In this article we are going to list the top 5 global risks for 2023. For a detailed coverage of this topic and a more comprehensive list please take a look at the top 10 global risks for 2023.
5. Weapons of mass disruption
We currently live in a world where more global access than ever before, and yet people are more misinformed than ever too. Meta Platforms, Inc. (NASDAQ:META) and Twitter are platforms where news from all across the world is shared, and yet, Meta Platforms, Inc. (NASDAQ:META) has come under constant scrutiny for the availability and spread of misinformation, which came to a climax during the U.S. 2020 elections when Russian bot farms reached over 140 million Americans. Social trust is continuing to devolve as a result of spread of misinformation, with people even doubting genuine facts because of a lack of trust. Disruptive tech also includes artificial intelligence, which has gained mainstream popularity after the release of ChatGPT, which was purchased by Microsoft Corporation (NASDAQ:MSFT) for $10 billion. Meanwhile, Alphabet Inc. (NASDAQ:GOOG) revealed a new chatbot tool called “Bard” which will directly compete with ChatGPT. The exponential advancements in tech and AI, including deepfakes, voice synythesis and facial recognition, could all play a part in the global lack of trust.
4. Erosion of social cohesion and societal polarisation
According to the World Economic Forum, the erosion of social cohesion and societal polarisation has become an increasingly stronger risk in the last few years as communities are becoming more and more fractured. The resulting lack of social stability and individual well-being is a major threat to the global economy which is potentially exacerbated by political instability and debt crises. This widening gap in beliefs between people on a majority of topics including religion, climate, economy and gender, among various others, has impacted elections all across the world, from the U.S. to Europe to Asia, and has resulted in major demonstrations even in traditionally autocratic countries such as Iran and China. This social turmoil has actually increased the percentage of autocratic regimes in the world. This has long term economic consequences for such regimes, including their stability and outlook in both the short and long term future.
3. Natural resources crises
Even in an increasingly global world, global cooperation is often less visible. This prevents the free flow of resources across borders in a world where there are sufficient natural resources but quite inequitably spread. Further, climate change is also having a major negative impact on the availability of natural resources with water and mineral shortages being a significant global risk for 2023. In several developing economies, food and water shortages are being impacted not just by climate change but also from global disruptions due to war, lack of political stability and disruption to trade. This decline has led to higher commodity prices, which again, have resulted in serious issues for developing economies where purchasing power is significantly low.
2. Extreme weather events
Climate change is real and it is here to stay, unless significant steps are taken to prevent this from happening. Mankind can make amazing advancements in this space if it wants to; the collective agreement between countries to ban the use of CFCs resulted in the hole in the ozone layer almost disappearing and acid rain, something every elementary school student was taught in the later 1990s and early 2000s, has also all but disappeared. Many governments are trying to fight climate change, offering significant grants and subsidies to companies engaged in this sector, which has resulted in accelerated growth in the clean energy industry. Some of the companies claiming to be leading the fight against climate change include Tesla, Inc. (NASDAQ:TSLA), one of the pioneers of electric cars and the most valuable car company in the world, Alphabet Inc. (NASDAQ:GOOG), which is the biggest corporate buyer of renewable energy and aims to become carbon-free by 2030, and Unilever PLC (NYSE:UL), which aims to halve its environmental footprint and become carbon negative by 2030.
1. Russia-Ukraine War
Topping the list of the top global risks for 2023 is the Russia’s war with Ukraine. The war is almost a year old now, having started when Russia invaded Ukraine unprovoked in February 2022. Many thought that Russia’s war with Ukraine would be a short one; after all, Russia has regularly been ranked among the most powerful militaries in the world and the second-most powerful military in Europe. However, Ukraine was provided unprecedented support by Western nations including those in the European Union and the U.S., which has resulted in a strong fightback from Ukraine, weakening Russia’s military strength. Currently, it appears that markets have priced in the expectation that the war’s intensity is subsiding and hopes of a negotiated resolution will prevent re-escalation.
However, there is still a significant risk that the conflict will escalate, especially considering Vladimir Putin’s unpredictability and the constant threat of nuclear escalation is just one of the reasons to keep an eye on how things turn out in 2023. Another risk is Russia preemptively attacking arms shipments from Western nations providing support to Ukraine, which could bring a response from NATO and result in another World War. Any serious escalations in the war could devastate financial markets. On the other hand, U.S. defense companies have benefited strongly in 2022 from the war, as the U.S. has provided significant military support which such contracts going to Raytheon Technologies Corporation (NYSE:RTX), Northrop Grumman Corporation (YSE:NOC) and Lockheed Martin Corporation (NYSE:LMT), which is why the latter two stocks saw double digit growth in their share price in the last one year.
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