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Global Risks 2009

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Global Risks 2009

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    1. Global Risks 2009

    2. Gareth Shepherd

    3. What is the World Economic Forum?

    4. What is the World Economic Forum?

    5. What is the World Economic Forum?

    6. Gareth Shepherd

    7. Global Risks 2009

    8. The Global Risk Report 2009 “This report takes a long-term approach to risk, looking ten years ahead, while not forgetting that decision-makers must respond to the crisis today with the consequences that carries for their countries and enterprises. Above all, Global Risks 2009 provides a framework for leaders to think about risk and how the risks that they face in the short term in their region and business link to the longer-term risks, with global implications.”“This report takes a long-term approach to risk, looking ten years ahead, while not forgetting that decision-makers must respond to the crisis today with the consequences that carries for their countries and enterprises. Above all, Global Risks 2009 provides a framework for leaders to think about risk and how the risks that they face in the short term in their region and business link to the longer-term risks, with global implications.”

    9. What constitutes a Global Risk? Global Scope: potential to affect (including both primary and secondary impact) at least three world regions on at least two different continents. While these risks may have regional or even local origin, their impact can potentially be felt globally. Cross-Industry Relevance: affects 3 or more industries. Uncertainty: about how the risk manifests itself within 10 years combined with uncertainty about the magnitude of its impact (assessed in terms of likelihood and severity). At the same time, it has to be a measurable uncertainty, otherwise it would be a completely random risk. Economic Impact: potential to cause economic damage of around US$ 10 billion. Public Impact: potential to cause major human suffering and to trigger considerable public pressure and global policy responses. Multistakeholder Approach: required for its mitigation. Non-business risks that affect business (i.e. not operational, project or financial risk) Can be strategic, exogenous and systemic Are highly interdependent Characterised by uncertainty, sharp discontinuities, non-linearity. Global Scope: potential to affect (including both primary and secondary impact) at least three world regions on at least two different continents. While these risks may have regional or even local origin, their impact can potentially be felt globally. Cross-Industry Relevance: affects 3 or more industries. Uncertainty: about how the risk manifests itself within 10 years combined with uncertainty about the magnitude of its impact (assessed in terms of likelihood and severity).At the same time, it has to be a measurable uncertainty, otherwise it would be a completely random risk. Economic Impact: potential to cause economic damage of around US$ 10 billion. Public Impact: potential to cause major human suffering and to trigger considerable public pressure and global policy responses. Multistakeholder Approach: required for its mitigation. Non-business risks that affect business (i.e. not operational, project or financial risk) Can be strategic, exogenous and systemic Are highly interdependent Characterised by uncertainty, sharp discontinuities, non-linearity.

    10. 2009 Global Risks ECONOMIC Food price volatility Oil and gas price spike Major fall in US$ Slowing Chinese economy Fiscal crises Asset price collapse Retrenchment from globalisation (developed) Retrenchment from globalisation (emerging) Regulation cost Underinvestment in infrastructure GEOPOLITICAL International terrorism Collapse of Non-Proliferation Treaty US/Iran conflict US/DPRK conflict Afghanistan instability Transnational crime and corruption Israel-Palestine conflict Violence in Iraq Global governance gaps ENVIRONMENTAL Extreme climate related weather Droughts and desertification Loss of freshwater Natcat: Cyclone Natcat: Earthquake Natcat: Inland flooding Natcat: Coastal flooding Air pollution Biodiversity loss SOCIETAL Pandemic Infectious disease Chronic disease Liability regimes Migration TECHNOLOGICAL Critical information infrastructure breakdown Emergence of nanotechnology risks Data fraud/loss

    11. Global risk landscape 2009 Economic risks dominate US$50 trillion wiped out in 2008 (= year worth of world economic output) according to the Asian Development Bank.Economic risks dominate US$50 trillion wiped out in 2008 (= year worth of world economic output) according to the Asian Development Bank.

    12. Risk Interconnectedness Map (RIM) The RIM highlights the different ways in which risks can be interconnected The RIM may also provide a proxy for understanding some of the mechanisms of risk transmission Global risks are inextricably linked Current risks have longer term effects with uncertain shape and scope Effective management of global risks requires a common understanding and willingness to engage in dialogue and action The current financial crisis must be managed while considering the broader, long-term consequences of today’s decisions. Today’s world is riskier precisely because of increased interconnectedness: it exponentially increases uncertainty.The RIM highlights the different ways in which risks can be interconnected The RIM may also provide a proxy for understanding some of the mechanisms of risk transmission Global risks are inextricably linked Current risks have longer term effects with uncertain shape and scope Effective management of global risks requires a common understanding and willingness to engage in dialogue and action The current financial crisis must be managed while considering the broader, long-term consequences of today’s decisions. Today’s world is riskier precisely because of increased interconnectedness: it exponentially increases uncertainty.

    13. The “5 Pathways” to Global Risks Mitigation

    14. Horizon scanning – systematising a means to identify incomplete indicators (‘weak signals’) – while there is still room for action … Consider the Consequences of Consequences: what are the 2nd and 3rd derivative repercussions? Look for the “lollapalooza” effects. As time progresses information increases but options for action and mitigation fall. Taking proactive mitigation action implies acting under increased uncertainty and with incomplete indicators. Horizon scanning – systematising a means to identify incomplete indicators (‘weak signals’) – while there is still room for action … Consider the Consequences of Consequences: what are the 2nd and 3rd derivative repercussions? Look for the “lollapalooza” effects. As time progresses information increases but options for action and mitigation fall. Taking proactive mitigation action implies acting under increased uncertainty and with incomplete indicators.

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