Summary: The Global Risks Report 2023: Insight Report, 18th Edition by Sophie Heading and Saadia Zahidi

Key Takeaways

• The world is facing a set of risks that feel both wholly new and eerily familiar. The COVID-19 pandemic, the war in Ukraine, the climate crisis, the cost-of-living crisis, the cyberattacks, the human rights violations, and many other threats and challenges are testing the resilience and cooperation of economies and societies. In this article, we will review a book that explores some of the most severe risks we may face over the next decade, and how we can prepare and respond to them.
• If you are interested in learning more about the book and how it can help you understand and navigate the global risk landscape, read on to find out what the book covers, what we liked about it, and what you can expect to gain from it.

Recommendation

The prolonged COVID-19 pandemic profoundly affected human health and the world’s economy. When the pandemic receded, the carbon emissions that feed climate change rose – and Russia’s invasion of Ukraine disrupted energy and food supply chains. According to the World Economic Forum’s (WEF) salient report on worldwide risks, produced in partnership with Marshall McLennan and the Zurich Insurance Group, these events fueled global inflation. With nations facing massive debt and inflation, the cost of living worldwide soared to unprecedented levels, as did income inequality and social conflict. The WEF warns that not all economies and societies will bounce back from these compounding crises.

Take-Aways

• A “global risk” is the potential likelihood of an event or condition negatively affecting the world’s economy, population or natural resources.
• Increases in the cost of living will be the world’s most urgent crisis between 2023 and 2025.
• The world’s failure to deal with climate change has ranked high on the Global Risks Report for years.
• Irreversible damage to ecosystems creates severe long-term risks.
• In recent years, “societal polarization” has become an increasing risk.
• The COVID-19 pandemic revealed that the world’s health systems are at risk over the long term.
• Financial and information warfare pose greater future threats than conventional war.
• An increasing debt crisis threatens economies with instability.
• “Polycrises” may be common in the future.

Summary

A “global risk” is the potential likelihood of an event or condition negatively affecting the world’s economy, population or natural resources.

The Global Risks Perception Survey (GRPS) provided the data for The World Economic Forum’s (WEF) 2023 Global Risks Report. The GRPS surveyed respondents from many fields on five issues regarding short-term (from now to two years out) or long-term (ten-year) risks. Those issues are:

• Outlook – The survey asked respondents to assess the world’s instability and evaluate global risks over time.
• Severity – It asked for an assessment of the likely impact of specific risks over one-, two- and ten-year time spans.
• Consequences – It sought evaluation of the potential individual risks and the effect of compounded global risks.
• Risk preparedness and governance – The survey asked respondents to evaluate people’s current capacity to respond to and manage global risks.
• Qualitative questions on risks – And, the survey asked specialists to consider possible new risks on the horizon.

The Executive Opinion Survey (EOS) solicited the views of more than 12,000 business leaders. The WEF designed the EOS to include another factor, the identification of the severe risks experts anticipate in individual countries in 2024 and 2025.

Increases in the cost of living will be the world’s most urgent crisis between 2023 and 2025.

The majority of GRPS respondents ranked the cost of living as the most urgent crisis in the two years starting in 2023. This crisis is not new, but it remains ongoing, and it will harm the most vulnerable populations. The cost of necessities, such as food and housing, rose before the pandemic. However, inflation exacerbated prices, particularly when combined with food and energy disruptions due to the war in Ukraine. [Note: This report was published before the war in the Middle East.]

Despite the resolution or mitigation of some supply chain issues that developed during the pandemic, the prices of necessities rose faster than inflation.

“[The] cost-of-living crisis was broadly perceived by GRPS respondents to be a short-term risk, at peak severity within the next two years and easing off thereafter.”

Impoverished sectors of society may end up unable to afford crucial basics, potentially leading to social unrest. Continued inflationary pressures could generate interest rate hikes, thereby exacerbating public and private debt. Respondents listed sustained inflation as a major threat in many countries, including Brazil, South Korea and Mexico.

The world’s failure to deal with climate change has ranked high on The Global Risks Report for years.

Scientists, policy-makers, diplomats and activists have discussed climate change for 30 years, yet the world has made little progress. The Global Risks Report first listed climate change as a severe risk in 2011. The 2023 report reports that carbon dioxide emissions and other climate change contributors are at record highs. Only a scant chance exists that the world will reach the international goal of limiting temperature rise to 1.5°C (2.7°F) by 2030.

“A failure to mitigate climate change is ranked as one of the most severe threats in the short term but is the global risk we are seen to be the least prepared for, with 70% of GRPS respondents rating existing measures to prevent or prepare for climate change as ‘ineffective’ or ‘highly ineffective’.”

