Internal Audit & Global Risks 2024

[Audio] Welcome to this video presentation focused on Global Risks in 2024 and its profound implications on the realm of internal auditing. In the rapidly evolving landscape of global risks, the year 2024 poses unique challenges that directly influence how organizations approach internal audit practices. As we delve into the findings of the Global Risks Report for 2024, we will explore key insights into emerging threats, their potential impact on internal auditing, and the strategic responses needed to navigate this dynamic environment. Join us on this informative journey to understand the global risks shaping the future and their implications for the critical field of internal audit..

[Audio] Welcome to a brief exploration of the World Economic Forum's Global Risks Report and its profound implications on the Internal Audit Profession. In this short session, we will delve into the key findings of the report, examining how global risks are reshaping the landscape and directly influencing the practice of internal auditing. Join us as we navigate through the critical intersections of global risk and the evolving role of internal auditors in the dynamic landscape of today..

[Audio] The World Economic Forum regularly publishes the Global Risks Report. This report typically assesses the global risk landscape, highlighting potential challenges and threats facing the world. Let's take a look into the results of the most recent survey conducted in 2024..

[Audio] The World Economic Forum's Global Risks Report for 2024 presents a gloomy outlook, identifying two major crises — climate change and conflict — as the central challenges facing the world. The report, based on insights from nearly 1,500 global experts, highlights a dual threat against a backdrop of rapid technological change and economic uncertainty..

[Audio] In the short term, the report points to misinformation and disinformation as the most significant risk, with concerns about the potential for AI to be used by bad actors to spread false narratives. Over the next two years, the report predicts that foreign and domestic actors will leverage these tactics to deepen societal and political divides, particularly during numerous upcoming elections. The report warns of the potential consequences, including civil unrest, government-driven censorship, domestic propaganda, and controls on the free flow of information..

[Audio] Looking ahead 10 years, climate-related risks dominate the top 10 threats, contributing to five out of the ten identified. Extreme weather events, in particular, pose an immediate risk, with nations unprepared for potential irreversible changes triggered by global warming. The report notes that the urgency of other climate-related risks, such as biodiversity loss and ecosystem collapse, is a subject of disagreement, with younger respondents expressing higher concern. In the near term, the report identifies additional risks, including the cost of living, cyberattacks, and polarization of views. These challenges, coupled with diminishing trust, political polarization, and a volatile geopolitical landscape, raise concerns about global cooperation to address these risks. The report suggests that solutions may emerge through localized cooperation among nations, corporations, and individuals..

[Audio] However, it emphasizes that cross-border collaboration at scale remains critical for challenges decisive to human security and prosperity. Against this backdrop, the 2024 World Economic Forum's Annual Meeting in Davos, Switzerland, is focused on the theme "Rebuilding Trust." The program advocates for a "back to basics" approach, promoting open and constructive dialogue among leaders of government, business, and civil society as a means to address the complex global challenges outlined in the report..

[Audio] The World Economic Forum's Global Risks Report for 2024 highlights various challenges, and while it doesn't explicitly detail the impact on the internal audit profession, we can make some general observations based on the information provided:.

[Audio] First of all there is Increased Emphasis on Risk Management: With concerns about global instability, climate-related risks, and the prevalence of misinformation, organizations are likely to place a heightened emphasis on risk management. This, in turn, may impact the role of internal auditors as they work to assess and mitigate these risks. Second, there are Technology and Cybersecurity Risks: The report mentions concerns about the potential misuse of artificial intelligence for spreading misinformation. Internal auditors may find themselves increasingly involved in assessing and managing technology-related risks, including cybersecurity threats..

[Audio] Thirdly, the Strategic Focus on Climate-Related Risks is also important: The dominant theme of climate-related risks in the long term suggests that organizations will need to integrate climate risk considerations into their strategies. Internal auditors may play a key role in evaluating and ensuring the effectiveness of climate risk management initiatives within organizations. Forthly, the Adaptation to Political and Geopolitical Changes are key for the future of the internal audit profession. The anticipation of a multipolar or fragmented order in the next decade implies that organizations will need to adapt to evolving political and geopolitical landscapes. Internal auditors may need to enhance their understanding of these changes and assess their impact on the organization's risk profile..

