The World Economic Forum’s annual Global Risks Report shows environmental concerns remain as top long-term risks by likelihood and impact. Following a year of a major disruption, the report highlights how the risk landscape is shifting, as well as the need to change how risks are assessed and responded to. The results saw infectious disease rise to the most impactful risk, with risks relating to lives and livelihood seen as the most prevalent in the short term. Knock-on effects from the pandemic including economic breakdown – price instability and debt crises, as well as technological risks – are perceived to materialise in the medium term. The report draws on learnings from the pandemic, and calls on businesses and governments to act on environmental risks now, in order to co-ordinate responses and avoid catastrophic impact. It also notes that delaying a response could lead to the intersection of environmental degradation and social fragmentation to amplify existing risks, accelerate the emergence of new risks, and inhibit effective response to issues.
Awareness of global risks and the impact on business landscapes has always been an important aspect of materiality. However, the past year has emphasised the level of uncertainty in navigating issues, and evidenced how quickly risks can develop or emerge. The need to “keep the finger on the pulse” and build business resilience is compounded by growing stakeholder expectations when it comes to ESG issues. It is therefore of utmost importance, when conducting materiality assessments, to refresh perceptions of how risks are developing and account for the non-static nature of risk manifestation in terms of likelihood, impact and timeline. Integrating analyses into internal systems and mitigation strategies, allows business to start to plan, adapt and respond to risks beyond those that are imminent. These actions are paramount to build long-term resilience and avoid disruption from future “shocks”. Not only this, but they will allow businesses to focus on the risk management for those that are most significant, and develop strategies that are more likely to address evolving concerns of major stakeholders.
Author: Sarah Kehoe