A stark difference remains between what international scientists argue is necessary and what politicians and diplomats can enact. Governments are under pressure to move toward clean, renewable energy, but, for example, the European Union spent €50 billion ($54 billion) on facilities driven by fossil fuel. Some nations reopened coal-powered plants as global leaders failed to transform their energy sources. Some 600 million people in Africa need electricity, which makes the solution of using fossil fuel – which is more available and less expensive –more attractive.

The global transition away from fossil fuels will be slow. The delay will have consequences. Backing away from climate goals will undermine human health and natural ecosystems. Climate change affects agriculture and human migration as well as terrorism and conflict in Africa, Asia and the Middle East.

Irreversible damage to ecosystems creates severe long-term risks.

Short-term risks such as political polarization may unfold in the course of only a few years, but they still raise implications for the future. One in five GRPS respondents, especially young people, are optimistic and believe that the world will return to relative stability within ten years. However, more than half of respondents believed crises would worsen and become more catastrophic within the 2020s.

Pivotal risks researchers expect to manifest between 2023 and 2033 relate to climate change and the natural order. Failure to adapt to climate change is the highest-ranked global risk for that decade, followed by related risks, such as destructive weather and the collapse of biodiversity and ecosystems. The loss of biodiversity and ecosystems is accelerating at the highest rate in history. Failure to address these issues could lead to worsening water scarcity, lower crop yields and the resultant potential food scarcity, as well as more human conflicts due to shortages of basic resources and even an increase in diseases that can jump from animals to humans.

Preserving ecosystems and biodiversity will require mitigating climate change by reducing fossil fuel emissions. However, even producing the green infrastructure necessary to generate sufficient clean energy may have an environmental impact.Nations also need to introduce carbon renewal technologies at a significant speed, although that, too, will carry a risk of unintended environmental consequences.

In recent years, “societal polarization” has become an increasing risk.

Broad societal polarization, including erosion in people’s sense of connectedness to others, ranks fifth as a global risk.Polarization, which results from a reduction of social capital in broken communities, affects people’s stability and economic productivity. Societal polarization is a significant short-term risk related to other short and long-term risks, such as the cost-of-living crisis, political and economic instability, and human migration due to climate change.

“A widening gap in values and equality is posing an existential challenge to both autocratic and democratic systems, as economic and social divides are translated into political ones.”

In countries as different as the United States, China and Iran, people remain polarized on multiple levels about multiple issues – including immigration, abortion, women’s health, ethnicity and religion. Such polarization leads to civil unrest, pushing people away from democracy and toward autocracy. Between 2011 and 2021, for example, the number of people worldwide living under some form of autocracy rose from 5% to 36%. At present, only 13% of human beings live under liberal democracy. Societal polarization can lead to a degree of political paralysis that would undermine the collective problem-solving that today’s international problems and risks demand. The election of leaders and political parties with extreme viewpoints, especially in economically dominant countries such as the United States, risks damaging vital alliances.

The COVID-19 pandemic revealed that the world’s health systems are at risk over the long term.

Global public health systems may prove ill-suited to handling future pandemics and other health crises. COVID-19 underscored other emergent health risks, including “antimicrobial resistance” (AMR), infectious diseases, chronic conditions related to climate change, mental health crises associated with changing social conditions, and anxiety and controversy over vaccinations.

“More frequent and widespread infectious disease outbreaks amid chronic diseases over the next decade risk pushing exhausted healthcare systems to the brink of failure worldwide.”

The aftereffects of the receding pandemic include a reduced sense of having a good quality of life and increases in work absences and the use of healthcare systems, all of which are vulnerable to various impacts of climate change. For example, global warming increases the length of time each year that mosquitoes are active and can transmit certain diseases, such as malaria. And, as climate change-related food insecurity grows, so will malnutrition.

With a growing and aging population and an increase in society’s “disease burden,” the demands on healthcare systems worldwide will become even heavier. Given previous pandemic-related delays for non-emergency services, these systems already face difficulties meeting demand and retaining staff. Since the supply of healthcare and the demand for it are poorly aligned, a new pandemic or catastrophic weather event could push healthcare systems to collapse.

Public health agencies can improve healthcare systems by sharing information and resources and bolstering their overall capacity. And, governments can help people prevent disease by promoting healthy lifestyles, proper nutrition and social connections.

Financial and information warfare pose greater future threats than conventional war.

In the near term, GRPS respondents regard “geoeconomic warfare” as a relatively high risk compared to traditional conflicts between states.A geoeconomic confrontation might include sanctions, trade wars, investment limitations and asset appropriation, as happened in 2022 after Russia’s invasion of Ukraine. Leading up to 2030, GRPS respondents rank economic and information warfare as a greater risk than traditional interstate conflicts, much less the use of weapons of mass destruction.

