Recession tops the most-feared list for leaders worldwide. Two-thirds of 350 leading risk analysis and management experts, polled by the World Economic Forum for the COVID-19 Risks Outlook. A Preliminary Mapping and Its Implications report to examine “the most likely and most concerning fallout risks from COVID-19 over the next 18 months, for the world and for companies,” identified the risk of recession as the biggest risk currently faced by the global economy and individual businesses alike.
It should come as no surprise, therefore, that half of the surveyed experts “identified bankruptcies, industry consolidation, failure of industries to recover and disruption of supply chains as crucial worries,” as all of the above are rather obvious consequences of recession and upheaval in the global markets.
Read on for our rundown of other key risks and risk factors that business leaders ought to prepare for and which the report describes in greater detail.
Over 50% of the experts surveyed by WEF fear an increase in cyberattacks and cybercrime in general. As state-mandated quarantine measures emptied office buildings worldwide, most businesses moved their operations online. In most cases, the pace and pressure of the change were not exactly conducive to securing the IT infrastructure, leaving it open to a fatal attack. Security lapses like these ought to be fixed as soon as possible. Using a variety of online tools, many businesses succeeded in providing continuity of operations at the pre-pandemic quality of service levels. To others, sweeping cross-border travel restrictions (which, in some cases, are not expected to be lifted by the end of 2020) and the looming specter of a second wave are still considerable risks. High-level management staff should closely examine the dangers lurking online and impediments to real-life business operations, while plans for dealing with potentially adverse consequences of the situation should be drawn up as soon as possible.
Interestingly, the report also mentions risks related to climate change—an issue that has been somewhat relegated to the background since the pandemic began: “On the environmental front, even with an expected 8% drop in global emissions for this year, the world would still miss the 1.5°C target to avoid a planetary catastrophe. Climate degradation will worsen if countries fail to embed sustainability criteria into their recovery plans and if COVID-19 eclipses sustainability on the public agenda,” the WEF report argues. Once treated as a second-class issue, climate policy outcomes have become a key challenge for leaders, also because many government assistance programs for businesses do, or are expected to, including criteria related to sustainability and climate action.
As it turns out, the plethora of changes that leaders and management staff will have to face in the new normal extends far beyond COVID-19 and its attendant issues.
Another important, but still underappreciated problem is the emotional and mental wellbeing of staff returning (or not) to work post-lockdown. The WEF report reads: “Widespread anxiety could worsen as a result of entrenched unemployment, inter-generational friction and the pressure that fear and isolation have put on mental health.” In their efforts to bolster staff wellbeing, however, leaders themselves ought to remember about their own limits and take care of their own health, mental and otherwise—for their sake and their companies’.
Because of the continued threat of the pandemic, much of the information that leaders receive and take in sounds alarmist. It should be noted, however, that the goal of the report compiled by the World Economic Forum was to identify potential risks and threats, and not to predict market trends—a subtle but highly important distinction. WEF experts were explicitly asked for their darkest scenarios, which does not mean that they are bound to become reality. Nevertheless, expecting only favorable developments from the markets is not exactly good business practice. The least risky play right now would be: hope for the best, plan for the worst.
The COVID-19 pandemic reshaped a lot of the business landscape and deprived us of the luxury of long-term planning. To counter that, CEOs, CFOs, and CHROs should emphasize preparing their businesses for rapid and dynamic change, and they must be ready to overcome obstacles even before their first symptoms appear on the horizon. Such a mindset seems to be essential to leadership in the new normal. According to its authors, the WEF report was compiled to serve “as a warning of how things could turn out if handled poorly, but more importantly, it offers a means to change direction before it is too late.” Now more than ever, companies will need strong and dynamic leaders who will boldly pave the way into this new normal. After all, this new reality might have little to do with the world as we knew it before the pandemic.