How to build business resilience in an era of risk turbulence

In the near term, some risks may worsen and reach an inflection point, including those related to AI, climate and the economy. This could result in significant disruptions to supply chains, human development and civil society.

In the longer term, the Global Risks Report’s 10-year outlook is dominated by environmental risks, as well as AI and cyber risks. Without meaningful preparation and mitigation, the world could face shocks that upend prosperity and lead to climate adaptation failures and erratic advanced technology behaviours.

Navigating this complex risk landscape and capitalizing on the opportunities it presents will require building resilience at organizational, country and international levels. It will also require greater cooperation between the public and private sectors.

Rise of the machines: Artificial Intelligence a top risk concern

Although AI has been used for decades, the release of ChatGPT and similar tools in late 2022 pushed generative AI into headlines, regulatory discussions, and risk registers. Along with a range of opportunities, generative AI brings serious risk implications, including related to copyright, cyber risk, misinformation, and a changing regulatory environment.

Pushed by the rapid evolution of generative AI, misinformation and disinformation rocketed from sixteenth place in last year’s report to the number one ranking this year for short-term risks (two-year horizon). It also ranked in the top five in the current and long-term risk landscape.

Organizations should be engaged in serious discussions regarding how and when to use AI, including anticipating and managing its risks. For example, as companies develop in-house generative AI, they should continue to verify the outputs, which at times may be erroneous — popularly referred to as “hallucinations.” The burden remains on human users to verify the accuracy and contextual relevance of AI outputs.

At a societal level, generative AI contributes to mistrust in institutions and elections, as voters face campaigns by domestic and foreign actors seeking to influence outcomes. As the Global Risks Report says, “The implications of these manipulative campaigns could be profound, threatening democratic processes.” The report notes the strong links between misinformation and disinformation and social polarization and even intrastate violence.

AI technology can also be weaponized by malicious actors to exploit vulnerabilities in new digital workplace pathways, putting more people and companies at risk of cyberattacks, phishing and cybercrime.

Job loss to generative AI and advanced technologies is an ongoing risk and concern with many stakeholders. But as some jobs are lost, others will emerge. With more organizations using AI and advanced technologies to improve business processes and productivity, this will in turn create novel employment opportunities as well as new risks in hiring, training and upskilling.

Resilient organizations can prepare for AI risks and opportunities by assessing their digital and cybersecurity footprints, instituting best practice controls and guidance, and stress-testing their growth strategies.

Geopolitics and climate change: Global supply chains feel the impact

Two of the highest ranked short-term risks this year relate to climate change and geopolitics, both of which impact global supply chains.

Concerns about the spillover of geopolitical and geoeconomic tensions were elevated as a result of the Israel-Gaza war, the Russia-Ukraine war, national elections and more. Open warfare, simmering conflicts and humanitarian crises can all hamper the flow of resources, food and energy supplies, threatening human health and disrupting business operations and strategy.

Extreme weather events, worsened by the changing climate, can similarly upset supply chains. And when events happen simultaneously, the results compound. For example, recent attacks on ships in the Red Sea caused some shipping companies to seek alternative routes, adding time and cost to the journey. At the same time, a lack of rainfall has disrupted shipping through the Panama Canal, leading to longer transit times and potentially higher prices for transported goods and more environmental impacts.

As organizations consider the suitability of their supply chains, they should anticipate geopolitical and climate-related disruptions among the risks they are preparing for. This could include planning for potential disruptions caused by regional conflicts, climate-driven crop failures, malicious cyberattacks on trade networks, and export controls on key minerals.

By using vulnerability assessments, scenario planning, onshoring or nearshoring, and alternative suppliers and trade routes, organizations can potentially reduce the impact of such disruptions.

Enhancing business resilience in a world at risk

Given the range of risks facing the world, public-private partnerships are increasingly needed as a part of meaningful resilience strategies.

Consider climate. Without immediate engagement and action by the public and private sectors, the world could soon pass an irreversible tipping point — a 3° Celsius increase — after which adaptation is no longer possible and disastrous weather events are baked in.

Or workforce of the future issues, including how AI and advanced technologies will affect people’s lives – if they have a job and where they should live. Reskilling and retraining can help mitigate some of these risks, though there are economic costs, opportunity costs and other questions.

Public-private sector collaboration on these risks and numerous others can help ensure that effective transition incentives and support are in place to meet the growing future demands of society.

It will take a relentless focus to build resilience at organizational, country and international levels — and greater cooperation between the public and private sectors — to navigate this rapidly evolving risk landscape.

To enhance their resilience, key areas for organizations to focus on include:

Assessing digital and cybersecurity footprints, instituting best practice controls and guidance, and stress-testing growth strategies.

Identifying potential supply chain resilience gaps.

Striking a balance between just-in-case and just-in-time strategies.

Using scenarios to stress test investment and growth strategies.

Building trust with workforces and stakeholders.

Through creative approaches and greater cooperation on risk, intersecting crises, and the trajectories they drive, businesses, governments and societal stakeholders can reduce uncertainty, improve risk investment decision making and responses, and build long-term resilience on a global scale.