“Past decades were defined by the non-deployment of humanity’s most powerful weapons and no direct clashes between global powers. Prior to 2022, militarization had fallen in all regions.”

A change in the movement toward demilitarization could be incredibly destructive. The growing mistrust among countries and regions has spurred a new re-prioritization of states’ military forces. The war in Ukraine led NATO members to increase their military budgets. Given the increased investment in weapons research, development and innovation, future conflicts will likely be “multi-domain” and could encompass land, sea, air, cyberspace and outer space. The parallel development of these capabilities suggests the possibility of a compounding effect that could fracture international relations and open an arms race. The easy availability of sophisticated, high-tech weapons could, in the hands of rogue states or actors, open new, dangerous avenues of “asymmetric warfare.”Given that many of these technologies will have multiple uses and the leaders involved will emerge from both the public and private sectors, achieving useful, effective arms control agreements will be complex.

An increasing debt crisis threatens economies with instability.

A debt crisis has been developing for several years. When interest rates were low, governments borrowed heavily to promote growth and survive the pandemic. However, countries now may be unable to sustain high levels of debt under normal economic conditions. As of 2022, debt in major economies was 112% of GDP compared to 65% of GDP in emerging markets.

“Downside risks loom large, and another global shock could result in deeper and more prolonged economic disorder.”

At present, the number of countries defaulting on their debt remains low. Yet this statistic is misleading. More than 50 countries urgently need debt relief, and while they represent only 3% of the global economy, they encompass 18% of the world’s population. Already, 50% of the world’s population lives in severe poverty. Therefore, the risk of default is much higher for lower-income countries. When wealthy countries intervene, geopolitical tensions increase. As defaults rise, so does the threat to creditors, including structurally important banks and pension funds.

Debt crises also have a deleterious impact on investment. According to GRPS respondents, debt crises become less important over the long run – but the erosion of public infrastructure and services becomes more critical. Wealthy countries are better positioned to weather these crises, but they face hard choices. Advanced economies that must endure a period of reduced growth and investment will become more vulnerable to political polarization and conflict. They may need to invest more resources in security than in environmental issues.

“Polycrises” may be common in the future.

Severe and urgent risks in a two-year or ten-year timeframe don’t exist in isolation. These risks can interact and form a polycrisis, a group of related global risks that compound and develop effects greater than their individual parts. Projecting out to 2030, one possible polycrisis scenario relates to the availability of natural resources, the consequences of climate change, and the ability of people to adapt and cooperate.

Two crucial features of such a polycrisis will determine whether nations can properly match their resources’ supply and demand: first, the extent to which nations achieve enough global cooperation to facilitate the movement of goods across borders and, second, the severity of climate change’s impact on the supply of specific resources. Resource collaboration will be crucial to avoid a very problematic international outcome. Without a level of real cooperation, nations remain at risk for social unrest, conflict or “resource wars.”

About the Authors

Sophie Heading, the primary author of The Global Risks Report 2023, leads the World Economic Forum’s Global Risks Initiative. Author Saadia Zahidi is a managing director at the WEF.

Genres

Report, Analysis, Risk, Global, Economic, Environmental, Geopolitical, Societal, Technological, Nonfiction

Review

The book is a report from the World Economic Forum that examines the current landscape of global risks and their long-term implications across economic, environmental, geopolitical, societal, and technological categories. The authors, Sophie Heading and Saadia Zahidi, are experts in global risks and strategic intelligence at the World Economic Forum.

They draw on insights from more than 1,200 experts and policymakers worldwide, as well as data and analysis from various sources, to identify and assess the most severe perceived risks to economies and societies over the next two years and the next decade.

The book is divided into three parts: the first part presents the results of the Global Risks Perception Survey, which ranks the likelihood and impact of 30 global risks; the second part explores the connections and interdependencies between these risks, and illustrates how a potential “polycrisis” relating to shortages in natural resources such as food, water, and metals and minerals could unfold in different scenarios; and the third part discusses the implications and recommendations for building resilience and cooperation in the face of these risks. The book also provides an appendix with detailed data and methodology of the survey and the analysis.

The book is a comprehensive and insightful analysis of the global risks and challenges that the world faces in the post-pandemic era. It provides a rich and nuanced picture of the complex and dynamic interactions between various factors and forces that shape the global risk landscape, and highlights the potential consequences and trade-offs of different choices and actions.

The book is also well-written and accessible, with a clear and concise style, and uses visual aids such as graphs, charts, tables, and maps to illustrate and communicate the key findings and messages. The book is not only informative, but also inspiring and empowering, as it offers a vision of a more resilient and cooperative world, and a way to address and mitigate the global risks through collective action and multistakeholder collaboration. The book is a must-read for anyone who is interested in understanding and influencing the future of the world.