Swiss Re and LSE: AI and Supply Chains Creating New Pathways for Systemic Risk
New research from Swiss Re Institute and LSE finds corporate risks are becoming increasingly interconnected. Artificial intelligence and supply chains are emerging as key channels through which disruptions can rapidly spread across the global economy.
Joint research from Swiss Re Institute and the London School of Economics and Political Science (LSE) indicates a rise in systemic risks within the global economy. The analysis reveals that corporate risks are increasingly linked, with artificial intelligence (AI) and supply chains identified as primary conduits for rapid disruption transmission across industries and the broader economy.
The study, which examined risk reporting from 91 Fortune-100 companies, identified a 24% increase in links between reported risks compared to 2019. This suggests that threats previously considered disparate are now more closely connected. Researchers caution that a shared reliance on common AI models and technology platforms could lead to faster and more synchronized market and industry responses during periods of stress.
Reporting on technology-related risks has grown by approximately 30% since 2019, extending beyond the tech sector into industries such as retail, aviation, pharmaceuticals, and food. Similarly, supply chains connect geopolitical, trade, climate, pandemic, and cyber risks. Mentions of climate risk have increased by roughly 31%.
The research highlights the necessity of strengthening resilience before crises occur. Companies and governments are urged to identify common dependencies, reduce concentrations, and enhance risk transfer capabilities. "Increasingly interconnected risks reduce the margin for error, and many advanced economies' governments have less capacity to respond to major crises," stated Jérôme Haegeli, Group Chief Economist at Swiss Re Institute.
According to the study, the severity of a future systemic crisis will increasingly depend on the location of the disruption, which systems rely on the affected component, and the speed of consequence transmission. By understanding these connections, companies can improve their operational resilience and determine which exposures to retain and which to transfer.