Effects of Environment and Cyber Risks on Economy
Environment and cyber risks to dominate in 2018--WEF
The environment and cyber threats are the greatest risks to businesses and will have a major impact on them this year, according to the Global Risks Report 2018 published by the World Economic Forum.
The report, issued annually in January, shares the perspectives of global experts and decision-makers on the key risks facing the world, which were canvassed from 1,000 of these respondents in a Global Risks Perception Survey (GRPS).
Extreme weather most prominent risk
Among the 30 global risks the experts were asked to prioritise for likelihood and impact, 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 – were ranked highly on both dimensions. Extreme weather events were seen as the single most prominent risk.
Ms Alison Martin, Group Chief Risk Officer, Zurich Insurance Group commented: "Extreme weather events were ranked again as a top global risk by likelihood and impact. Environmental risks, together with a growing vulnerability to other risks, are now seriously threatening the foundation of most of our commons. Unfortunately we currently observe a “too-little-too-late” response by governments and organisations to key trends such as climate change. It’s not yet too late to shape a more resilient tomorrow, but we need to act with a stronger sense of urgency in order to avoid potential system collapse."
The GRPS also found that cyber threats are growing in prominence, with large-scale cyberattacks 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.
Mr John Drzik, President of Global Risk and Digital, Marsh said: “Geopolitical friction is contributing to a surge in the scale and sophistication of cyberattacks. At the same time cyber exposure is growing as firms are becoming more dependent on technology. While cyber risk management is improving, business and government need to invest far more in resilience efforts if we are to prevent the same bulging ‘protection’ gap between economic and insured losses that we see for natural catastrophes.”
Deteriorating geopolitical landscape
Asked about the trajectory of risks in 2018, 59% of the responses cited an intensification of risks, compared with 7% pointing to declining risks. A deteriorating political landscape is partly to blame for the pessimistic outlook this year. Over 90% expect political or economic confrontations between major powers to worsen, while nearly four out of five expect an increase in risks associated with war involving major powers.Economic risks feature less prominently this year, creating concern among experts that the improvement in global GDP growth rates may lead to complacency about persistent structural risks in the global economic and financial systems. Even so, inequality is ranked third among the underlying risk drivers, and the most frequently cited interconnection of risks is that between adverse consequences of technological advancesand high structural unemployment or under-employment.