel, tourism and other service sectors, as well as manufacturing and retail supply chains”, while “global trade, investors’ desire for risk and the consumer demand” could suffer long-term damage.
A year later, the report presented a pandemic scenario that illustrated, among other effects, the amplifying role of “infodemics” in exacerbating the central risk. Subsequent editions have emphasized the need for global collaboration in the face of antimicrobial resistance (8th edition, 2013), the Ebola crisis (11th edition, 2016), biological threats (14th edition, 2019), and overwhelmed health systems (15th edition, 2020 ), between others.
However, what was once a conjecture, in 2020, became a reality. In this sense, this year's edition of the report points out that the economic and human cost of the pandemic is high, thus threatening years of progress in combating global poverty and inequality, in addition to weakening social cohesion and cooperation at a global level.
Although we have seen some notable examples of determination, cooperation and innovation, most countries have faced problems related to crisis management during the pandemic.
COVID-19 has accelerated the Fourth Industrial Revolution, transforming human relationships and expanding the digitalization of our social interactions, e-commerce, online education and remote work. These changes will transform society long after the pandemic and promise to leave enormous benefits as a legacy, as the ability to telework and the rapid development of vaccines are two examples. On the other hand, such changes can amplify existing inequalities and even be responsible for creating new social disparities.
The reduction in employability around the world, the digital expansion, the social division of interactions and the abrupt changes in the way markets are regulated are some of the examples of the impacts of the pandemic on a large part of the world's population.
In this context, interviewees who participated in the GRPS classified “digital inequality”, “youth disillusionment” and “social erosion of cohesion” as critical short-term threats.
Environmental Risks
With the title “no vaccine for the environment” the report pointed out in chapter 1, in the session on environmental risks, that in the absence of social cohesion and stable international platforms, cross-border crises will be part of our future, directly impacting our society.
In this sense, the study draws attention to blind spots in collective responses to a range of risks, such as debt crises, deteriorating mental health, technological governance failure, youth disillusionment, climate action failure and biodiversity loss.
Failed climate action and biodiversity loss[2] are identified as the most worrying blind spots.
To highlight the importance of implementing environmental actions, the report recalled significant points covered in the 2020 edition, highlighting that last year was the first time in 15 years that the study highlighted environmental issues in all five most likely long-term risks. Such considerations were analyzed in the chapter entitled “The Remaining Decade and Save the Axolotl”.
He also highlighted that the World Economic Forum's COVID-19 Risks Outlook, published in May 2020, pointed out how the crisis could paralyze progress made to contain climate change.
This year, study participants ranked environmental risks as four of the top five risks in terms of impacts. Such risks were categorized as: climate action; loss of biodiversity; crisis in natural resources; human livelihood crises; damage resulting from human actions.
In the first half of 2020, global CO2 emissions decreased by 9% due to the restriction measures adopted by most countries to combat COVID. In this context, the report highlighted the need – and the challenge – to make similar reductions annually over the next decade in order to keep global warming to 1.5°C.
The United Nations Conference on Climate Change (COP26), scheduled to take place in November 2021, will be a crucial moment for countries considered the world's largest emitters to commit to more significant national goals, in addition to aligning rules for carbon trading ( article 6 of the Paris Agreement) in order to accelerate investments in the transition to a low-carbon global economy.
The UN Conference on Biodiversity (COP15) and the United Nations Convention to Combat Desertification (COP15) must outline more ambitious goals for the protection of species and sustainable land management. Failure to take these actions will inevitably lead to catastrophic physical impacts and severe economic damage that will require costly policy responses.
From the analysis of Biodiversity Loss
It is noteworthy that 51.2% of those interviewed pointed to the loss of biodiversity as one of the critical threats to the world in the long term (5-10 years).
The report identified 7 main risks in terms of probability in the following order: (i) extreme climate events, (ii) failure of climate action; (iii) human-caused environmental damage; (iv) infectious diseases; (v) loss of biodiversity; (vi) concentration of digital power (vii) digital inequality.
The 7 biggest risks in terms of impact were classified in the following order: (i) infectious diseases; (ii) failure of climate action; (iii) weapons of mass destruction; (iv) loss of biodiversity; (v) crisis in natural resources; (vi) damages arising from human actions, (vii) crises in human livelihoods.
Regarding the methodology for classifying probability risks, it is worth highlighting that research participants were asked to evaluate the probability of the individual global risk on a scale of 1 to 5, with 1 representing a risk that is very unlikely and 5 a risk which is very likely to occur over the next ten years. For the risk assessment, respondents rated the impact of each global risk on a scale of 1 to 5, with 1 representing a minimal impact and 5 representing a catastrophic impact.
In the Global Risks Network's interactive graph, the loss of biodiversity was classified as the 5th risk that most concerns humanity globally. At this stage of the study, interviewees were invited to classify the three risks that they considered to be the most worrying for the world. Sequentially, they were invited to select up to five risks that they considered to be their main concerns over the next 10 years, in no particular order.
From future-proofing to global risks
As governments, businesses and societies assess the damage inflicted over the past year, strengthening strategic foresight is more important than ever. With the world more attuned to risk, there is an opportunity to raise awareness and find more effective ways to identify and communicate risk to decision makers.
Reducing the gaps that exist today will directly depend on the actions taken to combat COVID-19 and post-COVID, aiming to rebuild socioeconomic dynamics, prioritizing accessibility and inclusion. Inaction on economic inequalities and the division of society could further paralyze actions to combat climate change, which, in turn, remains an existential threat to humanity.
The response to COVID-19 offers four governance opportunities to strengthen the resilience of countries, companies and the international community: (i) formulating analytical frameworks that take a holistic, systems-based view of risk impacts; (ii) invest in high-profile “venture champions” to encourage national leadership and international cooperation; (iii) improve risk communications and combat misinformation; (iv) explore new forms of public-private partnership in risk preparedness.
In this context, although the global risks described in the report are terrible, the lessons from the pandemic period offer a learning opportunity for the future, so that we can better prepare for the next pandemic, thus avoiding an increase in processes risk, capabilities and culture.
It is evident, therefore, that through current experience the world will be able to plan in the face of crisis situations instead of just anticipating the crises that are to come.
[1]A global risk is defined in the report as an uncertain event or condition that, if it occurs, could cause a significant negative impact on multiple countries or industries over the next 10 years.
[2]The report points out the global risk of biodiversity loss as having irreversible consequences for the environment, humanity and economic activity, and a permanent destruction of natural capital, as a result of the extinction/reduction of species.
The quantitative data presented in this document were extracted from the following graphs present in GRPS 2021:
