The age of stability is over. Are we prepared for the risks to come?

The previous 15 years, in most of the world, have been a period of almost unnatural stability. Global risks have, for the preceding decade-and-a-half, manifested largely as isolated events. This level of stability is not the norm — and it now appears to be changing.

From conflict to climate, this year’s World Economic Forum’s Global Risk Report outlines in depth the risks and uncertainties humanity faces in the coming year and beyond. Today, 92% of risk experts are pessimistic about the 10-year horizon.

As we emerge from this period of relative stability, it seems that we can no longer rely implicitly on global cooperation to tackle the short- and long-term crises that we’re confronted with. A new approach to risk mitigation is needed.

But the question is: Are we prepared for this uncertain world? Signs suggest that we’re not addressing the need for risk mitigation to ensure we can navigate the current crises, both in the short and long term.

We have built a world that has generated significant wealth through connectivity, trade and openness. However, we are beginning to realize that the foundation supporting these benefits was not strong enough to secure them. Global cooperation is the glue that holds this together. If we lose this cooperation, then we face the potential loss of wealth that has been generated by globalization.

During the COVID-19 crisis, we witnessed some positive developments in terms of risk mitigation through global cooperation, such as the rapid development of vaccines. But we did not respond as well to the crises that followed: the supply chain issues that plagued us as economies were rapidly released from lockdowns; the Russian invasion of Ukraine that triggered an energy crisis, which fueled inflation in the G7 economies and, for the first time since the 2008 Great Financial Crisis, interest rate increases; and the stronger US dollar, which had consequences for countries and businesses with dollar-denominated energy bills and debts.

The impact of increased fossil fuel energy prices has been a signal to citizens about the coming costs of the energy transition necessary to mitigate climate change. It seems that the target of achieving net zero emissions by 2050 is often misunderstood and many people have yet to accept that the era of cheap carbon energy will eventually come to an end. The basic question of how to reduce fossil fuel dependency and subsidies is a politically sensitive one and, at times, a topic used by governments to row-back on net zero commitments for short-term political gain.

It is only a matter of time before record-breaking temperatures, drought, wildfires and flooding will drive a recognition that the planet will pass at least one climate tipping point within the next decade.

This is why meaningful carbon pricing and reductions in fossil fuel subsidies are essential. However, the current reality is quite the opposite. Regulatory interventions and subsidies are being implemented to keep carbon prices low, which is completely counterintuitive and hinders progress toward sustainability goals. To effectively address these challenges, stable regulatory rules and predictable policies are of utmost importance.

Despite the obstacles, there is still hope. Many individuals possess good intentions and make decisions that align with their beliefs in doing the right thing. However, we are placing an excessive burden on a limited number of change levers, such as the financial industry. While it is commonly acknowledged that we need green finance, particularly for climate adaptation and for investment in new transition technologies, the ultimate success lies in the adoption of sustainable behaviours by consumers. There is no way around this, and it will entail change that some perceive as painful.

But the critical question is: when will we be ready to accept this pain? And how many more years of continued warming do we need to witness before we act? Nevertheless, there is cause for optimism. The consequences of our actions will eventually lead us to the necessary conclusions and prompt essential policy actions.

Although the era we have gone through was relatively stable, the outlook for the future appears less certain due to a number of trends or, as the World Economic Forum prefers to call them, “structural forces,” such as climate change, demographic changes, technological acceleration and geostrategic shifts.

We are living in a low-cooperation world that is struggling to agree on decisions to address the already known and emerging risks. More and more we need to rely on localized strategies by individual nations, businesses and people, each of whom play an important role in risk adaptation and mitigation.

The actions of individual citizens, companies and countries, insignificant on their own, can move the needle on global risk reduction if they reach a critical mass. So, despite their scale, there are good reasons to remain optimistic in the face of all these challenges.