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A collaborative approach to mitigating risks is urgently needed in the face of rising geopolitical uncertainty, according to the World Economic Forum’s Global Risks Report 2020, published Wednesday.
The report, based on a survey of about 750 risk experts, found that 78% of respondents expect 2020 to involve increased risks of “economic confrontations” and “domestic political polarization.”
“On key issues such as the economy, the environment, technology and public health, stakeholders must find ways to act quickly and with purpose within an unsettled global landscape,” the report said.
The lack of a coordinated approach increases the likelihood of a prolonged global economic slowdown, with 72.8% of respondents expecting recession in a major economy.
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 all environmental:
The top five risks in terms of impact are:
As environmental concerns dominate the risks outlook, a growing number of respondents worry about failure of environmental policy, the report found.
Failure of climate change mitigation and adaption is the number one risk by impact and number two by likelihood over the next 10 years, according to the report.
Younger respondents to the WEF’s survey show even greater concern, ranking environmental issues as the top risks in both the short and long terms.
“High-profile events, like recent wildfires in Australia and California, are adding pressure on companies to take action on climate risk at a time when they also face greater geopolitical and cyber risk challenges,” John Drzik, chairman of Marsh & McLennan Insights, said in a statement released with the report.
Cyber-related issues, such as cyberattacks and data fraud or theft also remain a top concern, according to the report.
While the growth of digitalization offers opportunities for a coordinated approach, it also creates a need for coordinated solutions, the report said.
Collaboration on artificial intelligence, for example, will unlock its potential, but AI can also bring “significant risk” requiring a multilateral approach to challenges such as security, verification, deepfake videos, mass surveillance and advanced weaponry, the report found.
In the geopolitical landscape, situations can change rapidly, and companies need to quickly assess or reassess what those situations mean for them, said Fabrice Lebourgeois, Philadelphia-based risk management segment leader, U.S. & Canada for Marsh LLC, in an interview.
“Developing risk scenarios and planning for those ahead of time will always help an organization to pivot,” he said.
“The ability of organizations to change and mitigate the risk will be there when needed, but clearly is very challenging for risk management professionals in a world that is evolving, changing and dynamic,” Mr. Lebourgeois said.