This article first appeared in Forum, The Edge Malaysia Weekly on September 7, 2026 - September 13, 2026
Every risk committee I sit on wants to talk about two things this year: the next war and the next trade war. Understandable, given how fast-moving and visible both risks are. But there is an unfashionable and generally unconsidered argument for a Malaysian and Asean audience: the risk doing more long-term damage to our resilience is not the one making headlines. It is the one that never gets a crisis meeting scheduled for it, because it accumulates rather than erupts.
The global cost of conflict and violence is close to US$20 trillion (RM81 trillion) a year, according to the Institute for Economics and Peace, mostly military spending, which is a choice governments make. Conflict is volatile: spiking, then de-escalating. Markets price it quickly; war exclusion clauses have existed in insurance for a century and capital reallocates within a budget cycle: Europe has committed roughly US$1.2 trillion in extra defence spending by 2035, responding to Ukraine.
Climate risk behaves differently. The Network for Greening the Financial System now estimates cumulative global gross domestic product (GDP) losses of 15% by 2050 under 2°C, triple its earlier assessment. Swiss Re puts the loss at 18% by mid-century on current trends, with Asean facing losses approaching 37% of GDP in the severest case, the worst-hit region in the model. There is no negotiated end point; the losses compound on a base that keeps shrinking.
The World Bank’s 2026 Country Climate and Development Report for Malaysia puts a figure on our exposure: up to 8.3% of GDP by 2050 in a worst-case scenario, with roughly half of that already showing up in the data today. Agriculture alone could fall by 18% by mid-century. Heavy rainfall between 2015 and 2024 has already cut firm revenues and productivity by an estimated 3%, around US$7 billion in losses, with no single event attached to that figure.
Flooding accounts for 85% of all disasters recorded in Malaysia since 2000 and the World Bank warns that a “double whammy”, a one-in-20-year flood on the heels of an extended heatwave, could cut GDP by more than 20% in a single year. Bank Negara Malaysia’s own figures from the 2021 floods showed two-thirds of an estimated RM4 billion in losses were never insured. As Bank Negara deputy governor Datuk Marzunisham Omar has put it, climate change works like a butterfly’s wings, with consequences felt far from their source. Our tariff exposure turned out to be a rounding error. Our climate exposure is closer to the balance sheet.
The contrast is worth thinking about. Malaysia’s actual US tariff exposure fell to roughly 4.6% of export value after exemptions, with semiconductors largely spared. This is not an argument to dismiss trade risk but a matter of honesty about what the numbers tell us: the acute threat we prepared for proved manageable while the slow one we barely budgeted for already costs billions a year, with no negotiation available to stop it.
Extreme heat alone cost the global economy an estimated 512 billion working hours in 2023, roughly US$835 billion in lost income — a toll larger than many wars, repeated annually. Risk functions are generally built to stress-test for shocks that are legible, not for a decade of heat quietly shaving a point off GDP every year. Slow-onset impacts rarely trip a risk alarm; instead, they simply become a permanently lower baseline, a loss to absorb rather than a risk to manage.
This is where tipping point science matters to a boardroom rather than a laboratory. At 1.4°C of warming, where we already are, warm-water coral reefs have crossed their thermal tipping point into dieback and parts of the polar ice sheets may have crossed thresholds committing the world to metres of sea-level rise, a shift over 640 scientists have formally warned is underway. None of this arrived as a shock; it accumulated past a threshold and, once crossed, there is no reversing it.
Tipping points also have a useful second half: positive tipping points, where a modest push triggers a self-reinforcing cascade towards a better outcome. Solar and battery costs have fallen fast enough that clean power overtook coal as the world’s largest source of new electricity in 2025, driven by economics, not by subsidy. That is the model worth engineering: identifying thresholds where a modest capital push, in resilient infrastructure, flood-adapted agriculture or green manufacturing, flips slow decline into recovery. Malaysia, positioned inside the global semiconductor and battery supply chain, is well placed to engineer one.
Insurers know how to handle war; they exclude it and let sovereigns absorb the cost. Climate does not fit that model. The global gap between insured and uninsured catastrophe losses has widened past US$420 billion and keeps growing as insurers withdraw from exposed markets worldwide. Malaysia’s own flood-cover gap reflects the same pattern at a smaller scale. For pension funds, that should be uncomfortable: a portfolio can hedge against a war but not easily against a trend; actuarial assumptions erode invisibly, half a degree at a time, until the fund is forced into a repricing it never modelled for.
None of this argues for ignoring geopolitical risk; Malaysian businesses cannot afford complacency there either. But resilience planning has become lopsided, with entire risk functions built for the acute and visible while the chronic and boring, which is also our best chance at a positive tipping point, gets a line in the sustainability report. Real realignment comes not from the next ceasefire or tariff truce but from recognising that the baseline has already shifted and choosing to engineer a better threshold before a worse one is engineered for us.
Prof Tan Sri Dr Jemilah Mahmood, a physician and experienced crisis leader, is the executive director of the Sunway Centre for Planetary Health at Sunway University, Malaysia. She is the founder of Mercy Malaysia and has served in leadership roles internationally with the United Nations and Red Cross for the last decade. She also sits on several corporate and non-profit boards globally and nationally. In 2019, she was the first Malaysian recipient of the Asean prize.
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