Yemisi Izuora
A cocktail of overlapping environmental, societal and technology risks are set to fundamentally reshape the risk landscape in coming years, according to the World Economic Forum’s (WEF) Global Risk Report 2017.
WEF Global Risk Report
Extreme weather and climate change risks dominated this year’s WEF risk ranking, with all five environmental risks monitored by the organisation ranked both high-risk and high-likelihood for the first time.
Extreme weather was considered the biggest risk by likelihood, and second in terms of impact.
Natural catastrophes, a failure to adapt to climate change and a potential water crisis also feature in the top five by impact and top ten by likelihood.
Environmental and climate risks are, however, just part of the bigger picture in which several interconnected trends are now emerging as key drivers of risk, according to a panel of experts at the report’s launch in London.
Chief among these are growing inequality and the polarisation of society. These two problems will require new approaches to stimulate economic growth, deepen reform and increase efforts to improve social cohesion, the WEF said.
Rising income/wealth and increasing polarisation were ranked first and third among the underlying trends shaping the risk landscape over the next ten years. Climate change was second while cyber was fourth, followed by the aging population in fifth.
According to the WEF, risks identified in its Global Risk report over the past ten years – such as income disparity, the impact of technology and climate change – are now beginning to “crystallise” and “spill over” into mainstream politics.
For example, growing income inequality and societal polarisation may have triggered political change in 2016, most notably with the UK’s decision to leave the EU and the election of President-elect Donald Trump in the US.
“The year 2016 has seen profound shifts in the way we view global risks. Societal polarisation, income inequality and the inward orientation of countries are spilling over into real-world politics,” according to Klaus Schwab, WEF founder and executive chairman.
“Through recent electoral results in G7 countries, these trends are set to have a lasting impact on the way economies act and relate to each other. They are also likely to affect global risks and the interconnections between them,” he said in the report.
Technology featured to a lesser extent in the WEF survey’s top ten risk rankings, although it is becoming an increasingly important driver of risk.
For example, technology-related changes, such as the impact of automation on jobs and inequality, were said to be a factor behind the Brexit result and the election of Mr Trump.
“Although anti-establishment politics tends to blame globalisation for deteriorating domestic job prospects, evidence suggests that managing technological change is a more important challenge for labour markets,” the WEF said.
“It is no coincidence that challenges to social cohesion and policy-makers’ legitimacy are coinciding with a highly disruptive phase of technological change,” it added.
The WEF also highlighted a big challenge facing society to manage potential risks associated with the so-called fourth industrial revolution.
“Driven by the convergence between digital, biological and physical technologies, the fourth industrial revolution is creating new global risks and exacerbating existing risks,” the WEF said.
The WEF report found that artificial intelligence, biotechnology and robotics promise the greatest potential benefits, but also have the greatest potential negative effects and the biggest need for better governance.
To date, society has not kept pace with technological change, and in such areas legal and regulatory challenges await, said the report.
“How to govern fast-developing technologies is a complex question. Regulating too heavily too quickly can hold back progress, but a lack of governance can exacerbate risks as well as creating unhelpful uncertainty for potential investors and innovators,” the WEF said.
Many of the longer-term complex risks identified by the WEF report – such as adapting to climate change and the transition to new technologies – require greater international cooperation.
However, WEF highlighted a risk of weakening global cooperation. A key challenge will be to protect and strengthen systems of international cooperation, it believes.
“Examples are mounting of states seeking to withdraw from various international cooperation mechanisms. A lasting shift in the global system from an outward-looking to a more inward-looking stance would be a highly disruptive development,” the WEF said.