The Global Risk Landscape: Turbulence is the New Normal!
As the world moved into the second quarter of the 21st century, the prevailing mood feels very different from the sense of optimism apparent at the turn of the Millennium. In thinking about investment potential and the day-to-day whirl of corporate strategies, results and returns, it is sometimes easy to overlook the macro headwinds that buffet and throw off course the best laid plans.
WHITEFRIARS in general seeks to present attractive investment ideas, where we see value, disciplined capital allocation and strong cashflows, but it is also wise every now and then to consider global risk scenarios, which can have a sudden and dramatic impact on carefully researched strategies. One tool open to investors to explore this, is the respected Global Risks Report1, published by the World Economic Forum (WEF) annually, and now in its 21st iteration.
The WEF may have gone through its own peculiar turmoil of late, but it can command 1,300 of the best economic, strategic and policy-based minds working on the planet. To that effect, the Global Risks Report, presents a balanced and well-regarded peek into the anticipated risk environment investors and others may be subject to. The 21st report for 2026 leads thinking into the second half of a very turbulent decade, and as the world moves into the second quarter of the 21st century. Its value is in presenting thinking across three timeframes; the immediate, the short to mid-term (two years to 2028), and over the long-term across the next decade. Unsurprisingly, short and long-term risks tend to correlate only partially, however, many of these immediate, presumed impacts, have the potential to exert dramatic, possibly catastrophic, long-term effects.
The Global Risks Report confirms a dismaying trend that the accepted post-war consensus is breaking down with ‘a new competitive order taking shape’ forged through ‘kinetic wars, the deployment of economic weapons for strategic advantage and growing [societal] fragmentation’. It notes that as this new pervading reality takes hold, rules and institutions that have long underpinned stability are ‘increasingly deadlocked or ineffective’. German policy and economic paralysis, French riots, Spanish protests and the UK’s own peculiar malaise speaks to these trends, as does the inability of mature economies to set budgets, or the UN and NATO to galvanise relevance. This is a sobering and worrying time. It is unsurprising with this outlook, that the greatest risk the WEF identifies is ‘uncertainty’ over the short, medium and long-term, with the retreat from multilateral agreements, and a multi-polar competitive landscape of ‘power blocks’ succeeding where confrontation replaces multi-lateral co-operation.
Unsurprisingly, the overarching trend is one of escalating turbulence and the potential for catastrophe which 42% of contributors deemed likely in the short-term. With upwards of 50 recognised armed conflicts in the world today, of which 14-20 can be assessed as ‘major wars’2 this supports a pessimistic outlook given the uptick in inter-state conflict, and the re-emergence of ‘spheres of influence’ led by mutually hostile power belligerents. Geo-economic and state-based armed conflict were the most material crises identified in the short-term (32%) with extreme weather events coming a distant third at 8%.
Perhaps of interest to investors however is that the long-term view of environmental risks remains strong. Over the long-term window, contributors still see the impacts of climate change, extreme weather and biodiversity loss as more likely than geo-economic or armed conflict. The research showed however, that despite the long-term impacts of climate breakdown, environmental concerns overall are being increasingly deprioritized. One can see this in regulators pulling back from mandating disclosure regimes for business here, in Europe and the US. Of course, the breakdown in multilateral institutions and structures makes global co-operation on the scale of the Paris Agreement seem further away than ever, with climate mitigation left to single actors or ‘coalitions of the willing’.
Of 33 risks considered by contributors, asked to assess severity of impact over a two-and-10-year window, the top three long-term risks were viewed as environmental; however, the highest short-term climate related risk was only ranked #4, behind geo-economic confrontation, misinformation and societal polarisation. Armed conflict is elevated in the short-term (#5) but de-prioritised over the decade long window to #12, which is grounds for hope, perhaps, that all out global conflict can be avoided. General economic downturns do not feature as an elevated risk in either category suggesting those surveyed view global economic resilience, despite the mercurial protectionist landscape and supply chain disruption as being systemically robust.
The Global Risks Report, taken as read, is pessimistic in the short-term on the effects of conflict and economic warfare. Over the long-term climate change and its impacts are widely seen as the most injurious to global systems. This perhaps confirms, if confirmation were needed, that climate change is a put-off-until-tomorrow kind of challenge in the face of brutal armed conflict, conflict by economic means and a break down in multi-lateral co-operation. The implied paradox seems to be that if there is no major armed catastrophe within a decade, we can get on with worrying about climate change.
For investors, and anyone familiar with the almost daily volatility experienced in markets, this presents a very challenging environment in knowing where to allocate capital. Wars in the Middle East have made small to medium oil explorers attractive, but every fall in the price of oil results in a sell-off. Similarly, investors have piled into defence stocks in anticipation of a vast rearmament program, only to find governments prevaricating and side-lining massive upticks in defence spending, sending defence stocks lower.
Asked for their overall outlook ranked from ‘calm’ to ‘stormy’, 50% of contributors chose either turbulent or stormy for the short-to-medium term, but this rose to 57% projecting forward to 20363. Looking at the risk landscape overall, there will be few safe havens for investors. Even defensive stocks such as food retailers are likely to be hit with mounting cost inflation as just-in-time supply chains break down. The fractured times we are going through, appear to have no obvious solution; there is only likely to be restless turbulence ahead, through which the investors must navigate as best they can.
Notes:
1 The main source for the article is the 102-page World Economic Forum ‘Global Risks Report 2026’ WEF_Global_Risks_Report_2026.pdf
2 Assessment of global conflict can be assessed in different ways; this article uses statistics at www.armedconflict.org
3 WEF Page 21; 1% of respondents chose a ‘calm’ outlook for both the medium and long-term, whilst 49% chose ‘stable/unsettled for the medium term and 42% for the long-term. Pessimism increases strongly over the long-term to 57% viewing the outlook to be turbulent or stormy.
