Perspectives Podcast Episode 28: Global Risks Report 2023

Jennifer Beaudry 

Welcome to Zurich Canada's perspectives podcast, where we stay connected with our partners and employees, through conversations with guests who are experts in their fields. We deliver market insights and thought leadership to bring information relevant to you, our listeners. I'm Jenn Beaudry, Head of Communications at Zurich Canada, and your host. Today we're joined by Zurich Canada's chief risk officer, Sonia Kundi. We will explore the 2023 World Economic Forum's Global Risk Report. During today's discussion, we'll break down the key global findings of the report, both long and short term. Then we'll turn our attention to Canada and spend some time discussing the top concerns for our country. I'm excited for this conversation. Sonia, welcome to the podcast.

 

Sonia Kundi

Thanks, Jenn. Happy to be here.

 

Jennifer Beaudry

So, Sonia, tell us a bit about yourself. How did you choose a career in risk? Did you find it? Or did it find you?

 

Sonia Kundi 

I think like most people in the insurance industry, insurance found me. And then I found risk management through insurance. I started my career in the insurance industry about 20 years ago. And I was given the opportunity to go to Dublin, Ireland and work there with the newly appointed chief risk officer in rolling out the new risk management framework. This was a time when risk was relatively new. So, it was quite exciting. And I thoroughly enjoyed it and pretty much been in risk management ever since.

 

Jennifer Beaudry

Before we dive in, let's set the stage a little bit, you gave us some background about yourself. So maybe give us some background about the report itself. What is the global risk report?

 

Sonia Kundi

Sure. The Global Risks report, it's an annual report that's produced by the World Economic Forum, and Zurich is one of the strategic partners that work from that report with them. I'd say it's a must read for anyone that works in risk management, I'd encourage people to, at a minimum, read the executive summary. And then they can use the wider report to really dive into the areas that are most relevant to them. It really gives businesses the opportunity to get an understanding of today's critical risks and help them prepare for the future.

 

Jennifer Beaudry

As I said at the start, we're going to take a look at some of the wider global findings in this year's report and then kind of narrow in on Canada. At a high level, what are the key findings of this year's report globally?

 

Sonia Kundi

In the executive summary, it talks about how the world is facing a set of risks that feel both new and familiar. We've seen the return of older risks such as inflation, cost of living crises, trade war, widespread social unrest, and geopolitical confrontation.

 

Jennifer Beaudry

A lot to unpack in the reports. Outside of the current risk landscape, what are the top risks we expect over the long term? Let's say for the next 10 years, for instance.

 

Sonia Kundi

The next decade will be characterized by climate, environmental, and also societal crises, driven by underlying geopolitical and economic trends. In the longer term, or the medium term, the threat posed by climate change is a top risk on the 10-year horizon. Biodiversity loss and ecosystem collapse is viewed as one of the fastest accelerating global risks over the next decade, and failure of climate mitigation and climate adaptation have the longest-term concerns.

 

Jennifer Beaudry

What are the short-term risks? Let's talk about maybe over the next two years.

 

Sonia Kundi 

The report talks a lot about the cost-of-living crises, and they have it ranked as the most severe global risk over the next two years. But it really is seen as more of a short-term threat, conflicts and geo economic tensions have triggered a series of deeply interconnected global risks, which include energy and food supply crunches, and significant increases in the cost of living. When basics like food and energy become more expensive, that can create civil unrest and political instability. The report states increases in fuel prices alone led to protest in an estimated 92 countries. Commodity costs and supply chain disruptions remain key challenges in 2023. And businesses really are going to have to navigate that. Companies need to understand their financial situation in different economic scenarios. Nobody knows what's going to happen. Developing different scenarios or simulations will help them prepare for different outcomes.

 

Jennifer Beaudry

When we think about some of the most pressing issues of our time, like climate change, do the current crises, we're facing risk undermining efforts to tackle these longer-term issues?

 

Sonia Kundi 

They do. I mean, the report highlights that balancing short-and long-term term risks poses a particular challenge. The most obvious example being using more dirty energy in response to immediate energy shortages, which further jeopardizes the net zero environmental commitments that were already in doubt.

 

Jennifer Beaudry 

When we look back on the last few years, what are the top lessons we've learned when we think about risk management?

 

Sonia Kundi

Well, this decade really has demonstrated the way crises are deeply interconnected. The pandemic and the Ukraine conflict are great examples of this. The nature of global risks has created a far greater need for risk management practices to factor in this interdependency. When we plan for one risk, we must plan for all of its possible dependencies. It's vital that businesses are proactive in identifying key risks, they need to understand the underlying vulnerabilities, the triggers and the likely consequences of the risk. This will enable them to build resilience to potential crises before they emerge.

 

Jennifer Beaudry

Up to now we've talked about the global risks and the global impact. When we think of how these global risks translate to the Canadian market, what top concerns are there for us regionally? What should we be concerned about?

 

Sonia Kundi

So, the report does actually break down top concerns by country. Concerns to Canada include that crisis, of course inflation. And as mentioned earlier, the failure of climate change adaption. Climate change adaption continues to be a top concern, as Canadian communities continue to grapple with extreme weather events. The Canadian insurance industry are actively collaborating on the need for increased climate resiliency efforts. At Zurich, Canada, alongside industry colleagues, we've joined forces with environmental nonprofit, Ducks Unlimited Canada to form Nature Force. Nature Force represents a new paradigm in watershed resiliency, with an unparalleled insurance industry investment in natural infrastructure.

 

Jennifer Beaudry 

Thanks, Sonia. That really is an important industry wide initiative. It's clear from our discussion today that the way we approach risk continues to grow and evolve. For the future risk manager, any advice on preparing for the interconnected effects of these issues?

 

Sonia Kundi 

To assess risks holistically, risk managers really need to work with people across the organization. That way they can really fully understand the risks of business cases, for example, is there at Zurich Canada we have a cross functional emerging risk group. We have people from different areas of the business that bring a different perspective on the risks that we discussed, we get to understand how it could impact I don't know the claims environment or the underwriting environment. And we also look at the potential impact on our customers and the societies that we do business in. This enables us to understand how we can help our customers either build resiliency, or to provide them with new innovative insurance solutions.

 

Jennifer Beaudry

I knew this was going to be a fascinating conversation. Thank you so much for joining us on you

 

Sonia Kundi 

Thanks for having me, Jenn.

 

Jennifer Beaudry

Thank you for tuning into our discussion today. You can find the podcast and more information about the global risk report on the Zurich Canada website. You can also email us at Zurich.communicationscanada@zurich.com with your ideas, comments or feedback. We appreciate your comments and look forward to putting together more meaningful content in the future. Thank you and take good care.