Economic distress a major global risk concern

World leaders, businesses and policymakers will have to work together to manage the fallout from the novel coronavirus pandemic or risk the rise of economic distress and social discontent over the next 18 months, according to a new report by the World Economic Forum.

The report, "COVID-19 Risks Outlook: A Preliminary Mapping and Its Implications", looked into the views of nearly 350 senior risk professionals and ranked their biggest concerns for the world and for business.

The state of the economy in light of the pandemic dominated the risk perceptions of companies. A prolonged global recession, weakened fiscal positions of major economies, tighter restrictions on cross-border movement of goods and people, and possible collapse of a major emerging market or developing economy were among top concerns cited in the study.

The report, produced in partnership with Marsh & McLennan Cos and Zurich Insurance Group, also looked at the interconnectedness of risks and called on leaders to act immediately against "an avalanche of future systemic shocks such as the climate crisis, geopolitical turbulence, rising inequality, strains on people's mental health, gaps in technology governance and health systems under continued pressure".

Saadia Zahidi, managing director of the World Economic Forum, said the pandemic has "triggered an economic crisis with far-reaching implications and revealed the inadequacies of the past".

"As well as managing the immediate impact of the pandemic, leaders must work with each other and with all sectors of society to tackle emerging known risks and build resilience against the unknown," Zahidi said. "We now have a unique opportunity to use this crisis to do things differently and build back better economies that are more sustainable, resilient and inclusive."

The report found that two-thirds of respondents identified a "prolonged global recession" as a top concern for business. One-half identified bankruptcies and industry consolidation, failure of industries to recover and a disruption of supply chains as crucial worries.

Peter Giger, chief risk officer of Zurich Insurance Group, said: "The pandemic will have long-lasting effects, as high unemployment affects consumer confidence, inequality and wellbeing, and challenges the efficacy of social protection systems.

"With significant pressures on employment and education－more than 1.6 billion students have missed out on schooling during the pandemic－we are facing the risk of another lost generation. Decisions taken now will determine how these risks or opportunities play out."

The World Economic Forum said a "green recovery" and more resilient, "cohesive, inclusive and equal societies" can emerge if leaders act now.

John Doyle, Marsh & McLennan's president and CEO, said: "To create the conditions for a speedier recovery and a more resilient future, governments and the private sector need to work together more effectively. Along with major investments to improve health systems, infrastructure and technology, one of the outcomes of this crisis has to be that societies become more resilient and capable of withstanding future pandemics and other major shocks."

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