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The effects of climate change, artificial intelligence (AI) and geopolitical conflict loom large in the World Economic Forum’s (WEF) latest risk report, all bringing the potential for further supply chain disruption.

The report, published in partnership with Marsh McLennan and Zurich Insurance Group, records responses from 1,490 global leaders across academia, business, government and civil society, surveyed during September 2023.

It asks respondents to name what they think are the most severe current risks, as well as those likely to have the most impact over a two-year and 10-year period.

Extreme weather, AI-generated misinformation and disinformation, and societal and/or political polarisation are the top three risks for 2024, with the latter two perceived as strongly connected and able to amplify one another.

Two-thirds of respondents ranked extreme weather as the “top risk most likely to present a material crisis on a global scale in 2024”.

Environmental risks take the top four places over a 10-year period: extreme weather, biodiversity loss and ecosystem collapse, critical change to Earth systems – a new risk – and natural resource shortages.

Whereas climate change was previously viewed as a risk, it is now seen as “one of the structural forces that is already unfolding, and within which the rest of the risks need to be analysed”, said Saadia Zahidi, managing director at the WEF, speaking at a press conference to launch the report.

Cyber attacks come in as the fifth most pressing current risk.

“In my conversations with companies, two issues consistently come up as current key concerns – it’s the impact of artificial intelligence, and supply chain challenges,” said Carolina Klint, chief commercial officer for Europe at Marsh McLennan, speaking at the event.

“AI-generated misinformation, cyber attacks and cyber insecurity have emerged as top risks across all time horizons, and it’s about time,” Klint said. “These risks have not been prominently featured in past years, which I think is surprising given our dependency on technology, but also the acceleration of digitisation following the pandemic.”

Klint said that while AI can help fight cyber attacks, it also gives cyber criminals new tools.

“We have to recognise the fact that everything we use, such as water, electricity, the financial system, communication systems, all of this is dependent on the integrity of incredibly complex networked computer systems,” Klint said.

“Cybersecurity is not about protecting a computer or protecting a file. It’s actually more about making sure supply chains work,” she said, adding that “you don’t even have to be smart nowadays, in order to be a successful cyber criminal”.

This year, respondents were also far more negative in outlook compared to the results seen in 2023, said Zahidi.

Asked to rate the global outlook on a scale of “calm” to “stormy”, 30% of those surveyed felt it would be “stormy” or “turbulent” over the next two years, while almost two-thirds thought these labels would describe the next 10 years.

This is “quite different from last year, where in the longer term, there was still optimism, whereas this year, in the longer term, there is pessimism”, said Zahidi.

The same three risks – AI-generated mis- and disinformation, extreme weather and societal and/or political polarisation – also dominate the outlook for the next two years, with mis- and disinformation taking the number one spot.

Billions are expected to vote in elections in 2024 – including for the EU Parliament, India, Mexico, South Africa, Pakistan, the UK and the US – but fears are mounting that mis- and disinformation could undermine the democratic voting process and lead to civil unrest.

 

A new era of risk

Interstate armed conflict is also a new entrant in the top risk rankings over two years, with escalation in Ukraine, Israel and Taiwan possible.

Citing the supply chain risks and costs brought about by attacks on container ships in the Red Sea and drought in the Panama Canal, Klint said “businesses must again turn their focus on stress testing their supply chain investments and growth strategies against these potential new disruption scenarios”.

“We have to find a better way of balancing the short-term view of risk with a longer-term view of risk. We’re entering into a new era of risk now, and it’s time to be a little bit more creative and collaborative in our approach to building resilience,” she noted.

Economic risks appear only in the two-year outlook, with inflation and an economic downturn making it to positions seven and nine respectively.

Two competing narratives describe the global economy in 2024, the report says – either “surprising resilience in the face of the most aggressive global tightening of monetary policy in decades”, or high inflation and interest rates leading to a downturn so fragile that “new economic shocks would be unmanageable”.

The corporate debt default rate is nowhere near the peak seen during the global financial crisis, the WEF notes, and most corporate debt is “years from maturity”, protecting large firms from higher interest rates “for more than half a decade”.

But this is not the case for small and medium-sized enterprises and heavily indebted countries, which are at a higher risk of debt distress.

“Climate-vulnerable or conflict-prone countries stand to be increasingly locked out of much-needed digital and physical infrastructure, trade and green investments and related economic opportunities,” it adds.

Yet over the next decade, the majority of economic risks drop down the rankings, with economic downturn moving to number 28 – perhaps reflecting a decrease in the perceived risk of geoeconomic confrontation, the report says.

The WEF also flags that different groups among the respondents diverged on the urgency of environmental risks: younger respondents ranked “biodiversity loss and ecosystem collapse” and “critical change to Earth systems” far more highly over the two-year period compared to older age groups.

This mismatch in perceptions of urgency suggests “sub-optimal alignment and decision-making, heightening the risk of missing key moments of intervention”, the report says.