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The Pandemic in Perspective – building resilience to risk

The principal shortcomings in the response to COVID-19, and the emerging opportunities that can leave the world more resilient to future risk

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Hello and welcome to this podcast sponsored by Zurich Insurance Group. Individual countries and the multilateral system are continuing to wrestle with the fallout from the COVID-19 pandemic. In this podcast, we'll identify the principal shortcomings in the response to the crisis, and the emerging opportunities that can leave the world better prepared and more resilient to future risk. I'm Satwant Pandher and joining me today to discuss this are John Scott, Head of Sustainability Risk, and Peter Giger, Group Chief Risk Officer: both from Zurich Insurance Group. So, the World Economic Forum's annual Global Risks Report produced in collaboration with Zurich Insurance Group has just been published summarizing a year in which the theme of risk was the dominant story. John, tell us what are the report’s overarching findings and how do they differ from those of last year?

John

Well, it's hardly any surprise that in 2020, as the global pandemic with COVID-19 became a reality, that this year looks very different from previous years. And I think the COVID-19 crisis, what it's done is it's exposed fundamental shortcomings in preparedness for a pandemic. But not only that, it reflects other socio-economic and economic shortfalls in instability and inequality. So, this edition of the World Economic Forum’s Global Risks Report, which is actually the 16th edition, focuses pretty much on the impacts of these widening inequalities, and the social fragmentation, which is really creating barriers for people to advance themselves in the future. And in many cases these disparities in health outcomes, technology or opportunities in the workforce, are just a direct result of the dynamics of the pandemic. Existing societal divisions have widened, economic structures and weak safety nets have been challenged. And whether the gaps can be narrowed will depend on the actions taken in the wake of COVID-19 to rebuild with a view to a clean, green and inclusive future. And actions on economic inequalities and social fragmentation may further stall action taken to mitigate climate change. Of course, that is still the greatest threat to humanity in the next decade.

Satwant

And even with the fairly recent experience of the Ebola crisis, the spread of COVID-19 showed that the world was not as prepared for a pandemic as expected. Peter, what were the biggest gaps between theory and practice?

Peter

I wouldn't necessarily call it a gap between theory and practice, I think it was human behavior taking over. You know, it's very good for our mental health that we don't worry too much about the daily threats in our lives, but it's not good risk management for the society. And that's what actually happened because the writing was on the wall. I mean, in 2006, the Risks Report actually said, and I quote, “A lethal flu, its spread facilitated by global travel patterns and uncontained by insufficient warning mechanisms, would present an acute threat.” That is the Risks Report from 2006. Even in 2016 the edition stressed that the Ebola crisis would not be the last serious epidemic. But then because it never really happened on a pandemic level in this generation, it was ignored. It was ignored pretty much until it happened. Even when it happened, a lot of people were not believing that it would actually happen. And, the repercussions of the measures taken were totally surprising to large parts of the society.

So I think there is a couple of learnings that we can take from that. One is that risk mitigation would have been a lot cheaper than the actual fighting of the crisis. People find it much harder to finance then, than to fight the flop. For example, the fact that hospitals, the personal protection equipment purchases were just in time, actually goes a long way to show that the system was not built for resilience, it was built for, I don't know, minimized costs, probably. There was a lack of information sharing and collection.

So there was no preparation whatsoever for the event. And I think the lesson to be learned is: let's prepare for the unexpected. Let's have the system ready to deal with things we have not on our radar, because it's human nature to put them off the radar.

Satwant

And Peter, is there any common ground between the risks posed by pandemics and those of other global risks such as climate change or cyber attacks?

Peter

There is and there isn't, especially with climate change, I think it's a fundamentally different structure. Humans react pretty well to what I call the ‘adrenalin shock, type risks. So I mean, it's like, something bad happens, we put our act together, we focus, we manage and we move on. That's the pandemic type of thing. Whereas climate change, by the time the risk materializes, it will be pretty much too late because it's a systems issue and systems fall over cliffs. It's not a continuous deterioration, and it's not easily reversible. So that's why I think the reaction to COVID will not be a good guide to manage climate change. Absolutely not.

Satwant

OK, and John, I'm going to come back to you, and what are some of the early lessons we can draw in terms of government decision making, health system capabilities and other critical response areas?

