Ever get the feeling you’ve forgotten something

The WEF’s Regional Risks of Doing Business report is important for gaining insight into what concerns companies in their economies. In Europe, the three largest threats - Cyber-Attacks, Asset Bubble and Inter-State Conflict - together with the other geopolitical, social, fiscal and technology trends that make up the list, clearly pose a threat in the near-future. But where is Climate Change?

Climate change is a very real and serious threat to society. Extreme weather events such as heatwaves and flooding are becoming more commonplace and severe, leaving societies to deal with often devastating humanitarian and economic costs.

In the last 12 months, global protests have seen millions of young people take to the streets to voice their opinions, with the result that both policymakers and businesses are beginning to sit up and take notice. And a recent report by a UK environmental non-profit showed that the world’s largest 500 companies could potentially face USD 1 trillion of financial risks in the short-term due to climate change such as higher operating costs, asset write-offs and falls in demand (Source: 2019 Climate Disclosure Project report)

This is why, while reading the results of the WEF Executive Opinion Survey of European business leaders, I was surprised to see that climate change did not appear anywhere in the top 10 risks. For me, it’s the biggest existential risk for doing business in Europe and companies need to act now to be prepared.

Unfortunately, our latest Climate Change Scorecard indicates that the planet is not on track to meet the Paris agreement targets. Businesses urgently need to understand where and how their operations and supply chains are vulnerable to the physical risks of climate change. Equally important is that companies assess their transition risks so that their business models not only remain relevant in a lower-carbon future, but that they can seize the opportunities that will be presented.

As risk experts, we help customers protect against climate-related events and advise them on risk prevention and mitigation so they can adapt and be more resilient in the future.

Now turning to the very real risks identified for Europe by the report.

Cyber-Attacks were the report’s top threat in Europe. The digital world continues to evolve rapidly, more and more devices are connected to the internet and attackers are getting more organized, meaning the threat from external cyber-attacks is always increasing.

It’s important that customers trust the companies they do business with not to just provide them with the products and services they need, but to do so in a way that is responsible, ethical and protects their personal information.

We secure this trust though our Data Commitment: our promise to customers to keep their personal data safe, never sell it, never share it without being transparent and put it to work to better protect them and help them get the most out of life.

In EMEA, this means continuously investing in our cyber security capabilities and allocating significant resources to proposition development and artificial intelligence. Doing so allows us to better serve our customers and protect them against constantly evolving cyber risks.

Turning towards macroeconomic & geopolitical risks, Europe is currently experiencing the unpleasant twin peak of a natural slow-down in the economic cycle and a political move to the right. Unfortunately, one feeds the other: weak growth tends to result in a shift to the political right and more inward-looking economies. Factors like Brexit and the US-China trade war only serve to increase the chances of a market sell-off and heightened volatility across the region.

In such a scenario, it is likely that central banks will further loosen interest rates and increase asset purchases, driving prices higher, inflating today’s asset bubble further and causing discontent among parts of the population who feel savers are being penalized.

Our strong balance sheet, global/local business model and well diversified portfolio will help us navigate these headwinds and be there for our customers when they need us. Moving from a reactive to a preventative role will become increasingly important.

To sum up, economic, geopolitical and cyber risks undoubtedly pose an immediate threat to doing business in Europe. However, we all need to acknowledge that climate change is an existential risk to the world, including how we do business. It needs to be at the forefront of decisions because, if left ignored, the damages will be irreversible.

From Alison Martin, CEO EMEA and Bank Distribution, Zurich Insurance Group