Polarisation of politics and societies, and a weakening of the rules-based international system were headline threats in this year’s Global Risks Report 2019, published by the World Economic Forum as policymakers met in Davos

Polarisation of politics and societies, and a weakening of the rules-based international system were headline threats in this year’s Global Risks Report 2019, published by the World Economic Forum (WEF) as policymakers met in Davos.

Greeks protest austerity measures

Source: WikiCommons

The report asked whether the world is “sleepwalking into a crisis” as macroeconomic risks appear to have intensified, while the will to tackle them on a global basis has slackened.

Climate, extreme weather and natural disaster risks ranked highly for likelihood but would be tougher to address amid the world’s increasingly messy geopolitics, the WEF emphasised.

“Our ability to collaborate on these risks and then mitigate them is decreasing,” warned Børge Brende, WEF president, speaking to assembled media in London for the report’s release.

When economic growth sooner or later slides back into recession, Børge cautioned that central bankers have limited options to temper the negative effects of a downturn, with interest rates still close to zero.

The contradiction between counter-global protectionism and global issues such as trade, cyber-attacks, and automating technology, makes for bad economics.

Protectionist political policies, such as the Donald Trump’s trade war tariffs against China, populist politics such as that of Brexit offering “to take back control”, and popular unrest such as France’s ongoing Gilets jaunes protests, have all worsened the macroeconomic risk landscape within which companies operate.

Conversely, the political risks threading through the 2019 report mean companies sense they have less control or influence against macroeconomic and societal threats at home and abroad.

Strong scenario planning is increasingly important for resilience, emphasised John Drzik, president of global risk and digital at Marsh, as threats – such as civil unrest, changes to immigration policy concerning company employees, or critical infrastructure failures – could all cause disruption.

“Be proactive in your planning,” said Drzik. “We advise more energetic scenario planning and planning for response to events. Cyber risk is a good example, as a risk that companies now regard as inevitable.”