So first off, government decision making: I think governments that had prepared beforehand and had pandemic high perhaps on their risk registers were more prepared to appreciate the differences in the different dimensions of the pandemic risk. And there's a key point here about the science telling you one thing, and the politicians trying to make some decisions with big ramifications on the economy and society more broadly. I think even with that kind of preparation some countries just failed to apply the lessons learned in other countries and in fact, lost a lot of valuable time to build capacity, understand the vulnerabilities and develop contingencies. The other really important area of insight I think is around public communication. I think governments that were more successful in managing the COVID crisis in general, were those who managed to sustain popular confidence. Typically, through regular and consistent public reporting, transparency about the limits of their knowledge at any given time, and visible alignment between politicians and the experts in key areas such as epidemiology and behavioral science. The other really important factor and I can't stress this enough, really, because it's something that we've raised in previous Global Risks Reports is health system capabilities. Many countries are facing a huge demographic shift with older populations, with the chronic diseases of old age, which are a huge strain on healthcare systems. So when it comes to a major infectious disease event, like a pandemic, many countries are just not prepared with healthcare systems.

But having said that, extraordinary efforts were made in many countries to manage at least the first wave of the pandemic. For example, by delaying elective care, reallocating medical professionals, and in fact, building entirely new field hospitals, temporary hospitals. And two last points: I think national lockdowns did have some successes, shielding vulnerable individuals, for example. But there was terrible disruption of schooling, and obviously with the economy in a wide range of impacts on countries of all income levels. And that brings me to my last point about financial assistance to the vulnerable. The immediate response from developed countries - both in terms of monetary and fiscal policies - was largely effective in mitigating the immediate economic impacts. But the challenge is the cost of increasing indebtedness – both personal and public – and developed economies are often faced with this very difficult choice between a lockdown with little or no financial assistance for those who have lost their livelihoods, and keeping their economies open, but also the risk of the rapid spread of the virus and overwhelmed healthcare systems.

Peter

And in fact may I add there, we're already building the next risk. The vast public support has basically brought numbers of bankruptcy below expected levels in 2020, which is a very counterintuitive result, and suggests that somewhere around the corner, a wave of bankruptcies is waiting for us.

Satwant

And Peter, what are the main opportunities arising from the pandemic in terms of leveraging the attention and awareness of decision makers to risk management in general?

Peter

I think it's always the same lesson the future is unknown, and so you have to prepare for the unknown.
And if we go and perfectly prepare for the next pandemic, I think we fail, because the next crisis is going to be triggered likely by something else that we don't have on our radar.
Many of the supply chains, many of our systems were optimized to the nth degree, and with a little interruption basically, were at risk of collapsing. And I think for me, that's the key lesson here is that we need to allow more slack so we can deal with the unexpected, even if it's not perfectly optimized at the very moment.

Satwant

One of the themes to have emerged from the COVID-19 crisis is the importance of public-private partnerships on risk preparedness. John, could you identify some of the areas for future collaboration?

John

Yes, I think what's been clear from this crisis is that, in particular areas, public-private partnerships have worked really well. One of the obvious ones is in the development of the exit strategy. It is incredible when you think about it, I mean, normally, it takes between a decade or two decades to develop an effective vaccine. In the last year, a number of different vaccine programs have produce viable vaccines just in a year. I think that's been a great example of the innovation that can be unleashed when governments engage with the private sector to respond to a large-scale challenge like the pandemic. I think the broader scope as Peter said of other global risks there’re probably not prescriptive lessons we can learn specifically from the pandemic, but I think what is clear is that

it doesn't matter whether it's a healthcare risk, or whether it's climate change, or whether it's a technological risk or indeed a geopolitical risk, but it is really important that we support these multilateral organizations, and make sure that we have the right expertise that's built into the right policies, or the individual nation level, to create the right sort of mitigation and resilience to global risks.

Satwant

John, Peter, thank you for joining me today, and to our listeners, check out the other related content at Biggerpicture.ft.com

Related Links:

Global Risks Report 2021 (PDF)

Global Risks Report 2021 Executive Summary (PDF)

Learn more on the Zurich Knowledge Hub