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Environmental risks dominate growing global concerns

Posted On: Jan. 17, 2018 8:51 AM CST

The world will likely face more risks in 2018, and environmental risks pose the most significant challenges to global development, according to the World Economic Forum’s Global Risks Report 2018, published Wednesday.

The report, which is based on a survey of about 1,000 risk experts, found that 59% of respondents expect an increase in risk in 2018, and only 7% expect a decrease.

According to the report, produced in conjunction with strategic partners Marsh & McLennan Cos. Inc. and Zurich Insurance Group Ltd., the top five risks in terms of likelihood are:

  • Extreme weather events
  • Natural disasters
  • Cyber attacks
  • Data fraud or theft
  • Failure of climate change mitigation and adaptation

The top five risks in terms of impact are:

  • Weapons of mass destruction
  • Extreme weather events
  • Natural disasters
  • Failure of climate change mitigation and adaptation
  • Water crisis

While economic risks drew more concern in previous editions of the report, those risks have declined in perceived importance as the financial crisis has receded.

Environmental concerns have grown in light of the significant number of hurricane losses in 2017 and the first rise in carbon dioxide emissions in four years, the report said.

In addition, biodiversity is decreasing, agricultural systems are under strain, and pollution is becoming an increasing threat to health, the report said.

“A trend towards nation-state unilateralism may make it more difficult to sustain the long-term, multilateral responses that are required to counter global warming and the degradation of the global environment,” the report said.

Businesses need to better understand how to respond to heightened environmental risks, Marcus Cooper, head of middle markets, North America commercial insurance at Zurich North America, said in an interview.

For example, while many businesses were able to open immediately after the hurricanes and wildfires last year, their customers often were displaced, which led to a loss of business income that was not covered by traditional business interruption insurance because there was no damage to the policyholders’ properties, he said.

“Companies need to understand their risks and their operations and how the changes will affect them,” Mr. Cooper said.

Cyber security risks are also growing, according to the WEF report.

“Attacks are increasing, both in prevalence and disruptive potential. Cyber breaches recorded by businesses have almost doubled in five years,” the report said.

Some of the largest cyber-related costs to business in 2017 related to ransomware attacks, such as WannaCry and NotPetya, which accounted for 64% of all malicious emails last year, the report said.

“Another growing trend is the use of cyber attacks to target critical infrastructure and strategic industrial sectors, raising fears that, in a worst-case scenario, attackers could trigger a breakdown in the systems that keep societies functioning,” the report said.