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As we move into the second decade of the twentieth century, the world faces a set of risks that people have never seen or have forgotten their existence for decades, such as:
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High inflation with the rapidly increasing cost.
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Geopolitical confrontation with the spectre of nuclear war.
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Cyber Security, high tech risks.
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Environmental sustainability.
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Widespread social unrest with increasing polarity.
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The Risk of poly-crises.
What is remarkable is that businessmen and policymakers of recent generations who have never experienced such risks are now being called upon to face them. In addition, in the next few years, it will be required from them to face a new era with:
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Lower economic growth.
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Lower global investment.
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Globalization being challenged.
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Human development diminishing.
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Climate change causes multiple risks.
This is a new era where in addition the problem of unsustainable debt levels is very likely to re- emerge in sectors and countries around the world causing instability.
All these risks are converging to shape the conditions for a decade likely to be dominated by uncertainty and turmoil. Let's examine some of the results of these risks in more detail:
High cost of living
This year and possibly next year, the most considerable risk will be the increase in the cost of living. Governments and central banks are likely to face persistent inflationary pressures in the coming years as the likelihood of a protracted war in Ukraine are high. In addition, in Asia, the inability to deal with the pandemic is expected to continue to contribute to the rise in prices, while the trade war between East and West will push the disconnection of the supply chain. The resulting lack of supply will lead to persistent inflation and stagflation, the socio-economic consequences of which may be severe, given the historically unprecedented high level of public debt.
World arms race
Russia's invasion of Ukraine will lead to an increase in military spending and a proliferation of investments in new military equipment technologies that could lead to a global arms race. The long- term global risk landscape could be defined by multi-faceted conflicts and asymmetric warfare resulting in the targeted development of new technology weapons on a larger scale than seen in recent decades.
Risks from cutting-edge technologies
The increasing involvement of technologies in the critical functioning of societies will expose populations to immediate threats that could shake social cohesion. In fact, cybercrime is expected to increase, with attempts to disrupt resources and services supported by critical technologies. Thus, cyber-attacks on technologies for managing agriculture and water, financial systems, public safety, transport, energy, space and undersea communications infrastructure will become increasingly common.
A significant risk of new technologies in developed and developing countries will be their use to misinform or under-inform all people. It is also expected that there will be a misuse of personal data that undermines the right to privacy, even in well-regulated, democratic countries.
Environmental risks
Although climate and environmental risks are the risks for which we are least prepared, increasing demands on public and private sector resources from other crises will reduce the speed and scale of efforts to de-fossil fuel in the coming years. Such a development will exacerbate the effects of climate change, biodiversity loss, food security and natural resource consumption. It will accelerate ecosystem collapse and threaten food supplies and livelihoods in climate-vulnerable economies. It will amplify the effects of natural disasters and limit further progress in mitigating the climate crisis.
Polarity
As high inflation and slowing economic growth will wipe out middle-class incomes in all countries of the world, social unrest and political instability will no longer be limited to emerging countries but will also spread to developed countries. Citizens' frustration with losses in human development will increase. Declining social mobility, together with widening inequality, will pose critical challenges to political systems around the world. Thus, it is very likely that we will increasingly see the unfolding of the governing power of leaders who will be at the extremes of either the right or the left. Additionally, political polarization among economic superpowers in the coming years may reduce the space for collective problem-solving, fracture alliances, and lead to a more volatile global environment.
The risk of poly-crisis
In the future, it is very likely that we will see poly-crises with parallel creation of disparate crises, but which will interact with each other in such a way that the overall impact far exceeds the sum total of the partial crises. A potential poly-crisis related to the supply and demand of natural resources may arise from the interconnection of environmental, geopolitical and socio-economic risks. Therefore, it will be required to investigate the connection between different risks and focus on predicting their degree of correlation, building preparedness measures to minimize the scale and scope of multiple crises before they occur.
The strategy to follow
For at least the next two years, investors and traders will need to be prepared for a period of continued volatility with multiple shocks that will shake up and widen existing divergences in the economies and markets. However, this volatility is expected to be limited in the long term. In the future, the preparedness of business people and policymakers is expected to be strengthened as multilateral processes will be improved, helping the collective capacity to prevent and deal with emerging crises.
At this moment, it seems that we are approaching a tipping point. Suppose the course of action that policymakers, technocrats and entrepreneurs will decide in the coming years is collective and decisive by focusing on the long-term challenges without exclusions. In that case, it is most likely that we will be led to stability and development. Otherwise, the risks mentioned in this article will be magnified, causing more and more instability.
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