Geopolitics, energy, and economic and social instability are forming a new nexus of risks, according to AXA’s latest Future Risks Report. Image: NASA
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- Geopolitics, energy, and economic and social instability are forming a new nexus of risks, according to AXA’s latest Future Risks Report.
- 89% of risk experts said that the global public is more vulnerable to risk than five years ago.
- Since last year's study, the public’s trust in scientists, public authorities, and the private sector has plummeted.
Soon, leaders from around the globe will gather in Davos to address the state of our planet and the long list of pressing challenges it faces. The theme of this year's World Economic Forum annual meeting, "Cooperation in a Fragmented World," is a clarion call for government, business, and civil society leaders at this critical time.
With the whole world now teetering on edge, bold action is needed more than ever. In the past year, the pandemic persisted, the climate crisis deepened, war erupted in Europe, and high inflation returned, creating storm clouds over the global economy.
At AXA, where we are in the business of studying risk, we recently published a report examining the greatest emerging risks facing the planet. Our Future Risks Report is a survey of 4,500 risk management experts from 58 countries and a sample of 20,000 people from 15 countries across the globe. For nearly a decade, the report has tracked major changes in our world to help us anticipate future threats. In short, the report provides a preview of the biggest threats to our future.
Against the backdrop of war in Europe, skyrocketing inflation, and an economic downturn, the 2022 Future Risks Report shows a fragmented, overheated world in which crises are increasingly simultaneously occurring rather than one succeeding another. In addition to the major risks in previous years - such as pandemics, cyber attacks, and climate change - we are now seeing more threats linked to geopolitics, energy, and economic and social instability.
In the current context of growing global uncertainties, the 2022 Future Risks Report set out to distil three key lessons:
1) Climate change, geopolitics, and energy are forming a new risk nexus
Climate change has often been a focus of Future Risks Reports, but the level of concern around our warming planet varied geographically. This year, for the first time, experts in all regions selected climate change as their top threat. In parallel, climate change was the top concern in the U.S. amongst the general population. The ranking suggests that we can no longer ignore global climate crisis impacts. Equally concerning is survey respondents’ wavering trust in public authorities’ ability to tackle the climate crisis: just 14% of experts believe authorities are prepared for this risk, down from 19% in last year’s survey.
Geopolitics further complicated this year's urgency for an energy transition and climate action. In the wake of Russia's invasion of Ukraine, most experts expect geopolitical tensions to persist and spread, threatening energy and food supplies, increasing the risk of global war and cyberattacks, and making it more difficult for governments to cooperate in areas of mutual interest.
2) Economic risks are fuelling social tensions
Concerns about economic risk have been growing over the past five years. In 2018, the Future Risks Report's Top 10 Risks did not include any economic dangers. Yet today, three of the Top 10 Risks identified by experts relate to the economy: financial instability risks, macroeconomic risks, and risks related to monetary and fiscal policy. Among these, inflation is a top concern for experts and the public alike, many of whom are already facing struggles as their purchasing power drops.
Persistent rises in energy and food prices – exacerbated by shortages due to geopolitical turmoil – have the potential to widen inequalities and fuel societal unrest, which ranks high for experts in both the U.S. (4th) and Europe (6th). Thus, authorities should remain alert to the need for action to safeguard public safety.
The survey responses also highlight the need for increased financial literacy, as members of the general public are not as aware of economic risks as they believe. For example, only 26% of experts said the general public is either fully or somewhat aware of financial instability risks, compared to 49% of the public.
3) People feel more risk-averse amid rising vulnerability and erosion of trust
The world is becoming an increasingly dangerous place. Experts believe people across the globe are becoming more vulnerable to risks as rising geopolitical tensions fuse with market volatility, the climate crisis, and ongoing health threats. When asked if the global public is more or less vulnerable to risk than five years ago, 89% of experts said more vulnerable – up from 84% last year.
When asked if the global public is more or less vulnerable to risk than five years ago, 89% of experts said more vulnerable – up from 84% last year.”
Members of the public are becoming more risk-averse and -avoidant in their daily life, even when it means giving up on their ideals. In the U.S., the land of the "American dream," most respondents (52%) now share this view.
People must feel empowered to take on these challenges, which requires, first and foremost, our ability to build consensus and act as a collective force. For this to happen, everyone must assume their responsibilities - starting with business leaders and their companies.
Not least because the action is in our DNA but because global CEOs and our corporations have the financial, human, and technological resources to contribute, and a responsibility to play our part.
Coordination between policymakers and the private sector is equally critical. Together we can be a collective force that brings life to this year's theme to drive "Cooperation in a Fragmented World."
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The views expressed in this article are those of the author alone and not the World Economic Forum.
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