Davos Obsession With ‘Polycrisis’ May Seem Remote, But Corporate Boards Should Take Notice

The phenomenon of “Polycrisis” has now entered the corporate risk lexicon thanks to recent dialogue at the World Economic Forum’s Davos meeting. Prompted by the current combination of world-wide emergencies, its usage serves an endorsement for the continuing globalization of corporate governance, for companies across industries and institutional focus. And it’s a concept that’s picking up steam in the public conversation on risk.

“Polycrisis” is actually not a new term, coined solely by Davos glitterati to enliven their current gathering. Rather, it has limited if long-standing recognition within the economic, political and social scientist communities, as a series of interwoven and overlapping global crises that defy reduction to a single cause. It is grounded in the perspective that these are risks that are best understood holistically; i.e., that to concentrate only on a single crisis risks ignoring the fundamental interconnectivity of the crisis environment.

The Davos endorsement of “polycrisis” follows an uptick in public reference to the concept. For example, the Columbia University historian Adam Tooze refers to polycrisis as not simply a situation where institutions and economies face multiple crises, but rather one “where the whole is even more dangerous than the sum of the parts.” Former Treasury Secretary and Harvard President Larry Summers recently observed that “I can remember previous moments of equal or even greater gravity for the world economy, but I cannot remember moments when there were as many separate aspects and as many cross-currents as there are right now.”

The Davos crowd has applied “polycrisis” to describe what it perceives to be the interlocking risks associated with the global economic slowdowns and rising inflation, climate change, and the war in Ukraine. Other global risks cited as potentially adding to the polycrisis include a renewed pandemic, the hunger crisis, nuclear proliferation and continuing threats to democratic governments.

The World Economic Forum’s Global Risk Report for 2023 echoes this concern, suggesting that the cascading global crises will not fade from prominence in the near future, and calling for a collective leadership response on a global basis. And a leading risk thought leader is encouraging greater public-private collaboration on mitigating global risks: “It has to be governments, it has to be business, it has to be the finance sector to work together to really address these complex and systemic issues.”

And that is where the concept of polycrisis meets head-on with the corporate governance agenda. No matter whether it’s a board of a large multinational corporation or a smaller domestic-only enterprise; the risks perceived by the polycrisis proponents are likely at some point affect all organizations and their respective business models. It is difficult to perceive how boards can pursue their strategic direction without some acknowledgment of the larger, collective, consequences of real-world threats such as biodiversity loss, ecosystem collapse, trade wars and armed conflict between nations.

Bets Lillo, of TCU’s Neeley School of Business, views polycrisis as “an elegant way to define where we are right now.” Using the integral importance of supply chains as a reference, Lillo sees the Davos meeting as an opportunity for more thoughtful boardroom discussion on global interdependency.

But that’s going to be a very tough message for corporate boards already struggling to meet front-burner issues such as inflation, recession, job participation levels, workplace safety, regulatory enforcement and executive retention, to name a few. CEOs are understandably loathe to allocate precious board/management interaction to issues that are not clearly visible through the front window, and especially where they’re occurring in distant places. And that’s not to mention the efforts that boards are already contributing through their ESG-related focus on risks which are grounded principally in “whole world” environmental, social, health and cultural issues.

But the emphasis on polycrisis calls on boards to not only look more broadly on global risks that might affect the company’s business, but also to look at them in a different way. The fundamental governance message of polycrisis is to examine global risks not necessarily as a series of individual crises, but rather for their potential to converge or intersect, with amplified impact. And this type of examination requires boards to increase their understanding of how global events can have credible domestic-even “main street”- implications for their company’s long term feasibility.

The World Economic Forum’s annual Davos meetings have long been teased as unserious; i.e., more of a celebrity event than a substantive gathering of worldwide political and business leaders. And this year’s meeting is notable for the absence of heads of state; as The New York Times NYT describes it, the meeting has become “more and more of a giant business conference,” with so many leading CEOs in attendance. But as Forum participants might respond, ‘all the more’, in order to draw attention to the growing globalization of corporate governance and leadership.

So is the sky falling? Are polycrises insurmountable or unresolvable? Do they represent a threat to humanity as a whole? Of course not. But they are real, they are significant and according to one of the leading global platforms forums for international commercial and political cooperation, they’re not likely to be resolved without the support of the business community.

And that’s absolutely a reason why “Davos” should be on the agenda for the next board of directors meeting.