Think Australia’s bush fires are scary? See top risks to world in 2020

Investment analysts spend much time scrutinising statistics that provide insights into the global economy and they try to read geopolitical trends. Rising on the radar of risks are environmental problems, once seen as softer issues. Extreme weather is likely to be a significant risk to businesses and economic growth, according to a report circulating among World Economic Forum delegates. This stark reality has been brought home in Australia where many businesses have gone under as fires have ravaged and wiped out homes and shops, decimating supply and demand for goods and services. The World Economic Forum underscores that issues related to global warming are among the top risks facing the globe – just as young activist Greta Thunberg has been telling anyone who cares to listen. – Jackie Cameron

These are the top risks facing the world in 2020

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Following a year of floods and droughts, when fires ravaged Australia and the Amazon, and teenage climate activist Greta Thunberg was chosen as Time’s Person of the Year, it is perhaps little wonder that environmental issues dominate leaders’ concerns for the future.

But the latest edition of the World Economic Forum’s Global Risks Report shows how loudly they are sounding the alarm. Established leaders and up-and-comers agree: climate change is the stand-out long-term risk the world faces.

The report, which identifies the top threats facing our world by likelihood and extent of impact, names failure to mitigate and adapt to climate change as the key concern for the Forum’s network of business leaders, NGOs, academics and others. The group places it as the number one risk by impact and number two by likelihood over the next 10 years.

Long-term risk outlook for multistakeholders
Perceptions of global risks over the next 10 years, according to multi-stakeholders Image: World Economic Forum Global Risks Report 2020

In fact, respondents to the Global Risks Perception Survey, which underpins the report, rank issues related to global warming – such as extreme weather and biodiversity loss – as the top five risks in terms of likelihood over the coming decade. This is the first time one category has occupied all of the top slots since the report was launched in 2006.

Long-term risk outlook for global shapers
Perceptions of global risks over the next 10 years, according to global shapers. Image: World Economic Forum Global Risks Perception Survey

What’s the World Economic Forum doing about climate change?

Climate change is hitting harder and accelerating faster than many people predicted. And efforts to meet commitments to limit global warming are slipping, with countries veering off course. For the Global Shapers Community – the Forum’s younger constituents – environmental issues are even more pressing and top their list of concerns both in the short and long term.

Short term risks
Percentage of people who think a risk will increase over the next 10 years. Image: World Economic Forum Global Risks Perception Survey

Gathering economic clouds

Growing downward pressure on the global economy, driven by fragile macroeconomic structures and financial inequality, is deemed the biggest short-term threat by the ‘multi-stakeholders’ questioned.

And the risk of stagnation is exacerbated as leaders increasingly follow nationalist policies. Over three-quarters of respondents think this darkening economic outlook and domestic political polarisation are set to become more likely in the short term.

Trade tensions and geopolitical turbulence are also adding to the economic uncertainty – in particular the potential fallout from the United States and China’s trade stand-off. The two countries account for more than 40% of global GDP. They are also the world’s top two emitters of greenhouse gases. So the world’s economic performance and ability to address climate change is inextricably linked with theirs.

Risks in a digital world

Geopolitical and economic uncertainties are also driving concerns about digital technology: unequal access, a lack of governance, and more frequent and more damaging cyberattacks.

We live in uncertain times

The report highlights how long-mounting interconnected risks are starting to be felt. The synchronised slowdown of the global economy, the warmest temperatures on record and an increasingly unstable geopolitical environment are creating significant challenges.

“It is sobering that in the face of this development, when the challenges before us demand immediate collective action, fractures within the global community appear to only be widening,” the report says.

Read also: Eskom, trade wars and slow growth: A 2020 guide to the major risks SA and other EMs are facing

Waiting for the fog of geopolitical and geo-economic uncertainty to lift before taking action is not a viable option, and would mean missing crucial windows to address pressing issues, it continues.

The good news is that, despite global divisions, some businesses are committed to looking beyond their balance sheets towards tackling the urgent issues that are looming.

What’s the methodology?

The annual Global Risks Perception Survey asks the Forum’s network of business, government, civil society and thought leaders to gauge the risks facing our world.

The survey has four parts:

  1. The World in 2020. Respondents were asked whether the risks associated with 40 issues would increase or decrease this year relative to last year.
  2. Assessment of Global Risks. For 30 global risks, respondents were asked about their likelihood in the next 10 years and potential impact.
  3. Global Risk Interconnections. Respondents were asked to select three to six of the most strongly interconnected global risks.

A total of 1,047 responses to the survey were received.

The Global Risks Report 2020 is released ahead of the World Economic Forum’s Annual Meeting in Davos. The report urges governments and organisations to address the impact of specific threats and make preparations to contain potential fallout should they occur.

  • Charlotte Edmond, Senior Writer, Formative Content. 
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