Home News ‘Under-Employed, Under-Inclusive and Under Threat’: World Economic Forum issues Global Risks Report

‘Under-Employed, Under-Inclusive and Under Threat’: World Economic Forum issues Global Risks Report

by Brian Sims

Economic inequality, societal polarisation and intensifying environmental dangers are the foremost trends that will shape global developments over the next ten years. According to the World Economic Forum’s extensive and thought-provoking Global Risks Report 2017, collaborative action by world leaders will be urgently needed to avert further hardship and volatility in the coming decade.

In this year’s annual survey, some 750 experts assessed 30 global risks, as well as 13 underlying trends that could amplify them or alter the interconnections between them. Set against a backdrop of mounting political disaffection and disruption across the world, three key findings emerge from the survey as follows:

Patterns persist Rising income and wealth disparity and increasing polarisation of societies are ranked first and third, respectively, among the underlying trends that will determine global developments in the next ten years. Similarly, the most interconnected pairing of risks in this year’s survey is between high structural unemployment or underemployment and profound social instability.

The environment dominates the global risks landscape Climate change is the number two underlying trend this year. For the first time, all five environmental risks in the survey are ranked both high-risk and high-likelihood, with extreme weather events emerging as the single most prominent global risk.

Society isn’t keeping pace with technological change Of the 12 emerging technologies examined in the report, experts find Artificial Intelligence (AI) and robotics to have the greatest potential benefits, but also the greatest potential negative effects as well as the greatest need for better governance.

While the world can point to significant progress in the area of climate change in 2016, with a number of countries (including the US and China) ratifying the Paris Agreement, political change in Europe and North America puts this progress at risk. It also highlights the difficulty that leaders will face in agreeing on a course of action at the international level to tackle the most pressing economic and societal risks.

“Urgent action is needed among leaders to identify ways to overcome political or ideological differences and work together on solving critical challenges,” said Margareta Drzeniek-Hanouz, head of global competitiveness and risk at the World Economic Forum. “The momentum of 2016 towards addressing climate change shows that this is possible, and offers hope that collective action at the international level aimed at resetting other risks could also be achieved.”

How to address the world’s most pressing risks is the subject of discussions at the World Economic Forum Annual Meeting 2017, which runs from 17-20 January under the theme ‘Responsive and Responsible Leadership’.

Although 2016 will be remembered for dramatic political results that broke with consensus expectations, warning signs that a persistent cluster of societal and economic risks could spill over into real-world disruption have been reported on a regular basis in the Global Risks Report during the past decade.

Privacy and social cohesion

In 2006, Global Risks warned that the elimination of privacy reduces social cohesion. At the time, this was classified as a worst case scenario, with a likelihood of below 1%. In 2013, long before ‘post-truth’ became the phrase of 2016, Global Risks highlighted the rapid spread of misinformation, observing that trust was being eroded and that better incentives were needed to protect quality control systems.

The complex transitions that the world is currently going through, from preparing for a low-carbon future and unprecedented technological change to adjusting to new global economic and geopolitical realities, places even greater emphasis on leaders to practice long-term thinking, investment and international co-operation.

“We live in disruptive times where technological progress also creates challenges,” explained Cecilia Reyes, Chief Risk Officer of the Zurich Insurance Group. “Without proper governance and re-skilling of workers, technology will eliminate jobs faster than it creates them. Governments can no longer provide historical levels of social protection. An anti-establishment narrative has gained traction, with new political leaders blaming globalisation for society’s challenges, creating a vicious cycle in which lower economic growth will only amplify inequality. Co-operation is essential to avoid the further deterioration of Government finances and the exacerbation of social unrest.”

The propensity of the Fourth Industrial Revolution to exacerbate global risks also comes under scrutiny in the Global Risks Report’s Global Risks Perception Survey. Basing their analysis on 12 distinct emerging technologies, experts clearly identified AI and robotics as having both the highest potential for negative consequences and also the greatest need for better governance. Notwithstanding its potential to drive economic growth and solve complex challenges, experts also named AI as the top driver of economic, geopolitical and technological risks among the 12 technologies.

Rapid advances being made

John Drzik, president of global risk and specialties at Marsh, explained: “Artificial Intelligence will enable us to address some of the great issues of our age, such as climate change and population growth, on a much more effective footing. With investment in AI now ten times higher than it was five years ago, rapid advances are already being made. However, an increased reliance on AI will dramatically exacerbate existing risks, such as cyber, subsequently making the development of mitigation measures just as crucial.”

For the third year, the Global Risks Report also provides country-level data on how businesses perceive global risks in their countries.

*The Global Risks Report 2017 was developed with the support of strategic partners Marsh & McLennan Companies and the Zurich Insurance Group. The report also benefits from the collaboration of its academic advisors: the Oxford Martin School (University of Oxford), the National University of Singapore, the Wharton Risk Management and Decision Processes Centre (University of Pennsylvania) and the Advisory Board of the Global Risks Report 2017

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