Asia Pacific: Economic risks remain top-of-mind with extreme weather, natural disasters and talent shortage concerns

Economic downturns, such as recessions and stagnation, alongside the concern for the increasing frequency of weather events, natural disasters and labour and talent shortages, remain the most pressing concerns for businesses across the Asia Pacific (APAC) region over the next two years.

This forecast is according to the Executive Opinion Survey, conducted by the World Economic Forum and released by its strategic partners – Marsh McLennan, the world’s leading professional services firm in the areas of risk, strategy and people and Zurich Insurance Group (Zurich), a leading global multi-line insurer and provider of resilience services.

The annual survey reveals the top five near-term risks identified by more than 11,000 business leaders from 121 countries. These findings highlight the ongoing challenges faced by businesses amid a volatile and rapidly evolving economic landscape.

Zurich Insurance Group chief risk officer APAC Sid Medappa said in a statement, “The APAC region continues to face a dynamic risk environment, with uncertainty around the economy leading the agenda. These challenges are compounded by escalating climate risks, socioeconomic disparities, talent shortages and geo-economic tensions.

“They outrank the risks around adverse outcomes from the usage AI technologies and cyber risk which has been a concern for several years and remain key risks in the region.

“Businesses in the region need to adopt a proactive, holistic approach to risk management to safeguard their operations and target opportunities for sustainable growth in an increasingly unpredictable global environment.”

Economic risks persist and labour concerns intensify

For the second consecutive year, the possibility of an economic downturn tops the list of risks in most sub-regions, including Oceania, Southeastern Asia and Southern Asia.

However, in Eastern Asia, labour and talent shortages have overtaken economic concerns as the top risk, reflecting the region’s growing struggles to sustain a skilled workforce. Labour and talent shortages, initially identified as a top five risk last year, have risen in prominence. The issue is particularly acute in Eastern Asia, where the demand for IT and digital skills outpaces supply. Inflation also continues to be a dominant concern, exerting pressure on both business costs and consumer spending.

Oceania and Southeastern Asia are among the hardest hit by rising prices, amplifying the challenge of sustaining growth in these regions.

Climate, socioeconomic, and geo-economic challenges add complexity

The APAC region also faces a confluence of interconnected challenges spanning climate risks, socioeconomic disparities and geo-economic tensions, which collectively challenge business resilience.

Climate risks: Extreme weather events, including floods and heatwaves, remain a significant threat, particularly in Oceania and Eastern Asia. The growing frequency and intensity of these events emphasise the need for robust climate adaptation and mitigation.

Socioeconomic disparities: In Southern Asia, deep-rooted poverty and wealth and income inequality, which are also emerging in Oceania and Southeastern Asia, highlight persistent socioeconomic challenges. These issues are exacerbated by unemployment and a lack of economic opportunities in Southern and Southeastern Asia.

Geo-economic tensions: Eastern Asia continues to grapple with the fallout from geo-economic confrontation, including sanctions, tariffs, and investment screening, and reflect heightened trade tensions between major economies, which disrupt supply chains and investment flows. Addressing these multifaceted risks requires a coordinated and strategic approach. Investments in climate resilience, workforce development and inclusive socioeconomic policies are crucial. Additionally, fostering economic cooperation across the region can help mitigate the cascading effects of global uncertainty, ensuring businesses can adapt and thrive in an increasingly volatile world.