The COVID-19 Risks and Interdependencies Outlook report jointly published by Zurich and the World Economic Forum studied the possible risk-based consequences arising from the coronavirus and its potential second-order effects. Taking into account the views of 347 senior risk professionals, the report identified economic risks, societal risks and cyber risks as the most worrisome over the next 18 months.
Economic risks are the most likely and concerning fallout, in particular the risk of a prolonged recession of the global economy. That in itself is not surprising, but these risks also have far-reaching environmental, societal and technological implications and interconnections. An increase in indebtedness, both public and private will inevitably push some companies into bankruptcy.
One of the most important fallouts for the world of dealing with such a global crisis as COVID19 is ignoring other existential global risks. In this case a shortfall of activity to address climate change adaptation and mitigation. As countries emerge from the immediate health crisis and reboot their economies, changed working practices, attitudes towards travelling, commuting and consumption might make it easier to find business opportunities to capitalise on a lower carbon and more sustainable recovery.
In addition to the dangers to public health, the pandemic and the resulting lockdowns and shutdowns, could have long-lasting effects on people and societies. High structural unemployment is likely to affect consumer confidence, and the speed of economic recovery as well as exacerbate inequality, mental health problems and lack of societal cohesion.
Zurich head of sustainability risk and Zurich Insurance John Scott said, “Increasing inequality, dramatically shifting consumer behaviours and a lockdown that is having a significant toll on young people’s prospects, mental health and wellbeing are highly interdependent issues which impact the global economy, geopolitics and our societies in equal measure. On top of this, we are already seeing record levels of unemployment due to lockdown measures and are having to re-learn hard lessons – in particular that social deprivation determines health outcomes.”
He pointed out four areas where societal risks will have the greatest effect.
HR departments have rarely been more important. Working remotely increases the risk of isolation, alcohol dependency, excess smoking and bad backs through poor ergonomic posture.
The state was previously seen as the ultimate safety net but employers have had to accept that they too have to protect their workers in order to survive and thrive.
Getting back to a pre-Covid-19 growth phase is likely to be a long and difficult task and businesses will likely use fewer employees in the future. The challenge to return to normal is, therefore, as much a psychological as economic choice.
This economic crisis has already hit those in more socially disadvantaged groups disproportionately harder.
Some are having to face the moral dilemma of choosing between working to generate income or staying at home to protect their family’s health.
Therefore, continued exposure to health risks faced by essential workers, who are often among the lowest paid, raises the concern of heightened death rates amongst people in these roles – highlighting significant societal, income and health inequalities.
The mental health and wellbeing of young people is suffering – as are their long-term prospects
Youth employment in developed economies had only just returned to pre-2008 financial crisis levels. And in developing economies, youth unemployment has risen steadily, creating a real risk of social unrest.
Currently 80% of the world’s students – more than 1.6bn young people – are not attending school and many students in poorer communities lack the necessary tools to access online courses or are unable to easily work at home.
Consumer behaviours are already changing, even during the stabilisation phase, which most economies are in right now. In March, global consumer spending was lower with every passing week.
In the last two weeks of April and early May, however, consumer spending recovered a little each week in anticipation of a move into a ‘normalisation’ phase – where economies reduce lockdown measures and show signs of economic recovery.
At first, expenditure was on basics, such as groceries, but now spending is more focused on home improvements and clothing. There is not yet any significant expenditure on entertainment.
“The long-term societal impacts, such as an exacerbation of inequality and changes in consumer behaviours, the nature of work and the role of technology – both at work and at home – will change our way of life forever, for us as individuals, as a workforce, a society and future generations. These social dimensions of the crisis, including generational frictions and continued stress on people’s well-being, will be felt by people worldwide and create substantial societal consequences for the long term,” Mr Scott said.
“We do have cause for optimism. We need to focus not only on a healthcare solution, but a recovery that is focused on climate, sustainability, and on societal risks, such as inequality, mental health, the lack of societal cohesion and inclusion. If we do not do this, then the gaps in inequality – especially financial – are likely to remain and increase,” he said.