The Global Risks Report 2023

Publication Date

January 11, 2023

Page Number

93

Link to Report

Download

Authors

The Global Risks Report 2023

According to the Global Risks Report 2023 from the World Economic Forum, the world faces a set of risks that feel entirely new and strangely familiar. It investigates some of the most serious threats over the next decade. Tougher trade-offs risk undermining climate action, human development, and future resilience are in demand as we approach a low-growth and low-cooperation era. To analyze the nature of this polycrisis, the report structures the risks into five categories:

  1. Economic
  2. Environmental
  3. Geopolitical
  4. Societal
  5. Technological

Besides, and for the first time, The Global Risks Report introduces a time frame setting of current crises, risks that are likely to be most severe in two years and risks that are likely to be most severe in 10 years.

Current crises and ongoing risks

The top risks for 2023, according to the Global Risks Perception Survey (GRPS), are:

  1. Energy supply crisis
  2.  Cost-of-living crisis
  3. Rising inflation
  4. Food supply crisis
  5. Cyberattacks on critical infrastructure

However, failure to meet net zero targets, weaponization of economic policy, weakening of human rights, a debt crisis, and failure of non-food supply chains are all risks also accounted for. The lingering health and economic consequences of a global pandemic, a European war in Ukraine, sanctions affecting an interdependent global economy, and an escalating technological arms race heighten these dangers. New developments in the global risk landscape include general, historically high levels of public and private-sector debt, an ever-increasing rate of technological development, and the increasing pressure of climate change impacts and ambitions. These factors are drivers for the global risks upcoming over the short term.

Global risks ranked by severity over the short term (2 years)

  • 1. Cost-of-living crisis
  • 2. Natural disasters and extreme weather events
  • 3. Geoeconomic confrontation
  • 4. Failure to mitigate climate change
  • 5. Erosion of social cohesion and societal polarization
  • 6. Large-scale environmental damage incidents
  • 7. Failure of climate change adaptation
  • 8. Widespread cybercrime and cyber insecurity
  • 9. Natural resource crises
  • 10. Large-scale involuntary migration

What to expect in 2025. Global Risks Report 2023 Top 5.

Cost-of-living crisis

According to the report, the most serious global risk over the next two years is a global Cost-of-Living crisis, with inflationary pressures disproportionately affecting those who can least afford it. Supply-chain disruptions may result in sticky core inflation, increasing the risk of debt distress, a prolonged economic downturn, and a vicious fiscal planning cycle.

The affordability and availability of necessities can exacerbate social and political unrest Insecurity will have the greatest impact on already vulnerable states. Still, it may also exacerbate instability in countries facing simultaneous food and debt crises.

Economic downturn

Obdurately high inflation and more disorderly containment will increase the likelihood of global stagnation, liquidity shocks, and debt distress. Energy importers will bear the brunt of higher energy prices caused by a stronger US dollar, but the currency’s continued strength is importing global inflation.

Geoeconomic warfare

Economic policy weaponization among globally integrated powers has highlighted the vulnerabilities of trade, financial, and technological interdependence. As a result, sanctions have been imposed, key players have been nationalized, the government has seized assets, and multinational company operations face reputational and legal risks.

Economic policy, particularly in advanced economies, is increasingly focused on geopolitical objectives, with countries attempting to achieve “self-sufficiency” and “sovereignty” over rival powers. Examples of defensive measures include subsidies, stricter investment screening, data localization policies, visa bans, and company exclusion from key markets.

Economic levers such as delisting foreign companies, extensive use of foreign direct product rule, and export controls on key technologies and intellectual property have been used to constrain the rise of rivals proactively. These geoeconomic warfare trends risk causing widespread spillovers, resulting in a vicious and escalating cycle of distrust. Intensified geopolitical tensions risk eroding the economic landscape, resulting in persistent inflation or weak growth even after pressures subside.

Climate action hiatus

Current pressures should encourage energy-importing countries to invest in secure, cleaner, less expensive renewable energy sources. But, geopolitical tensions and economic pressures have stymied climate change mitigation progress. Policymakers must choose between energy security, affordability, and sustainability. Countries heavily reliant on fossil-fuel industries are increasingly calling for a just transition that benefits those who stand to lose from decarbonization.

Still, investors and policymakers are locking themselves into costly futures. Disagreements about what constitutes adaptation and a lack of shared goals and best practices, robust regulatory frameworks, and metrics increase the risk of adaptation efforts overshooting and undershooting.

Societal polarization

The erosion of social cohesion and societal polarization is a significant global risk, ranked by GRPS respondents as the fifth-most severe global risk in the short term. It is caused by a growing gap in values and equality as economic and social divides become political. The consequences of societal polarization are far-reaching. For instance, civil unrest growth and widening political schisms.

Increasing polarization contributes to the decline of democracies and the rise of hybrid regimes. Divisions promote the adoption of short-term, more extreme policy platforms to rouse one side of the population and perpetuate populist beliefs, making the erosion of the social and political center risk self-perpetuating.

This is exacerbated by social media, which increases polarization and distrust in institutions and political participation. Increased threat campaigns, political violence, hate crimes, violent protests, and even civil war could result. Several G20 countries will hold national elections in the next two years. In economic superpowers, electing less centrist leaders and pursuing more “extreme” policies may fracture alliances, limit global collaboration, and create a more volatile dynamic.

