Log in Join now News & media

Economic recovery is masking severe global stresses: WEF Global Risk Report 2018

Systemic risk potential is unprecedented, warns Zurich CRO

The structural and interconnected nature of risks in 2018 is threatening the very system on which societies, economies and international relations are based, according to the World Economic Forum's Global Risks Report 2018, Airmic members heard in a webinar briefing on 29 January.

The report - which every January shares the perspectives of global experts and decision-makers on the most significant risks that face the world - warns that the global community is struggling to keep up with the accelerating pace of change. It highlights numerous areas where systems are being pushed to the brink, from extinction-level rates of biodiversity loss to mounting concerns about the possibility of new wars.

Economic recovery?

Speaking to members, John Scott, chief risk officer at Zurich and a contributor to the report via its advisory board, explained that today's systemic risk potential "is on a level we've never seen before…We are increasingly vulnerable and as businesses we really have to think about what that means for us."

The good news, Mark Weil, CEO of Marsh UK and Ireland, told webinar participants, is that "the economic outlook is far better than many expected this time last year." Strong US growth, a recovery in the eurozone, and the UK economy which has so far avoided a "Brexit shock" predicted by many economists, are particularly notable, he said.

Mr Scott warned, however, that the economic recovery is masking many other global risks. According to the WEF report, the prospect of strong economic growth in 2018 should be seen by leaders as a "golden opportunity" to address the many signs of severe weakness in societies, economies, international relations and the environment.

Global stresses

The WEF research suggests that experts are preparing for another year of heightened risk, with 59% of survey respondents anticipating an intensification of risks, compared with just 7% pointing to declining risks.

A deteriorating geopolitical landscape is partly to blame for the pessimism, Mr Weil noted, with 93% of respondents expecting political or economic confrontations between major powers to worsen, and nearly 80% expecting an increase in risks associated with war involving major powers.

Brace for climate change impacts

Meanwhile, environmental risks dominated the survey for the second year running, with 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) ranked highly on both likelihood and impact. Extreme weather events were seen as the single most prominent risk.

Environmental threats have, over the years, "slowly come to the top of the agenda", Mr Scott of Zurich explained. He noted that "human beings are now having a demonstrable impact on the planet", and that businesses must "brace for climate change impacts". Environmental risks should be "understood and owned at the board level", he added.

Cyber threats are also growing in prominence globally, with large-scale cyber attacks 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.

Geopolitical friction is contributing to a surge in the scale and sophistication of cyberattacks, the webinar heard, while at the same time cyber exposure is growing as organisations become more dependent on technology.

You can listen to the webinar in full here. Click here to read The Global Risks Report 2018.