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A Virtual Davos: World Economic Forum Risk Report 2022

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In this year’s World Economic Forum’s (WEF) Risk Report, cyber threats are considered be one of the top five risks facing organisations and governments over the next two to five years; in addition, cyber threats among the top-10 risks that have worsened since the start of the pandemic.

Separately, and even more importantly, the report highlights the growing threat of delayed or in-action to climate change, expertly termed, ‘Climate Action Failure’ and also the sudden arrival and increasing risk posed by ‘Social Cohesion Erosion’, as well as ‘Infectious Diseases’ and ‘Debt Crises’.

The Annual Global Risks Report 2022 (WEF Risk Report) was published on 11th January 2022. The WEF Risk Report aims is to examine risks across five categories: economic, environmental, geopolitical, societal and technological. The WEF Risk Report gathers insights from 1,000 experts and leaders and the views of over 12,000 country-level leaders who identified critical short-term risks to their 124 countries.

The WEF Risk Report is, as is traditionally the case, released before the live ‘Davos Agenda 2022’, which is held in January each year. This year, given the current, ongoing pandemic and threat posed by climate change (and carbon emissions), the Davos Agenda 2022 is currently being held virtually on 17-21 January 2022.

Cross borders cyber-attacks (growing digital dependency)

Growing digital dependency, especially since the COVID-19 pandemic, has intensified cyber risks. During the pandemic, organisations have boosted their digitalization as workers have mostly been working from home – by way of remote working (or otherwise as part of the distributed workplace). This now poses the challenge of how businesses, education, healthcare and the broader economy can successfully tackle hybrid working, to regain, achieve and maintain social cohesion (or sense of belonging or community). This has led to the creation of virtual digital video conferencing and communication platforms and technological devices facilitating this change and, therefore, has increased individual’s exposure to cyberthreats. It has been determined that since 2020 ransomware and malware have increased by 435 % and 358%, respectively.

Moreover, more aggressive attack methods have been used with the help of sophisticated cyber tools and more sensitive information from victims. The WEF Risk Report states that “cybersecurity threats are growing and are outpacing societies’ ability to effectively prevent or respond to them”.

Cybersecurity failure ranks as the top-5 risk in Europe, East Asia and the Pacific while Great Britain, Ireland, Australia and New Zealand have ranked it as their number one risk.

 The consequences of this growing lack of digital safety is believed to:

  • entail higher costs for companies, especially small and medium-sized companies that spend around 4 % of their operational budgets on security whereas larger companies usually spend 1 % to 2 %.
  • increase risks such as disinformation, fraud and impact public trust in digital systems
  • lead to more severe and broadly impactful attacks
  • deteriorate cooperation between states if government continues to follow unilateral paths to control risks. Tensions between countries will grow turning cyber security into a “wedge for divergence” rather than cooperation among member states.

Philip James, a Partner in Eversheds Sutherland’s Global Privacy, Data & Cybersecurity Group comments:

Even though Russia’s FSB (the equivalent of the US FBI) recently announced the arrest of the ransomware, hacker group, known as REvil (see here for the official press release), the threat of cyber risk continues to grow in a digitally disintermediated, virtual world. The REvil arrest does highlight the importance of political pressure and diplomacy (as between, in this case, the US, Russia and the Ukraine). 

Alongside this, the ongoing transition to the ‘metaverse’ (whilst presenting many exciting opportunities) does bring with it the potential for a greater risk of fraud and synthetic or fake IDs and the use of deep-fakes."

Growing inequality between those who have access to digital services and those who do not

Around 40% of the world’s population is not yet connected to the internet. These individuals are already facing inequalities in digital security which will extend with internet 3.0 and the metaverse. A recent study has found out that low-income residents of San Francisco are more likely that wealthier residents to be cybercrime victims.

Moreover, the pandemic’s induced shift to work from home has led to large investments in digital technology and moves towards digitalization in some countries, but other countries could remain stuck in a pre-pandemic “analogue economy”. Digital inequality is a significant short-term risk in Latin America and Sub-Saharan Africa, two continents expected to have the slowest growth in 2022, as well as in other low-income countries.

Developing countries will have limited resources to enhance cyber defences against critical infrastructure breaches or cyber regulations to protect data and privacy. The WEF Risk Report recognises that “there is a risk that concerns over cybersecurity could further hamper attempts to promote rapid and inclusive digitisation”.

Climate Change Failure

Climate change continues to be perceived as the gravest threat to humanity. GRPS respondents rate ‘Climate Action failure’ as the risk with potential to inflict the most damage at a global scale over the next decade. However, EOS results hint at divergent senses of urgency between regions and countries. “Climate Action Failure” ranks 2nd as a short-term risk in the United States but 23rd in China — the two countries that are the world’s largest CO2 emitters. In addition to its 2nd place rank in the United States, it ranks among the top 10 short-term risks in 11 other G20 economies.

The divergence of views and priority given to the importance of climate change and achieving carbon-zero omissions is concerning. Eversheds Sutherlands’ Environmental, Social & Governance Group (ESG) is keen to support organisations on how it can assist businesses to support and prevent climate change failure. Contact a member of our Clean Energy Group, if you’d like to know how we can help tackle and work together to address the issues posed by rising carbon emissions and transition to clean energy.

Opportunities in space could be constrained by friction

In the last few years, an increased activity in the space has emerged. This greater number of actors operating in space “could generate frictions if space exploration and exploitation are not responsibly managed”. It could lead to a “higher risk of collisions” and “proliferation of space debris and impact the orbits that host infrastructure for key systems on Earth, damage valuable space equipment or spark international tensions”. It could also have environmental impacts raising the costs of public goods such as weather monitoring and climate change surveillance.

The WEF is calling for:

  • multi-stakeholders international dialogues that could help strengthen links between actors operating in the digitalized security world
  • cooperation between organizations to develop rules of behaviour in cyber space and best practices in security that can be shared across industries and economies.
  • Initiatives should focus on emerging technologies such as blockchain, quantum, artificial intelligence and the metaverse.

For further details or queries regarding the issues raised in the WEF Risk Report, please contact the individuals listed below or the relevant member of our Global Privacy & Cybersecurity or Environmental, Social & Governance Groups.