The cost-of-living crisis has topped the World Economic Forum’s 2023 report – up from second place in 2023.
It was cited as the number one risk over the next two years followed by natural disasters and geoeconomic confrontation. Geopolitcal risk failed to make the top ten last year.
Old and new merge
“As 2023 begins, the world is facing a set of risks that feel both wholly new and eerily familiar,” the report said. Tradition risks such as inflation, cost of living crises and war in Europe returned. Today’s policy makers often have little direct experience of dealing with such threats.
But such issues are amplified by relatively new developments. Those include unsustainable levels of debt, a new era of low growth, low global investment and de-globalization, the report said.
“Together, these are converging to shape a unique, uncertain and turbulent decade to come,” it said.
Over the next ten years, respondents to the report’s survey said climate change failures would predominate. First, organisations are likely to fail to mitigate climate change. Second, they are likely to fail to adapt to climate change. Six of the top ten risks relate in some way to humanity’s relationship with the natural world.
Organisations must ditch short-term approaches to risk management. “A rigorous approach to foresight and preparedness is called for, as we aim to bolster our resilience to longer-term risks and chart a path forward to a more prosperous world,” it said.
Taking a more forward-looking approach to risk requires adopting four principles. First, organisations must strengthen risk identification techniques and foresight strategies. (See Setting the scene for success, in Enterprise Risk, Winter 2022). Second, organisations must give more weighting to future risk. Third, business must invest in risk preparedness in multiple, interconnected areas. Finally, organisations and countries must collaborate better on risk management.
“In a complex risks outlook, there must be a better balance between national preparedness and global cooperation,” the report said. “We need to act together, to shape a pathway out of cascading crises and build collective preparedness to the next global shock, whatever form it might take.”
Read the full report.