[Audio] Furthermore, we can expect Challenges in the Information Flow: The report warns of potential challenges in information flow due to misinformation and disinformation. Internal auditors may need to be vigilant in ensuring the reliability and accuracy of the information they rely on for their assessments. There is also Increasing Regulatory Scrutiny to be expected from regulatory authorities. The combination of economic uncertainty, global risks, and potential climate-related challenges may lead to increased regulatory scrutiny. Internal auditors will likely need to stay abreast of evolving regulations and ensure that organizations are in compliance. And finally there will be Shifts in Corporate Governance: The report's emphasis on rebuilding trust and the need for cross-border collaboration could lead to shifts in corporate governance practices. Internal auditors may be involved in assessing and enhancing governance structures to meet evolving expectations. In summary, the Global Risks Report suggests a complex and challenging global environment that may impact how internal auditors approach risk management, technology, climate-related concerns, and governance. The profession may need to adapt its practices to address emerging risks and contribute to organizational resilience in the face of these challenges..

[Audio] In the long term, economic, environmental, and technological trends pose risks to developmental progress and living standards, particularly around labor and social mobility. These trends may hinder individuals' access to income, skilling opportunities, and the ability to enhance their economic status. While economic opportunity ranks among the top 10 risks in the short term, it drops to #11 over the longer term, possibly indicating a shift in global decision-makers' concerns..

[Audio] Simultaneously, simmering geopolitical tensions, coupled with technological advancements, introduce new security risks. Interstate armed conflict emerges as a top risk over the two-year horizon, with concerns about conflict contagion and the potential escalation of frozen conflicts. The rise of technology, particularly frontier technologies like artificial intelligence (AI), raises apprehensions about a globally fragmented approach to regulation. Without concerted collaboration, this approach may fail to prevent the spread of dangerous capabilities, potentially leading to proliferation. Looking ahead, technological advances, including generative AI, could empower non-state and state actors to develop disruptive tools and weapons, from malware to biological weapons. The narrowing of pathways to stable livelihoods could impact various human development metrics, affecting poverty levels, access to education, and healthcare. Moreover, declining intergenerational mobility may reshape societal and political dynamics in both advanced and developing economies..

[Audio] Possible escalation in key hotspots—Ukraine, Israel, and Taiwan—poses significant risks to the geopolitical order, global economy, and safety. Convergence of geographic, ideological, socioeconomic, and environmental trends may fuel new hostilities, amplifying state fragility. In an increasingly multipolar world, a broader range of influential powers may fill the void, potentially weakening conflict containment measures. Global peace has declined notably over the past decade, marked by a surge in active conflicts, with related deaths nearly quadrupling from 2020 to 2022. This escalation is attributed, in part, to geopolitical power shifts, economic fragility, and limitations in international security mechanisms. Interstate armed conflict enters the top 10 risk rankings, posing a threat to global security and financial systems. Specific flashpoints could divert major powers' attention and strain resources, potentially leading to conflict contagion and overwhelming humanitarian crises. The risk of war between states remains relatively rare but could contribute to broader destabilization..

[Audio] In this year's report, a noteworthy aspect is the divergence in opinions between younger and older respondents. While 66% of survey participants identified extreme weather as a top risk, significant differences emerged based on age demographics. Younger individuals view extreme weather as particularly urgent, reflecting a cultural and generational bias for action. This sense of urgency may stem from a perceived slow pace of change in addressing climate issues in previous years. Additionally, there is a surprising contrast in the perceived urgency of extreme weather between the public and private sectors, with the public sector expressing greater concern..

[Audio] In summary, the outlook for 2024 is characterized by a complex and interconnected set of challenges, including climate-related risks, geopolitical tensions, technological advancements, and the need for global cooperation to navigate these issues and ensure human security and prosperity. The report underscores the importance of understanding and addressing these risks for a more stable and resilient future..