In January the Global Risks Report 2019 was published by the World Economic Forum, in partnership with Zurich. It identifies some key challenges and risks facing the world in the year ahead.
Local authorities don’t operate in a vacuum, and many of the major challenges and future shocks identified in the report should be high on the risk management and contingency agendas for chief executives in the year ahead. But what are these major challenges?
This year’s report identifies extreme weather events as the most likely global risk in 2019. Without a reduction in greenhouse gas emissions, temperatures could rise by as much as 5°C by the end of this century.
For the UK, the biggest weather-related risk is likely to be severe flood events. While flood defences and management are already high on the agenda for local authorities, is the planning for unforeseen events rigorous enough?
A huge number of questions need answering, from what rising water tables could mean for housebuilding plans to whether there is quick access to funds inthe event of an emergency.
On the economic side, slow growth remains a significant concern across the globe. The Global Risks Report 2019 references the latest International Monetary Fund forecasts, which suggest growth has peaked, and which point “to a gradual slowdown over the next few years”.
In the UK slow economic growth has led to a decade-long squeeze on public spending. Many local authorities have responded to austerity measures by exploring commercial opportunities and partnering with third-party providers to deliver services.
However, it is vital they are clear about what they are getting into. As we saw with the collapse of Carillion, when outsourcing goes wrong the consequences can be severe.
Directly linked to the global economic downturn are mounting personal debt piles. Nearly half (48%) of respondents to the Global Risks Report 2019 expect debt defaults (public or private) to be a major risk this year.
Personal debt has been a particularly big talking point in the ongoing universal credit debate in the UK, with bodies like Citizens Advice warning that the six-week waiting period could exacerbate debt problems, particularly rent arrears. The shortage of affordable housing is another challenge familiar to local authorities, and one directly contributing to personal debt in many circumstances.
Rising personal debt will inevitably lead to increasing pressure on local authorities, particularly when it comes to adult social care. Is enough being saved in pensions? How will the cost of care be met as populations get older and savings dwindle?
On the technology side, concerns around data fraud and cyber-attacks feature prominently in the report.
Roughly two-thirds of respondents expect risks related to identity theft to increase in 2019, while loss of privacy is a concern for three-fifths. There is also now increasing dependence on artificial intelligence (AI), robotics and sensor-driven technologies powered by the internet of things.
From robots in social care to customer service chatbots, such technologies offer huge potential for the public sector, but they also present new risks that must be understood and carefully managed.
There are several questions. How will privacy be affected? How will personal data be secured? And who will be held accountable for the decisions made by an AI program?
Technological changes are also influencing wellbeing. The Global Risks Report 2019 cites a recent study that identifies technology as a major cause of loneliness and social isolation in the UK.
This is a challenge exacerbated by demographic shifts. The proportion of single-person households rose from 17% in the 1960s to 31% in 2011. The report even questions whether urbanisation and weakening family bonds are linked to rates of mental health problems in higherincome societies.
Whatever the cause, increasing rates of mental ill-health and social isolation could add to the pressure on local authorities.
As the Global Risks Report 2019 makes plain, the world is facing a growing number of complex and interconnected challenges, to which local authorities are not immune. Councils will need to develop innovative solutions and have a clear idea of how best to use their resources in the years to come.
At Zurich, we are here to help local authorities as they plan for the challenges ahead. We are constantly looking at ways we can tailor our products and services to meet their changing needs, from employing more underwriters with commercial expertise, to developing new policy wordings that better reflect the evolving public sector risk landscape.
Rod Penman, head of public services, Zurich Municipal
Column sponsored and supplied by Zurich Municipal