The World Economic Forum Warns Of Polycrises

Every year I look forward to several insightful reports. The World Economic Forum’s Global Risks Report is one of them. This year’s report is based on interviews with more than 1,200 experts from academia, business, government, the international community and civil society. “Global risk” is defined as the possibility of an event or condition that, if it did occur, would adversely affect a significant portion of the world’s GDP, population, or natural resources.

The report lists the main risks that are currently occurring. But it also takes into account what the most important risks are likely to be in the short term, in the two-year perspective and in the long-term perspective over the next ten years.

Current global risks

Regular news readers should not be surprised to see an energy crisis, a cost of living crisis; and rising inflation are the three biggest risks. Interestingly, experts do not believe that energy supply crises will last long. It is not included in the highest risk in the short term – after two years.

Short-term global risk

The top ten risks, ranked by severity, over the next two years can be seen in the figure below.

The cost-of-living crisis was largely seen as a short-term risk that would peak over the next two years and ease thereafter. While the inflation picture has improved, and the likelihood of a short-term recession or even a mild one has improved, the risk of a deep recession cannot be ignored.

Meanwhile, the third biggest threat, geo-economic confrontation, is expected to remain mainly economic in the short term. By economic, they mean that instead of war, they see increasingly sanctions, tariffs, and investment screening to constrain national competitors.

Long-term global risk

The main thing you notice when you compare the short-term risks with the long-term risks that will be evident ten years from now is a shift to the top of the list of several environmental risks. In the two-year perspective, “natural disasters and extreme weather events” and “failure to mitigate climate change” are the top four environmental risks. In a ten-year perspective, they are joined by “failure to adapt to climate change” and “biodiversity loss and ecosystem collapse”.

“Inability to adapt to climate change” is defined as “the failure of governments, businesses and individuals to implement, adopt or invest in effective climate change measures to adapt to climate change, such as lack of climate resilient infrastructure”. In contrast, “failure to mitigate climate change” is defined as “the failure of governments, businesses and individuals to implement, adopt or invest in effective climate change mitigation measures, such as decarbonisation of economic activity”.

The threat of polycrisis

This year’s report introduced the term “polycrisis”. A polycrisis occurs when co-occurring shocks, deeply interconnected risks and weakening resilience intertwine. These “disparate crises interact in such a way that the combined effect far exceeds the sum of each part.” The concept of polycrisis and interconnected risks also applies to business and supply chain management, not just to nation states.

The risks are indeed interconnected. The report shows how specific risks, such as “erosion of social cohesion”, are linked to other risks.

Conclusion

This report is written to explain risks at the national and global level. That is why potential risks of the entrepreneur – such as labor shortage – are not necessarily covered. Nevertheless, business leaders should definitely consider the risks identified in this report.

It’s unfortunate for entrepreneurs that this report comes out in January. This report is very useful when companies are going through a strategic planning process. For most companies, this happens at the end of the year. Download this report and stick with it!