‘Building back better’ – here’s how we can navigate the risks we face after COVID-19

As a perfect storm of health and economic crises leaves the world navigating uncertain times, a new report casts light on what lies ahead. The World Economic Forum’s COVID-19 Risks Outlook: A Preliminary Mapping and Its Implications looks at what the coronavirus pandemic means for the world based on the views and analysis of 350 senior risk professionals.

Here, Saadia Zahidi, Managing Director of the World Economic Forum and Head of Centre for the New Economy and Society, discusses the report’s findings.

What new risks has coronavirus triggered?

The virus has made some known global risks seem less of an immediate concern and at the same time introduced a new set of uncertainties. Just in January, when business leaders were asked to identify the biggest risks of the coming decade, climate change was high on the list. But as we are now so distracted by the coronavirus pandemic, concerns about sustainability and the green transition have fallen down the agenda. In their place, the COVID-19 Risks Outlook report found, business leaders were more concerned about specific threats like a prolonged global recession, which they were not speaking about back in January.

Uncertainties about the current virus outbreak are compounded by fears of further coronavirus waves in the future, leading to an economic downturn with a domino effect on supply chains, bankruptcies and the movement of people and goods across borders.

We’re in uncharted water when considering what a wave of bankruptcies might mean for jobs and lost livelihoods, and also how this will impact different industries. In a year’s time, are we likely to see just the largest firms surviving and a lot of the small- and medium-sized players disappearing?

When economic risks are mixed with other factors that are unfolding, a second set of effects begin to emerge. So much of our economic activity is digitalized, automated and integrated, and factors like the sustained shift in working patterns from lockdown restrictions creates new opportunities for cybercriminals, for example. Concern about the rise of cybercrime comes out as one of the top risks.

What challenges does the pandemic present to companies in emerging markets? Many emerging economies already face a twin burden. First, weak health care systems leave many people with insufficient healthcare provision and limited access. Second, these economies don’t necessarily have the same strong fiscal positions that are often seen in the developed world.

Most developing economies are unable to afford the vital measures needed to prop up the economy during difficult times like coronavirus lockdowns, such as payments to furlough workers or providing loans and support to large industries. As a result, a number of emerging markets are now facing the possibility of a major debt crisis.

Some countries are looking to the developed world for support, while others are seeking help from major international organizations. The pandemic could push half a billion additional people into poverty around the world, many of them in developing countries and emerging markets. But poverty could also impact some developed economies, as there are plenty of countries where the most vulnerable households receive insufficient support to keep them from poverty. COVID-19 could unravel some of the huge progress made by countries around the world to lift their people out of poverty.

How do we bounce back from the impact of the crisis and build a better future?

We have looked at ways to “build back better” and it’s very clear that investing in greener economies is going to be a huge part of recovery efforts. Whether that’s cleaner energy, greening how our cities grow in the future, or creating more environmentally sustainable transport and mobility systems, sustainability is going to be a necessary part of building a better future. Many economies have in the past looked at redefining industrial policy and building more sustainable infrastructure as an impetus for more sustainable growth. And we will certainly need a coordinated new stimulus and approach in these areas, but restarting growth is not necessarily limited to that side of things. It has become clear during this pandemic there are other critical systems that have been underfunded or overlooked. Areas like healthcare and schools have not received adequate support, or job quality has not been as good as it should have been.

Investing in health, education, care and public services can both improve the resilience of our societies and prevent them from being so exposed to future shocks and will create a lot of jobs in the coming years.

Companies in both the developing and developed world are facing huge economic disruption. How can they blunt the impact to the workforce? A lot of governments are offering support to large businesses, small- and medium-sized businesses and directly to households. Faced with the prospect of huge economic disruption, financial support like government wage-sharing schemes aims to ease the cost burden on individual companies and help them stay afloat.

There have also been some direct subsidies, with payments made to households in order to bolster their incomes. All of these measures can help, but it is not going to be enough if we don’t also start imagining a new path to recovery. We need to start working on investments in new areas of future growth, which includes ensuring that small- and medium-sized companies survive and are functional when economies restart. We’re already starting to see some of the permanent structural changes brought about by the impact of the pandemic. As parts of Asia and Europe begin to emerge from lockdown restrictions, there are signs of seemingly permanent changes in consumer behavior. We have to start rethinking where future sources of economic growth will come from.

The effects of recent events will be felt by many businesses for years to come and some may not survive without support. We have to think much more carefully about helping with reskilling and upskilling, and providing better social safety nets for affected workers, because it may be a two- to three-year journey before they’re able to move into a new sector.