by Johnny Wood*
-A new World Economic Forum report looks at the risks, challenges and opportunities the world is facing as a result of the COVID-19 pandemic.
-A prolonged global recession tops the list of most feared risks, replacing long-term risks like climate change as key business threats.
-Sustainability should be a key component of economic recovery.
As a perfect storm of health and economic crises leaves the world navigating uncertain times, a new report casts light on what lies ahead.
The World Economic Forum’s COVID-19 Risks Outlook: A Preliminary Mapping and Its Implications looks at what the coronavirus pandemic means for the world based on the views and analysis of 350 senior risk professionals.
Here, Saadia Zahidi, Managing Director of the World Economic Forum and Head of Centre for the New Economy and Society, discusses the report’s findings.
What new risks has coronavirus triggered?
The virus has made some known global risks seem less of an immediate concern and at the same time introduced a new set of uncertainties.
Just in January, when business leaders were asked to identify the biggest risks of the coming decade, climate change was high on the list. But as we are now so distracted by the coronavirus pandemic, concerns about sustainability and the green transition have fallen down the agenda. In their place, the COVID-19 Risks Outlook report found, business leaders were more concerned about specific threats like a prolonged global recession, which they were not speaking about back in January.
Uncertainties about the current virus outbreak are compounded by fears of further coronavirus waves in the future, leading to an economic downturn with a domino effect on supply chains, bankruptcies and the movement of people and goods across borders.
We’re in uncharted water when considering what a wave of bankruptcies might mean for jobs and lost livelihoods, and also how this will impact different industries. In a year’s time, are we likely to see just the largest firms surviving and a lot of the small- and medium-sized players disappearing?
When economic risks are mixed with other factors that are unfolding, a second set of effects begin to emerge. So much of our economic activity is digitalized, automated and integrated, and factors like the sustained shift in working patterns from lockdown restrictions creates new opportunities for cybercriminals, for example. Concern about the rise of cybercrime comes out as one of the top risks.
What challenges does the pandemic present to companies in emerging markets?
Many emerging economies already face a twin burden. First, weak health care systems leave many people with insufficient healthcare provision and limited access. Second, these economies don’t necessarily have the same strong fiscal positions that are often seen in the developed world.
Most developing economies are unable to afford the vital measures needed to prop up the economy during difficult times like coronavirus lockdowns, such as payments to furlough workers or providing loans and support to large industries. As a result, a number of emerging markets are now facing the possibility of a major debt crisis.
Some countries are looking to the developed world for support, while others are seeking help from major international organizations. The pandemic could push half a billion additional people into poverty around the world, many of them in developing countries and emerging markets. But poverty could also impact some developed economies, as there are plenty of countries where the most vulnerable households receive insufficient support to keep them from poverty.
COVID-19 could unravel some of the huge progress made by countries around the world to lift their people out of poverty.
*Senior Writer, Formative Content
**first published in: www.weforum.org