- Global risks overview
- The cost-of-living crisis
- Climate change
- The energy supply crisis
- The deepening food crisis
- Global health and well-being
The World Economic Forum 2023, at Davos, was focused on the world's most pressing global challenges and the potential for advancing innovative solutions.
In this blog post, we will shine a light on some of the most severe risks for the next decade and our abilities to tackle global issues for future resilience using simulation modeling.
Global risks overview
The Global Risks Report 2023, published by the World Economic Forum, examines how present and future global risks can interact with each other resulting in compounding impacts and unpredictable consequences.
The report explores interconnected environmental, geopolitical, and socioeconomic risks relating to the supply of and demand for natural resources including food, water, and energy.
The disruption of non-food supply chains, a debt crisis, and the weakening of human rights are also among the risks for 2023 with the greatest potential impact on a global scale.
The Global Risks Report outlined the most pressing global issues facing the world, including the cost-of-living crisis in the short term and the climate crisis in the long term.
The cost-of-living crisis
The participants of the World Economic Forum 2023 raised the important subject of the cost-of-living crisis. The cost of food and housing increased in 2022, primarily due to continued disruptions in the flows of energy and food.
Higher prices for food, energy, and housing led to a drop in real earnings. This could result in trade-offs in spending on necessities, lowering health and well-being for society as a whole.
Continued supply-chain disruptions may lead to inflation, particularly in food and energy. This could increase the risk of financial distress and a prolonged economic downturn.
Meanwhile, forecasting, planning, and the creation of mitigation strategies can avoid supply chain disruptions and increase robustness. Disruption resilience can be achieved with the help of supply chain visibility, analysis, and planning tools.
Dynamic simulation and analytical optimization are the two main technologies giving organizations the opportunity to tackle risk management in supply chains. These tools make it possible to see how new approaches assist in better meeting the fast-changing demands of today’s supply chains.
Climate change was one of the primary concerns discussed at Davos 2023. Speeding up the green energy transition should tackle humanity’s greatest challenge, which is climate change. The big topics around climate change this year are the decarbonization of industries and the energy transition.
If we learn the lessons of COVID-19, we can approach climate change more informed about the consequences of inaction.
The use of low-carbon systems, such as solar, wind, biomass, nuclear, and hydrogen, offering clean and secure energy is expected to grow. The International Energy Agency predicts that by 2027, the renewable power capacity will rise by 2,400 GW, which is an acceleration of 85% from the previous five years.
Investment in new technologies, including more sustainable fuel sources, is a particularly popular topic. Green hydrogen became a buzzword this year as it produces only water as a by-product and has clear potential. The demand for hydrogen is already increasing thanks to a significant boost in public and private investments, particularly in shipping, aviation, and heavy industry.
However, it requires precise calculations for plant design, logistics, market research, as well as a risk assessment of hydrogen production and transportation.
Simulation of green hydrogen supply chains enables managers to assess the feasibility of such projects from both the engineering and financial sides. Simulation models visualize processes of production and transportation, account for the projects’ economics, and allow executives to make more intelligent decisions according to business values. This contributes to the more widespread use of sustainable fuel sources.
The energy supply crisis
Renewable energy sources are extremely necessary, not only for mitigating the climate crisis, but for the energy crisis as well. Energy consumption and conservation were also hot topics last year and continue to be in 2023 due to high tariffs. Energy prices are estimated to remain 46% higher than average in 2023, relative to January 2022 projections.
Current pressures should result in a turning point, encouraging energy-importing countries to invest in “secure”, cleaner, and cheaper renewable energy sources. The global energy sector will be transformed in the coming decades from a predominantly fossil fuel-based sector to one increasingly dominated by renewables and other clean energy technologies.
Businesses that make key changes can maximize the sizeable opportunities to further the energy transition. AnyLogic simulation models help analyze the effects of using renewable energy sources and decentralized energy management, as well as optimize energy systems and find solutions to overcome the energy crisis.
The deepening food crisis
Food insecurity is largely interconnected with the climate crisis. Experts are already warning that more people will face hunger in 2023 than the previous years as food prices continue to grow.
Assuring food self-sufficiency and food security through green and low-cost agricultural production and food processing is essential for sustainable industrial development.
The changing environment brings new challenges for farmers. They need to adapt to survive economically. Transforming food production practices can solve food security issues by using digital and data-driven solutions to allow more informed decision-making.
For instance, simulation modeling could be used for optimizing drone operations for spraying fields. By using simulation for planning, farmers can efficiently apply drones for better crop yields. Another example of technology application in the agricultural sector is optimization of logistics operations. The simulation modeling enabled the manufacturer to determine cost-optimized supply chain configuration.
Global health and well-being
Healthcare remains a substantial topic to discuss and come up with new solutions for in 2023. The COVID-19 pandemic is a health crisis unlike any we’ve seen in our lifetimes. With the right recovery plan, we can stop the spread of COVID-19, eliminate health disparities, and possibly even prevent future pandemics.
There is also potential for healthcare to reap the advantages of technological advances and digital transformation that other sectors have embraced, such as augmenting capacity. Healthcare simulation can show capacity and resource utilization, help identify challenges, and effectively address emerging health risks.
Ensuring good health and well-being for all are essential for economies and societies to remain resilient in the face of future health, economic, and environmental challenges. Preventing the next pandemic and ensuring healthy futures requires addressing the environment as climate change itself is a major health risk. So, this leads to the conclusion that global challenges are closely interrelated and must be addressed in a comprehensive manner.
Countries and economies are troubled, in the face of massive disruption, by the challenges of building a resilient world in which everyone prospers.
As humanity today faces a growing set of risks, it’s time to try new approaches using such technologies as simulation to prepare for risks and create mitigation strategies. These actions could pave the road for a more positive and stable world with a stronger and prosperous shared future.
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