Global tensions are rising, but risk perceptions are in the eye of the beholder. Zurich’s John Scott discussed the big picture with Global Reinsurance.
The world of 2024 looks to be a febrile one, with Europe seeing a continuing war in Ukraine, a rise in far-right populism, and civil unrest on the streets of Paris and Berlin.
Little wonder that anxiety is on the rise. Recently, the World Economic Forum partnered with Zurich and Marsh McLennan to produce the Global Risks Report 2024.
The three wrote in a statement accompanying the release that there was a predominantly negative outlook for the world over the next twenty-four months—eighty-four per cent, it said, are concerned, with ninety-two per cent expecting things to worsen over the next ten years.
John Scott, head of sustainability at Zurich, acknowledges how big the topic is and the depth of feeling that the 1,500 global experts surveyed evinced. But he also says that much of the report is based on a survey of peoples’ perceptions.
“I think global risks impact all businesses,” he says. “but some are more impactful than others. In a two year outlook, it’s the risk of misinformation and disinformation that is rated as having the highest impact, on businesses and on individuals through the broader political impact, especially in this year of elections. What do people believe as they participate in social media? What’s their favourite rabbit hole and what confirmation bias are they getting?”
An ongoing theme in 2024 has been the interlinking of crises and tensions across the world. The war in Ukraine, for example, led directly to an increase in energy and food prices, driving inflation in many economies, while rising tensions from that conflict have triggered other geopolitical tensions. And the recent attack on Israel by Hamas, and the former’s response to that, have sparked escalatory tensions across the Middle East.
Zurich used the term ‘polycrisis’ In its Global Risks Report 2023, denoting that there was a compounding effect from a ‘cluster of interdependent global risks’. This compounding effect, it wrote at the time, means that their overall impact exceeds the sum of their individual parts.
Scott reflects on the use the of term.
“It was something we chose to use in the 2023 report,” he says, “because it described a set of circumstances in which there seemed to be a lot of immediate crises. I think that is still true, but is it fundamentally any different to how it was five or ten years ago? I don’t think so, because global risks have always been highly interconnected. The triggering of one tends to trigger others.”
Scott harkens back to the financial crisis of 2008 and 2009.
“That crisis was largely in the finance sector,” he says. “Now, that that is a big and influential sector, but the consequences were mainly focused on finance and the consequences for businesses and individuals in terms of ultra-loose monetary policies, with very low interest rates and governments buying back financial assets.
”That made money essentially free, which was a strange time for finance and economies, but it didn’t trigger lots of other crises in the same way as the Covid-19 pandemic, or the Russian invasion of Ukraine.”
He continues: “If you look at some of the other global risk events over the last fifteen or so years, like the 2011 Tohoku earthquake triggering the Fukushima nuclear accident in Japan, or the 2014 / 2015 Ebola outbreak in West Africa these risks also didn’t trigger lots of other crises, at least not immediately, but have had impacts on the other global risks over time.
“For example, Fukushima had political impacts accelerating the shut-down of nuclear reactors in Germany, making their energy market more reliant on natural gas. A decision that was probably regretted during the energy crisis triggered by the Russian invasion of Ukraine and subsequent sanctions.”
Overall, Scott acknowledges to Global Reinsurance that while some trends and incidents can be a risk to some, they remain opportunities for others.
“It depends hugely on your perspective,” he says. “Ageing societies look like threat from the view of the Global North, with potentially lower economic growth, and rising costs of pensions and health care for an ageing population.
“From the perspective of the Global South, with fast growing, increasingly well-educated populations, the economic opportunities of service jobs in the Global North and potential domestic economic growth from developing the minerals or metals manufacturing sectors vital for the energy transition make the structural force of demographic bifurcation, look like an opportunity. So, it’s not as simple as saying it’s an economic downturn for everyone in the world,” Scott adds.