Clifford Chance

On the 10 January 2024, the World Economic Forum ("WEF") released its 19th Edition of 'The Global Risks Report 2024' ("GRR") highlighting the most severe risks threatening the world in 2024 and beyond. Here are its key findings and implications.

The world is constantly experiencing novel and familiar risks and challenges that place persistent strain on companies and individuals. The GRR 2024 identifies these global risks through the Global Risks Perception Survey ("GRPS") and examines them over three different time frames allowing decision-makers to balance current crises with developing long term priorities.

Key findings

(i) Current risks

The GRR underlines a predominately negative outlook for the world over the short term, with risks such as false information, a rise in conflict and economic uncertainty being highlighted as the most pertinent issues currently facing the world.

False information was recognised by GRPS survey participants as being of especially high risk with the COVID-19 pandemic laying fertile ground for misinformation and disinformation to take hold and polarise communities, societies, and countries. Over the next two years it is anticipated that a wide set of actors will capitalize on the boom in synthetic content, amplifying societal divisions, ideological violence and political repression causing major disruption in electoral processes across several economies.

Rise in conflict was another key risk identified in the Report largely due to the escalation in conflict across Ukraine, Israel, and Taiwan. Each of these conflicts posing a serious risk to geopolitical order, global economy, safety, and security.

Economic uncertainty was also flagged as posing serious risk. Small and medium sized companies as well as heavily indebted countries were identified as being particularly exposed to slowing growth and elevated interest rates. More generally supply-side pressures and demand uncertainty were identified as possibly contributing to persistent inflation and high interest rates.

(ii) Risks over the next decade

The GRR recognises that the next decade will bring with it significant change. Within the global risks landscape, four global risks emerge as the most pressing over the next decade, they include:

Earth Systems: A well accepted risk facing the global community is climate change but the GRR identifies the threshold for large-scale and self-perpetuating changes to planetary systems is likely to be exceeded within the next decade. The Report identifies that surpassing the 'climate tipping point' will result in socio-environmental crisis including ecosystem collapse, natural resource shortages, involuntary migration, and infectious diseases. It also recognises that whilst nascent mitigation technologies such as AI are attractive, they could have unintended environmental and social consequences, creating questions around legal liability, and accountability.

AI Technologies: The proliferation of progressively powerful general purpose AI technologies will cause enormous change to the global economy and society. The GRR recognises this and notes that commercial incentives and national security may outweigh regulatory efforts to curb these adverse societal and security outcomes. Further, it recognises that the constant advancement of AI could create division between those who are able to access it and those who cannot, potentially leaving vulnerable countries and communities further behind. Finally, the GRR found that deeper integration of AI in conflict decisions could lead to unintended escalation, for example if states incorporate AI into nuclear weaponry this could significantly raise the risk of accidental or unintentional escalation over the next decade.

Human Development: Human development indicators demonstrate that progress has been made over the last few decades however, the GRR recognises that human development might stall as barriers to economic mobility arise from climate change, advances in AI and geopolitical restraints. Further, it argues that bifurcated labour markets could widen the inequality between developed and developing economies as job demand and supply diverge.

Organized Crime: The convergence of several top ranked risks such as climate change, state fragility, conflict and economic hardship could turn this moderate risk into a pressing crisis due to the widening governance gap it creates, the GRR argues. Technological advancement is also identified as playing a key role in exacerbating this risk, opening new markets, allowing transnational criminal networks to spread, and increasing the risk of cybercrime and cyber insecurity.

(iii) Approaches to address global risks

The GRR sets out four broad categories to approach these global risks, particularly while operating in a fragmented geopolitical environment. They include:

Localised Strategies: Involving little to no cross-border coordination, instead relying on the public and private sector to increase the community's preparedness for inevitable global risk. This may involve measures such as public awareness and education (reducing the impact of AI-enabled misinformation); financial instruments (insurance, catastrophe bonds or public risk pools) and national and local regulation.

Break through endeavours: Involving the prioritization of the future with a focus on breakthrough research and development. This research and development may encompass medical breakthroughs, new technologies and novel approaches to quantifying and governing risk.

Collective actions: Involving the aggregate and independent efforts of individual citizens, companies, and countries to effect change on a global scale. These efforts are insignificant when pursued on a micro level, but aggregate efforts are said to have the power to alter market dynamics and mitigate climate-change.

Cross-border coordination: Involves mitigating likelihood. It includes mutual restraint (restraining the use of weapons of mass destruction and the incorporation of AI into lethal weapons), addressing the weakest link in a system and implementing global treaties and international agreements. Cross-border coordination is argued to be necessary and, in some instances the only path to address the global risks that threaten human prosperity and security.

Implications & Next Steps

Regulation and an awareness of the long-term structural transformations occurring in the world such as the rise of AI, climate change and demographic transitions is essential in mitigating their associated risks.

In Australia the Albanese government has already indicated that it will take measures to address and monitor the risks associated with the rise in AI and new technologies. The government announced that it will particularly focus on the country's AI regulation in high-risk settings such as healthcare, employment, and law enforcement. Consultation is ongoing as to whether changes should be made to existing laws or whether AI specific laws are necessary.

Proactive measures are also being taken in Australia's regulatory space with ASIC committing to placing businesses use of algorithms and AI under increased scrutiny as well as better resourcing their regulation. Further, the corporate watchdog also intends to make an example of board directors and executives who are found to be recklessly ill-prepared for cyberattacks.

While future predictions over the world economy can sometimes feel like crystal-ball gazing, the future risks in WEF's report seem like a safe bet in many respects. Entities can prepare themselves for the risks associated with economic uncertainty, AI developments and climate related developments to put themselves in control and save from too many sleepless nights. Developing reliable and dependable policies and processes to guard against regulatory development and interaction is one of the key ways to keep the night monsters at bay.