COVID-19 Risks Outlook: A preliminary mapping and its implicationsWorld Economic Forum(WEF)/Zurich report delves into secondary risks and effects to be faced in wake of pandemic
The WEF COVID-19 Risks and Interdependencies Outlook report presents a collection of possible risk-based consequences from the coronavirus and its potential second-order effects. This report takes advantage of the views of 347 senior risk professionals who participated in the COVID-19 Risks Perceptions Survey.
John Scott, Head of Sustainability Risk and Zurich Insurance comments in the WEF & Zurich Insurance Covid-19 Risk report: “Increasing inequality, dramatically shifting consumer behaviors and a lockdown that is having a significant toll on young people’s prospects, mental health and wellbeing are highly interdependent issues which impact the global economy, geopolitics and our societies in equal measure. On top of this, we are already seeing record levels of unemployment due to lockdown measures and are having to re-learn hard lessons – in particular that social deprivation determines health outcomes.”
- HR departments have rarely been more important. Working remotely increases the risk of isolation, alcohol dependency, excess smoking and bad backs through poor ergonomic posture.
- The state was previously seen as the ultimate safety net but employers have had to accept that they too have to protect their workers in order to survive and thrive.
- Getting back to a pre-Covid-19 growth phase is likely to be a long and difficult task and businesses will likely use fewer employees in the future. The challenge to return to normal is, therefore, as much a psychological as economic choice.
- This economic crisis has already hit those in more socially disadvantaged groups disproportionately harder.
- Some are having to face the moral dilemma of choosing between working to generate income or staying at home to protect their family’s health.
- Therefore, continued exposure to health risks faced by essential workers, who are often among the lowest paid, raises the concern of heightened death rates amongst people in these roles – highlighting significant societal, income and health inequalities.
- The mental health and wellbeing of young people is suffering – as are their long-term prospects
- Youth employment in developed economies had only just returned to pre-2008 financial crisis levels. And in developing economies, youth unemployment has risen steadily, creating a real risk of social unrest.
- Currently 80% of the world’s students – more than 1.6 billion young people – are not attending school and many students in poorer communities lack the necessary tools to access online courses or are unable to easily work at home.
- Consumer behaviors are already changing, even during the stabilization phase, which most economies are in right now. In March, global consumer spending was lower with every passing week.
- In the last two weeks of April and early May, however, consumer spending recovered a little each week in anticipation of a move into a ‘normalization’ phase – where economies reduce lockdown measures and show signs of economic recovery.
- At first, expenditure was on basics, such as groceries, but now spending is more focused on home improvements and clothing. There is not yet any significant expenditure on entertainment.
Cause For Optimism
John Scott concludes: “The long-term societal impacts, such as an exacerbation of inequality and changes in consumer behaviors, the nature of work and the role of technology – both at work and at home – will change our way of life forever, for us as individuals, as a workforce, a society and future generations.
These social dimensions of the crisis, including generational frictions and continued stress on people’s well-being, will be felt by people worldwide and create substantial societal consequences for the long term.”
“We do have cause for optimism. We need to focus not only on a healthcare solution, but a recovery that is focused on climate, sustainability, and on societal risks, such as inequality, mental health, the lack of societal cohesion and inclusion. If we do not do this, then the gaps in inequality – especially financial – are likely to remain and increase.”
Excerpts From The WEF/Zurich Report: Societal Risks In A Post-Covid-19 Era
The report aims to identify the emerging concerns and fallouts from COVID-19 over the next 18 months, analyze the pandemic’s implications and effects beyond the immediate crisis response, and provide cross-cutting insights on the current risks landscape that would not otherwise be available. The perspective of the business community on these global concerns is reflected, not just in the business impact and risks, but in the broader global consequences
We are in a healthcare crisis that is also an economic crisis and an energy crisis. The length and depth of the economic crisis will depend on solving the healthcare crisis with an exit strategy involving a combination of an effective, widely available vaccine and therapeutic drugs.
What is clear is the interdependencies of the global risks triggered by the COVID-19 pandemic. We are experiencing an historic event that will change many aspects of the world we live in, the geopolitics, the economic impact on many industry sectors, the competitive business landscape, the long-term societal impacts such as an exacerbation of inequality, consumer behaviors, the nature of work and the role of technology at work and at home.
Key Messages From The Report:
- Economic risks are the most likely and concerning fallout, in particular the risk of a prolonged recession of the global economy. That in itself is not surprising, but these risks also have far-reaching environmental, societal and technological implications and interconnections. An increase in indebtedness, both public and private will inevitably push some companies into bankruptcy.
- One of the most important fallouts for the world of dealing with such a global crisis as COVID19 is ignoring other existential global risks. In this case a shortfall of activity to address climate change adaptation and mitigation. As countries emerge from the immediate health crisis and reboot their economies, changed working practices, attitudes towards traveling, commuting and consumption might make it easier to find business opportunities to capitalize on a lower carbon and more sustainable recovery.
- For risk managers and business people, in addition to all the current risk management activities designed to protect employees and customers in the immediate crisis, there are a number of recommendations of how to deal with this future uncertainty
- Modeling and scenario analysis: Use skills developed in economic scenario modeling to apply to Covid-19, using a range of scenarios to explore how the future may develop and create agile responses.
- Build scenarios into existing risk models to understand the impacts of different recovery rates on business, operational, credit or market risks.
- Split your teams; one team to manage the immediate consequences of Covid-19, focused on bringing back business. A second team to envision the future and find new opportunities as the competitive landscape and customer-behaviors change
- Ensure that appropriate measures are in place to protect physical and other assets that are currently idle, or re-purposed, so that they can be re-started quickly, once normal business activities are resumed
Access the entire report here.