HEC Lausanne responds to the World Economic Forum’s (WEF) Global Risks Report 2022

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Following the publication of the World Economic Forum’s annual Global Risks Report 2022, HEC Lausanne highlight recent research that addresses some key threats identified in the report.

As the world emerges from the pandemic, the World Economic Forum (WEF) has published its latest Global Risks Report, identifying and evaluating the main risks facing the world over a ten year horizon. The report divides risks across five main categories: economic; environmental; geopolitical; societal; and technological, with the most immediate threats to the world over the next two years including climate action failure, the erosion of social cohesion, mental health issues, and digital inequality.

HEC Lausanne ensures that its research focuses on the key challenges affecting business and society. It is committed to helping leaders understand and meet these challenges in the real world, now and in the future. This commitment is also highlighted by the participation of HEC Lausanne academics in the Swiss National COVID-19 Science Task Force.

Here are some examples of research from our experts at HEC Lausanne that touch upon many of the risks featured in WEF’s Global Risks Report.

Low Emission Zones: good or bad? Urban air pollution is a hot topic. HEC Lausanne’s Virginie Lurkin (along with co-authors Julien Hambuckers at HEC Liege, and Tom van Woensel at Eindhoven University of Technology) has published important research on the controversial issue of Low Emission Zones (LEZs) in cities. Designed to reduce traffic emissions, LEZs are proving highly divisive, with claims and counterclaims about their merits. V. Lurkin’s contribution to the debate suggests that, in some circumstances, LEZs may actually do more harm than good, producing a net gain in pollution. It is a reminder for urban planners and policymakers of the need to understand user behavior in order to avoid unintended consequences.

The cost of digital inequality: Inequality is a thread running through several risk areas defined by the report, not least the inequalities arising from fractured and unequal access to digital networks and technology. But as economist Roxana Mihet notes, financial innovation is double edged. Potentially, financial technology could lower costs for poorer investors and boost their participation in the investment markets. In the US, though, fintech appears to have done the opposite. It has allowed the wealthy to monopolize the best financial information, lowering returns for poorer investors, squeezing them out of the market, and widening the wealth gap.

Globalization and conflict: Looking further into the future, environmental and geopolitical risks assume greater importance as threats in the mid-to long-term. Does globalization make conflict more likely? It’s a question tested by Dominic Rohner, our internationally recognized expert on political and development economics, with co-author Quentin Gallea, postdoctoral fellow and lecturer at HEC Lausanne. As the pandemic reveals the fragility of global supply chains, D. Rohner and his co-author take a timely look at the relationship between trade and conflict. They find that the booming trade exerts a calming effect on the world’s main waterway bottlenecks, a notorious location for conflict. However they also acknowledge that economic slowdowns may make the major powers less willing to keep container ships moving. To counter this D.Rohner and Q. Gallea suggest an increased role for organizations like the UN in securing the passage of maritime transport.

In the longer-term, climate action failure is seen as the most serious threat to the world as we emerge from the pandemic. Academics at HEC Lausanne are engaged in a variety of research that touches on these climate issues.

Steering a course to sustainability: As the world moves on from COP26, Dr Busra Gençer, former PhD at HEC Lausanne, and Prof. Ann van Ackere‘s research on the transition to green electricity generation highlights the role of the roadmap – the sequence of intermediate targets – in shaping the journey towards sustainable goals. While roadmaps do not affect whether or not the final target is reached, they are highly influential in determining how they are achieved. By manipulating the steps on the roadmap, policymakers can try to ensure their goals are met in the most efficient and cost-conscious way.

The ESG challenge: Companies will need to pay their part too. Research by Prof. Gaia Melloni and Janet Su, PhD at HEC Lausanne (and co-author Ariela Caglio at SDA Bocconi) emphasizes the challenge society faces in persuading companies to act sustainably and responsibly. This ongoing work explores the topical issue of how a firm’s disclosure on Environmental, Social, and Governance (ESG) initiatives impacts financial performance at different periods during the pandemic.

Even as the world continues its recovery from the COVID pandemic, the World Economic Forum’s Global Risks Report reminds us of the many other critical challenges we face over the next decade. It is at times like this the importance of business school research stands out. Research at HEC Lausanne tunes in to the key issues featured in the Global Risk report because these are the issues that business leaders are grappling with on a daily basis.

As Rafael Lalive, Vice-dean for Research at HEC Lausanne notes: “Business schools can make an important contribution to meeting the threats identified in the Global Risks report. At HEC Lausanne we want our research to have an impact in the real world, influencing theory and practice, and helping to create a more sustainable planet. It’s only by working together, with business schools, universities, and the wider research community, that we can solve these challenges.”