Davos 2023 survey says old risks have returned to test today’s leaders

Research finds that business leaders and policymakers think geopolitical rivalries are heightening economic constraints and exacerbating shorter and longer-term threats

People march through Dublin to protest against the rising cost of living. WEF survey respondents fear there could be overwhelming dangers posed by coping with conflicts, inflation, a potential recessiShow more

Short-term risks such as the cost-of-living crisis and global economic disruption are crowding out concerns about long-term pressures on the planet and adapting to climate change, the annual survey of resilience for the Davos World Economic Forum has found.

Poly-crisis is the dominant theme of the WEF’s Global Risk Report as business leaders fear there could be overwhelming dangers from coping with conflicts, inflation, a potential recession and trade wars. The 1,200 business leaders and policymakers warn that geopolitical rivalries heighten economic constraints and further exacerbate both shorter and longer-term risks.

The top rankings for two years and 10 years in the future show a marked divergence, according to Saadia Zahidi, WEF managing director. She pointed to a fear that current issues could spiral at the expense of climate and sustainable development goals.

“A lot of older risks have come back to the fore — things like re-emerging health crises, food crises, energy and the cost of living” she told a launch event in London.

“This combination of geopolitical and economic risks is then layered with climate risks that haven’t been so front and centre."

Today’s generation of leaders has not had to deal with inflation, a potential recession and trade wars. Four fifths of the respondents expect consistent, ongoing crises that compound each other in an increasingly volatile trajectory. Even after 10 years, the number who hold these fears remains half the total.

Carolina Klint, a risk management leader at insurance specialist Marsh, said the dangerous cocktail of immediate problems affecting basic supply chains and businesses' investment outlook means that for many, "just in time" has been put aside in favour of a "just in case" approach.

“The cost-of-living crisis ranked as number one in terms of severity. It is a crisis that we are very much in the middle of right now,” she told The National. “Striking the balance between the long-term and short-term is very much at the heart of this report.

“The relative predictability of the business environment has gone down to the extent companies are willing to accept the upfront investment in order to remain in business.

"Supply chains have been under a lot of pressure. It started with the US/China trade war and was then amplified by the pandemic. International businesses are feeling the impact and so are much more willing to look at allowing for a bit more slack in the system so they can bounce back more quickly and also survive if a crisis hits.

“We are talking about the fact that risks are interconnected and accelerate or worsen one and other. The same is also true for resilience. If you invest in resilience in one area, that can have a positive spillover effect in another.”

For Ms Klint there is the underappreciated impact of global or regional shortages, such as a food or fuel crunch, adding that no country is immune to social unrest

“We had protests in 92 countries and you could instantly see how that led to political upheavals," she said. "That’s a direct effect of the cost-of-living crisis and that they feel they don’t really feel they have alternatives.”

One of the consequences of the near-term focus on basic life needs is that there is a greater likelihood of a messy trade-off between climate mitigation — that is, trying to stop or slow global warning — and climate adaptation — trying to create the means of coping with the changes both now and in the future.

Although the climate sits in the top four spots of the 10-year ranking, it is not in the top three of the two-year outlook. These are the cost-of-living crisis, natural disasters and extreme weather plus geopolitical confrontation.

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John Scott, head of sustainability risk at Zurich Insurance Group, warned of the perils of businesses taking a "green hush" approach to addressing their climate impact.

"The reality is solving climate is the ultimate team sport," he said. "It isn't just about one sector. It has to be government, it has to be business, it has to be the finance sector working together on these complex and systemic issues."

Ms Zahidi observed there was a dynamic of panic and neglect in the annual cycle of examining risk, noting the absence of pandemic preparedness in respondents' near-term assessment.

“One of the reasons infectious disease has been pushed down the list is exactly the reason that other crises have emerged,” she said.