Conflict and geo-economic tensions have triggered global risks: Report

Conflict and geo-economic tensions have created a domino effect of interconnected global risks including energy and food supply crunches, according to a new report.

The World Economic Forum Global Risks Report 2023 highlights the current and future hazards global leaders will most likely face.

For Australia, the report flags immediate-term risks as the cost-of-living crisis, debt and rapid or sustained inflation. This comes on a global backdrop of energy supply crises and price shocks, supply-driven inflation, threats to food availability and growing cyberattacks on critical infrastructure.

At the same time, these crises risk undermining efforts to tackle longer-term risks, notably those related to climate change, biodiversity and investment in human capital.

The report shares some dire news noting that the window for action on the most serious long-term threats is closing rapidly and concerted, collective action is needed before risks reach a tipping point.

Across three timeframes, it paints a picture of the global risks landscape that is both new and familiar, as the world faces many pre-existing risks that previously appeared to be receding.

Unless the world starts to cooperate more effectively on climate mitigation and climate adaptation, over the next 10 years this will lead to continued global warming and ecological breakdown.

Failure to mitigate and adapt to climate change, natural disasters, biodiversity loss and environmental degradation represent five of the top 10 risks – with biodiversity loss seen as one of the most rapidly deteriorating global risks over the next decade.

In parallel, crises-driven leadership and geopolitical rivalries risk creating societal distress at an unprecedented level, as investments in health, education and economic development disappear, further eroding social cohesion. Finally, rising rivalries risk not only growing geo-economic weaponization but also remilitarization, especially through new technologies and rogue actors.

The report noted that the coming years will present tough trade-offs for governments facing competing concerns for society, the environment and security.

Already, short-term geo-economic risks are putting net-zero commitments to the test and have exposed a gap between what is scientifically necessary and politically palatable. Dramatically accelerated collective action on the climate crisis is needed to limit the consequences of a warming world.

Meanwhile, security considerations and increasing military expenditure may leave less fiscal headroom to cushion the impacts of an elongated cost of living crisis. Without a change in trajectory, vulnerable countries could reach a perpetual state of crisis where they are unable to invest in future growth, human development and green technologies.

The report calls on leaders to act collectively and decisively, balancing short- and long-term views.

In addition to urgent and coordinated climate action, the report recommends joint efforts between countries as well as public-private cooperation to strengthen financial stability, technology governance, economic development and investment in research, science, education and health.

The report, produced in partnership with Marsh McLennan and Zurich Insurance Group, draws on the views of over 1,200 global risk experts, policy-makers and industry leaders.

The Global Risks Report 2023 comes ahead of the World Economic Forum Annual Meeting 2023, which will convene the world’s foremost leaders under the theme, Cooperation in a Fragmented World. The meeting will be held January 16-20.