Is this the word of 2023?
30 January 2023 at 4:05 pm
As risk creation outstrips risk reduction, there is one word that could define this year, says Kaushik Sridhar.
A polycrisis is a cluster of related global risks, with compounding impacts and unpredictable consequences. It might not be a new word, but it’s a relevant one as we go into 2023.
Crises have always rippled out into the world around them, creating far-off and sometimes unanticipated effects. However, the early years of the 2020s have demonstrated the interconnectedness of global risks with a fresh force.
Conflict and geo-political tensions have accelerated a series of deeply interconnected global risks, according to the World Economic Forum’s Global Risks Report 2023.
These include energy and food supply crunches. 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.
COVID-19 and climate change are rapidly making it clear that, in today’s crowded and interconnected world, disaster impacts increasingly cascade across geographies and sectors. Despite progress, risk creation is outstripping risk reduction.
Three years on from the first COVID-19 cases, countries are reporting record infections due to the latest variant, but the pandemic pales compared to the long-term risks the world faces from climate change.
Climate change is the global economy’s biggest long-term challenge but one the world is least prepared to tackle because of short-term problems led by a cost-of-living crisis. The economic fallout of the pandemic and diverging recoveries also continue to threaten cooperation on other global challenges, at a time when climate and environmental risks loom large.
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, says the report.
Failure to mitigate and adapt to climate change, natural disasters, biodiversity loss and environmental degradation represent five of the top ten 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.
Are we now living in the decade of global risks, in which world events trigger an unavoidable cascade of crises? And how can businesses and risk managers look to mitigate these risks?
These trends point to an additional risk, the feeling of powerlessness, at a time when we need the mobilisation of all actors to provide collective, innovative and coordinated responses.
To change course, new approaches are needed. Risk creation is outstripping risk reduction. Disasters, economic loss and the underlying vulnerabilities that drive risk, such as poverty and inequality, are increasing just as ecosystems and biospheres are at risk of collapse.
Global systems are becoming more connected and therefore more vulnerable in an uncertain risk landscape. COVID-19 spread quickly and relentlessly into every corner of the world, and global risks like climate change are having major impacts in every locality. Indirect, cascading impacts can be significant.
Structural reforms can further support the fight against inflation by improving productivity and easing supply constraints, while multilateral cooperation is necessary for fast-tracking the green energy transition and preventing fragmentation.
