Business Interruptions have been rated as one of the highest risks globally. The World Economic Forum (WEF) Global Risks Report 2022 presents the results of the latest Global Risks Perception Survey (GRPS), and an analysis of key risks emanating from current economic, societal, environmental, and technological tensions. The report concludes with reflections on enhancing resilience, drawing from the lessons of the last two years of the COVID-19 pandemic. The key findings of the survey and the analysis are summarized below. You can read the full report here.
To understand how these risks can impact your organization, we will first introduce the key risk categories to provide context followed by the actual risks & how they can impact your organization and, finally we will explore how potential solutions such as risk & resilience software can mitigate the effects of these risks on your business.
Key risk categories
Top 10 most severe risks on a global scale over the next 10 years.
1. Climate Action Failure (Category: Environmental Risk)
2. Extreme Weather (Category: Environmental Risk)
3. Biodiversity loss (Category: Environmental Risk)
4. Social cohesion erosion (Category: Societal Risk)
5. Livelihood crisis (Category: Societal Risk)
6. Infectious diseases (Category: Societal Risk)
7. Human environmental damage (Category: Environmental Risk)
8. Natural resource crisis (Category: Environmental Risk)
9. Debt crisis (Category: Economic Risk)
10. Geoeconomic confrontation (Category: Geopolitical Risk)
How these risks can impact your business.
Climate Action Failure – Our inability to fight climate change will impact your bottom line if resources that once existed are no longer available or are in short supply. There are ways businesses can think about aligning to country-specific net-zero emission frameworks to support positive climate action. Genesis Resiliency is partnered with the climate action group Climate Proof because we all need to prepare our communities now for ever-increasing severe weather events, like floods and wildfires. Immediate protection. Long-term change. Together, we make climate change action work. Learn more about Climate Proof here. And see our article about building business resilience in the climate change era here.
Extreme Weather – Extreme weather events, such as more powerful storms, will increase with climate action failure. These events will have significant financial impacts due to the planning required to identify & obtain raw materials needed to protect your business or homes and in insured damage, claims are made but not paid out due to policy clauses or bulk claim amounts. Some of these events can be anticipated and additional context around the importance of planning can be found in our article that references the importance of planning for business interruptions related to weather.
Biodiversity loss – This will impact your supply chain. The loss of natural resources will force you to source from other providers, which may cost more than your current suppliers.
Social cohesion erosion – Income disparities are exacerbated by an uneven economic recovery increasing polarization and resentment within societies. Your customers will be affected by income disparity.
Livelihood crisis – Companies are innovating & automating and jobs will be lost, impacting the communities in which we live and work. The less money in the community, the less money for your business.
Infectious diseases – Covid variants continue to be a threat. And new health threats – such as antibacterial resistance are looming on the horizon. These will affect the ability of businesses to remain open in the event of future outbreaks and lockdowns.
Human environmental damage – With the intent to either indirectly or directly destroy our environment, humans have learned more efficient ways to source and produce goods. Humans impact the physical environment in many ways: overpopulation, pollution, burning fossil fuels, and deforestation. Changes like these have triggered climate change, soil erosion, poor air quality, and undrinkable water. These negative impacts can affect human behavior and can prompt mass migrations or battles over clean water as stated by National Geographic. Compounding factors from human environmental damage include how the ongoing threat of intentional acts against other people or properties in the form of crime, will continue and is a factor that organizations need to consider. According to Matthew Ranson who wrote a publication on the impacts of Crime, Weather, and Climate change - The results show that temperature has a strong positive effect on criminal behavior, with little evidence of lagged impacts. Under the IPCC's A1B climate scenario, the United States will experience an additional 35,000 murders, 216,000 cases of rape, 1.6 million aggravated assaults, 2.4 million simple assaults, 409,000 robberies, 3.1 million burglaries, 3.8 million cases of larceny, and 1.4 million cases of vehicle theft, compared to the total number of offenses that would have occurred between the years 2010 and 2099 in the absence of climate change. The present discounted value of the social costs of these climate-related crimes is between 20 and 68 billion dollars.
Natural resource crisis – As supply chains currently struggle with shipping, sourcing will continue to be a challenge for most businesses that provide products and goods to sell. [BM1] The National Intelligence Council Report from the US Office of the Director of National Intelligence stated the major assumption underpinning this analysis is that mounting prosperity in both the developed and the developing world will continue to drive increased consumer demand for key resources. At the same time, constraints in energy, water, and other critical natural resources and infrastructure, together with socio-economic shifts, will bring new and hard-to-manage instabilities. There will be an increased risk of discontinuous and systemic shocks to 2040 as a consequence of these factors.
Debt crisis –Inflation may impact your ability to pay for things necessary to continue operating and will decrease the amount your customers have to spend. Debt crises are identified as an imminent threat to the world for the next two years although GRPS respondents believe they will reach their most critical point in three to five years. Government stimulus was vital to protect incomes, preserve jobs, and keep businesses afloat. However, debt burdens are now high and public budgets will continue to be stretched after the pandemic just when resources are needed for financing green transitions.
Geoeconomic confrontation – International economic sanctions can impact your ability to operate. GRPS respondents believe geoeconomic confrontations will emerge as a critical threat to the world in the medium to long term and be one of the most potentially severe risks over the next decade. While pressing domestic challenges require immediate attention, the pandemic and its economic consequences have proven that global risks do not respect political frontiers.
Humanity faces the shared and compounding threats of economic fragmentation and planetary degradation, which will require a coordinated global response.
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Martin Gierczak, Founder