Global risks and the role of European SMEs

Note: The views and conclusions in this op-ed are the author’s own.

A look at the worldwide risk landscape shows that SMEs are in a position to play an important role in averting global challenges

In January the World Economic Forum (WEF) released the “Global Risks Report 2024”. The study surveyed 1.490 experts across various sectors on the likely impacts of global risks in one, two, and ten years, as well as on how to mitigate these risks. The main outlook of the findings is negative. In the next two years 27% of respondents expect ‘Upheavals and elevated risk of global catastrophes‘, another 54% anticipate ‘Some instability, moderate risk of global catastrophes‘, and only 16% expect ‘Stable’ or ‘Calm‘ conditions. Ten-year forecasts predict even higher risk levels, including 17% of experts expecting the ‘Global catastrophic risks looming‘ and only 9% expecting low or negligible risk levels.

Facing a pivotal moment

In the immediate future, the top risks ‘most likely to present a material crisis on a global scale in 2024‘ are extreme weather, AI-generated misinformation and disinformation, societal and/or political polarization, cost-of-living crisis, and cyberattacks. Moreover, out of the top 20 most frequently predicted risks for 2024, nearly half of them are economic, including the economic downturn, skills or labour shortages, and disruptions to energy, food, and other critical supply chains.

SMEs have a stake in nearly all these risks, as they can be negatively affected, but more notably – because SMEs are important to help prevent the said risks, as they account for 99% of EU companies and two-thirds of employment. Several SMEs and startups support the green digital transformation of industries. Digital SMEs enhance cyber resilience by offering their cybersecurity tools and facilitating the digitalization of other businesses and local public services. Moreover, SMEs have a large role in fostering skills development and preventing shortages, for example by collaborating with universities and Vocational Education and Training (VET) providers. Building a healthy economy, with skilled small business owners and employees helps prevent the middle class from becoming more fragile – a process which is one of the drivers of societal and political polarization, where AI-generated misinformation and disinformation can reign free.

The risk landscape will evolve in the next years, but the risks forecasted for 2024 will not simply vanish and new risks will come to the forefront. The Global Risks Report 2024 highlights this shift in its two- and ten-year perspectives. SMEs will play a valuable role in addressing these emerging threats.

The way forward

Which risks are likely to have the most severe impact in years to come? In the short term (two years), misinformation and disinformation are seen as a top concern, followed by extreme weather events, societal polarization, cyber insecurity, and interstate armed conflict. A decade from now the top four most severe risks indicated are environmental. They are closely followed by largely digital threats – misinformation and disinformation, adverse outcomes of AI technologies, and cyber insecurity.

New risks emerge in both rankings e.g., lack of economic opportunity, involuntary migration, geoeconomic confrontation, and insufficient public infrastructure and services. Technological power concentration is a risk that rose in the rankings most dramatically, compared to previous the global risk survey. In 2024 technological power concentration ranked 17 places higher when experts were asked to indicate the most severe threats for the next two years. Overall, it is ranked as the 12th most likely impactful risk over both 2-year and 10-year windows, out of 34 risks researched.

To address the risks from AI, cyber insecurity, and technological power concentration, respondents mostly recommended national and local regulations, global treaties and agreements, research & development, and multi-stakeholder engagement. Furthermore, on economic risks, experts emphasized the importance of building resilient supply chains, social initiatives, and public-private partnerships. Digital SMEs serve a vital role both directly as stakeholders in these processes (governance, R&D, resilient supply chains, public-private partnerships, etc.), as well as indispensable sources of technical and “boots on the ground” expertise for governments and other actors.

Overall, the insights featured in the report very much reflect concerns raised by the DIGITAL SME community. Europe needs to drive a sustainable green and digital transition by building on its most innovative European companies, digital SMEs, to address the 10-year risk forecasts that are dominated by environmental and technological pitfalls. Overly concentrated technological power is quickly moving up in risk ranking. Local and international governance, R&D, and engagement with all stakeholders are recognized as the most promising ways forward to avoid that technological progress will only be shaped by the hands of a few players.

To avoid or minimize negative scenarios we cannot continue the “business-as-usual”.  Europe needs to take decisive action and leverage the strengths of its industrial base – a Digital New Deal – to make use of the untapped potential of European industry and SMEs in every region of Europe. It is not only a matter of prosperity but of European and global stability for years to come.