2019's top political, economic, social, and environmental risks

08 April 2019 Consulting.us

The negative externalities of economic growth are projected to be dire in the long-term, with climate change likely to exacerbate economic and governmental order outcomes, leading to profound global instability. Shifting the globe towards sustainable economic development, which also factors in the protection of non-human species, is now a central imperative in the eyes of many scientists and politicians.

Rapid economic growth, industrialization, and globalization have shot off a vast number of negative effects, even as they have lifted large numbers of people out of poverty. Global warming, water shortages, and potential future ecological collapse are pressing issues staring down both the developed and developing world.

Economic risks are also increasingly in the cards, with a stop-and-start trade war between the two largest global economies, the prospect of a hard Brexit, and wider geopolitical uncertainties as populism and nationalism take hold across various economies. Terrorism and the threat of nuclear war, meanwhile, remain ever-present, despite the defeat of Daesh and the cooling of tensions in the Korean peninsula.

To better illuminate the most threatening global risks, Mercer annually releases its "Global Risks Report" as part of its work for the World Economic Forum. The report is based on a survey of more than 900 executive-level respondents from business, academia, government, and NGOs.

Top risks according to latest Global Risk report

The top risk in Mercer's latest survey is that of extreme weather events, which have both the third-highest impact, as well as the highest probability of occurrence. Extreme weather events, from hurricanes to heat waves, ravaged much of the world in 2018, with the prospect of more extreme weather to come. Natural disasters, including wildfires and mudslides, also had considerable impact, reflecting the intertwined nature of events. Weather-related events are becoming more frequent and extreme, according to the scientific community, because of climate change.

In terms of straight impact, weapons of mass destruction continue to be deemed as the biggest risk, even if the probability of their usage remains small. A failure of climate change mitigation and adaption takes the number-two spot, followed by extreme weather events. Water crises, which have been dogging parts of the world already, take the number-four spot. The report notes that the ecosystem remains fragile, with biodiversity loss and ecosystem collapse ranking sixth.

Meanwhile in terms of likelihood, extreme weather events are number one, followed by a failure to mitigate and adapt to climate change. Natural disasters take the number-three spot, while data fraud or theft and cyber attacks come in third and fourth, respectively. Manmade environmental disasters, including large-scale pollution – PCBs, nuclear power plant failure, CFCs, plastics, and more localized environmental degradation – close out the number five spot.

Interconnected risk map

 

This year’s web of interconnection between the different risks, highlights the major impact environmental degradation could have on social issues – and ultimately the collapse of governance. The report states that environmental factors are likely to see increased forced migration, and risks to food supplies and water. These factors have can have enormous impacts on certain parts of the globe, which then have international knock-on effects. 

Large-scale involuntary migration is deemed a key risk, which factors into profound social unrest and a potential loss of local or state governance. Fiscal concerns also remain, with an expected slowdown of global growth and high debt levels. The firm notes, however, that the biggest risks are from gradual effects that create multiplier effects, ultimately resulting in the crystallization of highly impactful events at “dizzying speeds."


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