Global Risks 2022

Most major sustainability issues have important risk dimensions for companies – and societies. In many cases, these are still not adequately represented in board-level discussion, company risk assessments or registers and therefore not well reflected in sustainability strategy.

WEF’s Global Risks 2022 Report provides a very useful, comprehensive global review and outlook upon what is important, and this article provides an overview of the report.

It’s that time of year when here in the northern hemisphere it’s dark, cold and rainy and months until the next bank holiday.

To add to the general sense of doom it’s also when WEF’s Global Risk Report is published – and as ever it doesn’t make light reading. But in so many social and environmental issues earlier rather than later action, and interventions targeted at causes rather than effects, are much more effective, and often cheaper too.

WEF have been reporting on the global risk outlook for 16 years and this year they report ‘a time of unparalleled disruption and complexity.’ with major risks stemming from climate change and disruption, geopolitical factors and social cohesiveness. All issues that transcend international borders.

The headline issues and risks

• Environmental issues persist in the top 10 global risks – the top 3 being ‘Climate action failure’, ‘Extreme weather’ and ‘Biodiversity loss’.
• The risk and resilience agenda is unsurprisingly dominated by the Covid-19 pandemic, with countries reporting record infection rates – but it is noted this pales in significance compared to climate risks.
• The transition to net-zero offers the ‘best and only’ chance to avoid the most damaging effects of climate change, but a disorderly transition brings other risks and challenges.
• Looking at when risks will be most severe environmental risks rise up the agenda between 0-2 years and 10 years.
• The impacts of the Covid-19 pandemic are reflected in a renewed focus on social cohesion and livelihoods – the horizon assessments reflect a cascade of impacts and consequences.
• Political and government responses are seen as insufficient to tackle consequences and there’s a low level of confidence in policy structures and leaders’ willingness and capability to deal with the issues.

The major global risks 2022

The WEF’s Global Risk Report includes two major aspects:

• The top 10 global risks by severity.
• The global risk horizon – when risks might become critical threats.

The top 10 global risks by severity for the next 10 years

1. Climate action failure.

2. Extreme weather.

3. Biodiversity loss.

4. Social cohesion erosion.

5. Livelihood crises.

6. Infectious diseases.

7. Human environmental damage.

8. Natural resource crises.

9. Debt crises.

10. Geoeconomic confrontation.

The global risk horizon – when risks might become critical threats

The report presents the top risks by short, medium and long-term time horizons to illustrate when they are most likely to occur.

For example ‘Climate action failure’ moves from third position (0-2 years) to first (2-5 years and 5-10 years with a greater weighting).

The short-term horizon is dominated by aspects related to Covid-19 such as livelihoods, debt and social cohesion but the report suggests these rank lower in the medium and long-term as they are outranked by environmental aspects.

The risk environment looking forward

New in this report is ‘Covid-19 hindsight’ – looking at risks that have got worse since the start of the pandemic. While these are dominated by societal risks ‘climate action failure’ and ‘extreme weather’ feature in third and fifth places respectively.

But a major aspect of risk assessment lies in the complexity of social-environmental systems driven by non-linearity, dynamic elements, interdependency, and feedback systems.

For example, ‘backlash against science’ was rated as the 10^th largest risk. This can be seen as an undermining influence in work on climate action, public health measures and vaccine responses to the pandemic and many other areas. It also links to wider systemic global trust issues.

The next big question lies in how best to make use of this information. The report represents different perceptions of risk and explores severity, likelihood and different time horizons, However, it’s important to recognise that many of these are fairly volatile and are influenced greatly by awareness.

Previous iterations of the report didn’t feature infectious diseases with great prominence. However, over time the risk reports have shown building of consensus on climate-related risks that represent a development of understanding. It can be easy to apply hindsight, many of the pandemic’s impacts have been exacerbated by long-term structural issues like inequality, debt and social cohesion.

Dramatic action is required on decarbonisation to address the ongoing and escalating climate crisis. Governments and policy makers seem caught between the need for transformative action as required by scientific advice and significant proportion of citizens – and what they see as the risks of taking action – resistance and backlash from the carbon-intensive lobby and likely description to business models and jobs along the transition.

The Global Risk Report highlights that commitments made at COP26 suggest that governments have woken up to the need for urgent action on climate. However, even these commitments fall short of meeting the Paris goal of 1.5 °C.

WEF’s Global Risk Report provides the reminder (if it’s needed) of why the sustainable transition is so urgently needed.