Global Risks Report 2021: Where next?

What a difference a year makes. When the World Economic Forum (WEF) published its annual risks report in January 2020 and dedicated a chapter to the risk of health systems not being ready for a pandemic, there was little indication of how prescient this warning would prove to be. This year, when the WEF revealed its Global Risks Report 2021, published in partnership with Marsh & McLennan Companies (Marsh), SK Group and Zurich Insurance Group (Zurich), it was to a very different kind of gathering.

This difference was captured by WEF president Børge Brende (pictured centre) who noted that it feels like a whole decade has occurred over the last year. The evolution of the COVID-19 pandemic, he said, has made something very clear –the world really needs to wake up to ongoing global risks. This is not just about keeping an eye out for blind spots but also keeping a focus on the risks that the world has been addressing and building resilience against.

“We saw last year that risks are global and interconnected,” he said. “Last year showed that risks aren’t confined by borders or categories. COVID doesn’t know any borders; COVID anywhere is COVID everywhere. We [also] know climate change doesn’t know any borders. And one of the major risks that we’re still facing is the polarized world when it comes to geopolitics and also geo-economics. Even if we see some light at the end of the tunnel, there are still huge risks connected to the polarized and fractured world.”

Unfortunately, Brende said, one of the main findings of the report and one of the WEF’s main worries for the coming years surrounds inequalities and societal fragmentation. These are immediate risks but they will bring long-term consequences if not addressed. The report’s global risks perception survey identified livelihood crisis, digital inequality and societal cohesion-erosion as some of the main issues threatening the very tissue of society.

“We really need to make sure that the growth that comes in the coming years has to be more inclusive, has to create decent jobs and also has to be more sustainable,” he said. “If we don’t address the underlying growth of inequalities, we will also see new risks when it comes to fragmentations in society. “This [finding] has to be taken seriously and also connected to the response to the economic crisis that we’re still in. We’re not out of the woods so, whatever it takes still applies and there’s a larger risk of doing too little than too much and, not only focusing on consumption, now we have to invest in the future. We have to invest in global access to the internet, we have to invest in schools, in upskilling and in re-skilling, and making sure that inequalities are not growing, but declining.”

Offering her perspective, Carolina Klint, risk management leader, Continental Europe, Marsh said she hopes that COVID has changed the way people think about risk. Everyone has had the opportunity to learn firsthand that low-frequency, high-severity events do happen, she said, and also that their impact can be both sudden and profound.

“The pandemic has accelerated trends that have been coming for a long time,” she said. “And it’s clear that improved collaboration and coordination is the only way to improve our collective resilience and capacity to respond to these shocks. So, we see many businesses now grappling with how to survive and build resilience, and not only in relation to the ongoing pandemic impact, but they also have to cope with an increased number of cyberattacks, catastrophic climate events and social unrest.”

There are three critical drivers of the changing risk landscape according to Klint - political, technological, and societal. On the political side, a key concern is that, over the last year, the world has seen border closures, lockdowns and export restrictions. Companies need to keep an eye on shifts in domestic policies that focus on national security and self-sufficiency as these could impact access to foreign talent and investment. as well as disruption to national supply chains.

“Technological drivers are also accelerating and disrupting the business landscape and the rapid digitalization and take-up of remote working has exponentially increased cyber exposures and created more complex and potentially less secure networks,” Klint said. “So businesses should now really take the time to assess changes that were made in the heat of the pandemic, and verify that the right investments have been made in networks and controls and make sure to close any security and governance gaps [they find].”

Finally, looking to the societal drivers that are also creating real pressures on industry, Klint that businesses are facing increased scrutiny of their practices. More than ever, consumers, employees and investors expect firms to reflect their values, which means that businesses need to take a firmer stance to avoid negative impacts to their revenue, reputation, capital and talent pool.

2020 proved to be the emotional equivalent of a marathon, she said, and this means that businesses need to recognize their employees as human beings and pay attention to the mental health risks arising from ongoing pandemic stresses. Organizations should be prepared to provide their people with programmes and tools to support their mental wellbeing. Also, given the ongoing war for talent, these same businesses will have to develop policies to ensure that flexible work is viable, inclusive and permanent.

“I think it’s fair to say that 2020 left us with a renewed appreciation of risk,” she said. “The pandemic has forced conversations on how we understand, prepare and manage risks in this fast-changing environment. And I think we can draw inspiration from many successful responses to COVID-19… It took people and sectors working together to crack these big complex challenges.

“And companies now need to take a step back and plan for the unexpected, against this backdrop of a constantly changing risk landscape, and make the needed shift in strategy and strengthen their organizational resilience and empower their leaders to make quick decisions with confidence. And with the right focus, I think there are opportunities to invest in clean, smart and inclusive growth, but it is time for action and the stage is set for a more resilient, sustainable and inclusive future.”

Source: Insurance businessmag