Global risks ranked by severity over the long term (10 years)

  • 1. Failure to mitigate climate change
  • 2. Failure of climate change adaptation
  • 3. Natural disasters and extreme weather events
  • 4. Biodiversity loss and ecosystem collapse
  • 5. Large-scale involuntary migration
  • 6. Natural resource crises
  • 7. Erosion of social cohesion and societal polarization
  • 8. Widespread cybercrime and cyber insecurity
  • 9. Geoeconomic confrontation
  • 10. Large-scale environmental damage incidents

To account for this time span, it analyzes five newly emerging or rapidly accelerating risk clusters that could become tomorrow’s crisis. By acting now, the report investigates their current drivers, emerging implications, and opportunities to prevent and reshape these outcomes.

Natural ecosystems:

Increasing risks to natural capital (“assets” such as water, forests, and living organisms) due to increasing trade-offs and feedback mechanisms related to climate change push us past the point of no return.

Human health:

Chronic risks exacerbated by overburdened healthcare systems dealing with the social, economic, and health consequences of the COVID-19 pandemic.

Human security:

A nascent demilitarisation reversal and a growing vulnerability of nuclear-armed states to emerging technologies, such as new weapons and multi-domain conflicts.

Digital rights:

The potential evolution of data and cyber insecurity, given the slow, insidious erosion of individuals’ digital autonomy, putting privacy at risk.

Economic stability:

Escalating debt crises, with ramifications for financial contagion and the collapse of social services, resulting from a global debt reckoning and causing social distress.

The risk clusters identified as newly emerging or rapidly accelerating are not meant to be exhaustive. Instead, they intend to provide topic-specific analysis, nudge pre-emptive action and attention, and serve as models for applying similar analysis to future risk domains.

The polycrises: Four Emerging Futures

Following a natural resource polycrisis futures framework, including Accelerated climate action, Slow climate action, Geoeconomic confrontation and Geoeconomic cooperation as axes, the Global Risks Report 2023 developed four possible scenarios. In this sense, the Resource Rivalries cluster contains:

Resource collaboration – the danger of natural scarcity

Geoeconomic cooperation+Accelerated climate action

Effective climate action measures and flexible supply chains made possible by global cooperation absorb the effects of climate change on food production. On the other hand, water, metal, and mineral scarcity cannot be avoided. Despite ambitions, persistently high commodity prices stymie climate mitigation and add to inflationary pressures in broader value chains. At the same time, water scarcity causes a growing but relatively contained health and humanitarian crisis in developing countries.

Resource constraints – the danger of divergent distress

Geoeconomic cooperation+Slow climate action

Current crises draw attention to and slow climate action, exposing the most vulnerable countries to hunger and energy shocks, even as countries work together to address constraints partially. Without intervention, the water and mineral shortages experienced in the Resource collaboration scenario are a multiplier to broader risks. As the physical consequences of climate change impact food and water resources and global disruptions to trade, political stability, and economic growth, developing markets face a multi-resource humanitarian crisis.

Continued investment in safe, renewable energy and related infrastructure will drive exponential demand for finite critical metals and minerals. Annual demand for these resources will exceed 450 per cent of 2018 production levels by 2050. The emerging demand and supply concerns surrounding natural resources are already causing concern.

Resource competition – the danger of resource autarkies

Geoeconomic confrontation+Accelerated climate action

Distrust fuels a push for self-sufficiency in high-income countries, limiting the need for rivalry over food and water to some extent while widening national divides. State intervention focuses on the resource most vulnerable to supply concentration – critical metals and minerals – resulting in shortages, price wars, and the transformation of business models across industries.

The balance of resource power shifts, causing the formation of new blocs and schisms in existing alliances between mineral-rich and -poor countries, while the risk of accidental or intentional conflict rises.

Resource control – the danger of resource wars

Geoeconomic confrontation+Slow climate action

Besides the weaponization of metals and minerals discussed in Resource competition, geopolitical dynamics exacerbate climate-induced food and water scarcity. This results in a truly global, multi-resource crisis, with widespread socioeconomic consequences that, in both scope and scale, outnumber those faced in other futures, including famine and water scarcity refugees. Geoeconomic warfare is common, but more aggressive clashes between states have become one of the few ways to ensure population supply.

An endnote

Because of the nature of the polycrisis, the Global Risks Report 2023 describes four possible futures centered on the scarcity of food, water, metals, and minerals. These could precipitate a humanitarian and ecological crisis. Such include water wars and famines, continued overexploitation of ecological resources, and a halt in climate mitigation and adaptation efforts. Global risk relationships are unpredictable, so foresight exercises can help anticipate potential connections, directing preparedness measures toward reducing the scale and scope of polycrises before they occur.

Addressing trust erosion in multilateral processes will improve the international community’s ability to prevent and respond to emerging cross-border crises and strengthen the safeguards to address long-standing risks. Furthermore, capitalizing on the interconnectedness of global risks can broaden the impact of risk mitigation activities. As the economy deteriorates, governments must make more difficult trade-offs between competing social, environmental, and security concerns.

According to the report, investing in resilience must prioritize solutions that address multiple risks. For instance, funding adaptation measures with co-benefits from climate mitigation or investing in areas that strengthen human capital and development. Some risks detailed have reached critical mass. Hence, it recommends that now is the time to work decisively and long-term to chart a course toward a more positive, inclusive, and stable world.

To download the report, click here.

 

 

 

 

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