“Our lives are changing at an unprecedented pace. Transformational
shifts in our economic, environmental, geopolitical, societal and technological systems offer unparalleled opportunities, but the interconnections among them also imply enhanced systemic risks. Stakeholders from across business, government and civil
society face an evolving imperative in understanding and managing
emerging global risks which, by definition, respect no national
So writes Klaus Schwab, Founder and Executive Chairman of the World Economic Forum in his preface to the 60 page Global Risk 2014 Report.
“Conceptual models are needed to define, characterize and measure the potential negative impacts of interconnected global risks. This report aims to enhance our understanding of how a comprehensive set of global risks is evolving, how their interaction can lead to unexpected and often systemic impacts, and the trade-offs involved in managing them.
Moving from urgency-driven risk management to more collaborative efforts to strengthen risk resilience would benefit global society. Together, leaders from business, government and civil society have the foresight and collaborative spirit to shape our global future.”
More pertinent excerpts from the Report include:
- Interdependence between risks
The Global Risks 2014 report highlights how global risks are not only interconnected but also have systemic impacts. To manage global risks effectively and build resilience to their impacts, better efforts are needed to understand, measure and foresee the evolution of interdependencies between risks, supplementing traditional risk-management tools with new concepts designed for uncertain environments.
If global risks are not effectively addressed, their social, economic and political fallouts could be far-reaching, as exemplified by the continuing impacts of the financial crisis of 2007-2008.
- Globally coordinated, flexible institutions needed
The systemic nature of our most significant risks calls for procedures and institutions that are globally coordinated yet locally flexible. As international systems of finance, supply chains, health, energy, the Internet and the environment become more complex and interdependent, their level of resilience determines whether they become bulwarks of global stability or amplifiers of cascading shocks.
- Overcome collective action challenges
Strengthening resilience requires overcoming collective action challenges through international cooperation among business, government and civil society.
The risks considered high impact and high likelihood are mostly environmental and economic in nature: greater incidence of extreme weather events, failure of climate change mitigation and adaptation, water crises, severe income disparity, structurally high unemployment and underemployment and fiscal crises in key economies.
- Females and youth more risk aware
Female respondents perceived almost all global risks as both more likely and more impactful than did males, especially in the environmental category. Younger individuals gave higher scores for the impact of almost all of the risks, particularly environmental risks, such as water crises, greater incidence of natural catastrophes, loss of biodiversity and greater incidence of extreme weather events.
- Failure of global governance
The failure of global governance emerges as a central risk that is connected to many different issues. Mapping perceived interconnections between risks helps to understand the potential transmission channels between them.
- Decline in trust in leadership
The decline of trust in institutions, lack of leadership, persisting gender inequalities and data mismanagement were among trends to watch, according to survey respondents. Experts added further concerns including various forms of pollution, and accidents or abuse involving new technologies, such as synthetic biology, automated vehicles and 3-D printing.
- Collaborative multi-stakeholder action needed
Collaborative multi-stakeholder action is needed. Wide variance in how risks are identified and managed still exists.
- Open communication and learning from each other
Businesses, governments and civil society alike can improve how they approach risk by taking steps such as opening lines of communication with each other to build trust, systematically learning from others’ experiences, and finding ways to incentivize long-term thinking.
- Digital disintegration could take us off the net
So far, cyberspace has proved resilient to attacks, but the underlying dynamic of the online world has always been that it is easier to attack
than defend. The world may be only one disruptive technology away from attackers gaining a runaway advantage, meaning the Internet would cease to be a trusted medium for communication or commerce.
Fresh thinking at all levels on how to preserve, protect and govern the common good of a trusted cyberspace must be developed.
- Economic growth undermines its own foundations
Economic growth, for example, may be inexorably undermining its own foundations through its negative side-effects on ecosystems, biodiversity and the climate – effects that cannot be stopped at national borders.
Disruptions in the online environment are becoming as impactful as those in the physical world, if not more.
- Global water crisis
Environmental risks also feature prominently in this year’s list, appearing as three of the top 10 global risks of greatest concern. Water crises, for instance, rank as the third highest concern. This illustrates a continued and growing awareness of the global water crisis as a result of mismanagement and increased competition for already scarce water resources from economic activity and population growth. Coupled with extreme weather events such as floods and droughts, which appears sixth on the list, the potential impacts are real and happening today.
- Climate change is key driver
Climate change, ranked fifth on the list, is the key driver of such uncertain and changing weather patterns, causing an increased frequency of extreme weather events such as floods and droughts. It is important to consider the combined implications of these environmental risks on key development and security issues, such as food security, and political and social instability, ranked eighth and 10th respectively.
Given that global risks can be addressed effectively only through international collaboration, it is hardly a surprise that global governance failure is also included in the list as the risk of seventh highest concern.
Read the full Report here.