It is time to wake up to long-term risks: World Economic Forum

The raging pandemic is a wake-up call to the whole word that an international cooperation is an utmost priority to address such long-term challenges as posed by Covid-19, according to the World Economic Forum's Global Risks Report 2021 released on Tuesday.

The report said the World Economic Forum had been warning the world about the dangers of pandemics over the last 15 years before the impediments turned into a reality.  

The globe witnessed the effects of ignoring preparation to face such a long-term risk.

The report observed that billions of caregivers, workers and students – especially minorities who were disadvantaged before the pandemic – are now at risk of missing pathways to the new and fairer societies that the recovery could unlock.

When it comes to technology access and digital skills, the gap between the "haves" and the "have nots" risks widening and challenging social cohesion. This will particularly affect young people worldwide who might face a second global crisis in a generation and miss out on opportunities in the next decade.

While these potential disparities could cause societal fragmentation for states, an increasingly tense and fragile geopolitical outlook will also hinder the global recovery if mid-sized powers lack a seat at the global table, said the report.

Societal fractures, uncertainty and anxiety will make it more difficult to achieve the coordination needed to address the planet's continued degradation.

For the first time, the report rates risks that the respondents perceive will pose a critical threat to the world.

Clear and present dangers (0-2 years) reveal concern about lives and livelihoods – infectious diseases, employment crises, digital inequality and youth disillusionment.

In the medium-term (3-5 years), respondents believe the world will be threatened by knock-on economic and technological risks, which may take several years to materialise – such as asset bubble bursts, IT infrastructure breakdown, price instability and debt crises.

Existential threats (5-10 years) – weapons of mass destruction, state collapse, biodiversity loss and adverse technological advances – dominate long-term concerns.

Saadia Zahidi, managing director at the World Economic Forum, said in 2020, the risk of a global pandemic became reality, something the Global Risks Report had been highlighting since 2006.

"We know how difficult it is for governments, business and other stakeholders to address such long-term risks, but the lesson here is for all of us to recognise that ignoring them doesn't make them less likely to happen," she said.

Saddia suggested that as governments, businesses and societies begin to emerge from the pandemic, they should now urgently shape new economic and social systems that improve collective resilience and capacity to respond to shocks while reducing inequality, improving health and protecting the planet.

To help meet this challenge, the next week's event, The Davos Agenda, will mobilise global leaders to shape the principles, policies and partnerships needed in this new context.

The report also reflects on the responses to Covid-19, drawing lessons designed to bolster global resilience.

The lessons include formulating analytical frameworks, building trust through clear and consistent communication, and creating new forms of partnership.

Zurich Insurance Group Chief Risk Officer Peter Giger said the acceleration of the digital transformation promises large benefits such as creation of almost 100 million new jobs by 2025 as digitalisation may displace some 85 million jobs at the same time.

Since 60% of adults still lack basic digital skills, the risk is the deepening of existing inequalities, he added.

"The biggest long-term risk remains a failure to act on climate change. There is no vaccine against climate risks, so post-pandemic recovery plans must focus on growth aligning with sustainability agendas to build back better," said Peter.

According to Carolina Klint, risk management leader, Continental Europe, Marsh, economic and societal fallout from Covid-19 will profoundly impact the way organisations interact with clients and colleagues long after any vaccine rollout.

As businesses transform their workplaces, new vulnerabilities are emerging, she said, adding that while rapid digitalisation is exponentially increasing cyber exposures, supply chain disruption is radically altering business models.

"Every business will need to strengthen and constantly review their risk mitigation strategies if they are to improve their resilience to future shocks," advised Carolina.

SK Group president Lee Hyung-hee said the pandemic in 2020 was a stress-test that shook the foundations of economies and societies worldwide.

Rebuilding resilience to systemic shocks will require significant funding, international cooperation and greater social cohesion, Lee said, adding that resilience will also hinge on the continued growth in connectivity worldwide, as it is seen that economies that were digitised early performed relatively better in 2020.

"If the continued deployment of 5G and AI is to emerge as an engine for growth, however, we must urgently bridge digital divides and address ethical risks," said the SK Group president.

The Global Risks Report 2021 has been developed with the invaluable support of the World Economic Forum's Global Risks Advisory Board.

It also benefits from ongoing collaboration with its Strategic Partners Marsh McLennan, SK Group and Zurich Insurance Group and its academic advisers at the Oxford Martin School (University of Oxford), the National University of Singapore and the Wharton Risk Management and Decision Processes Center (University of Pennsylvania).