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The World Economic Forum has published a new report ‘Global Risks 2007’ which assesses 23 ‘core’ risks facing companies around the world. The report highlights a growing disconnect between the power of global risks to cause major systemic disruption, and the ability to mitigate them.
The report suggests that many of the 23 core global risks have worsened over the last 12 months, despite growing awareness of their potential impacts. In addition to specific risk mitigation measures, institutional innovations may be needed to create effective responses to a complex risk landscape.
The report suggests two such innovations – the appointment of ‘Country Risk Officers’ and the creation of flexible ‘coalitions of the willing’ around specific global risk issues, providing crucial momentum to mitigation efforts. The first would provide a focal point in government for mitigating global risks across departments, learning from private-sector approaches and escaping a ‘silo-based’ approach. The second would allow mitigation strategies to emerge from dynamic interplay between governments and business, achieving a balance between inclusiveness and decisiveness.
In addition, the report recommends a number of key needs for addressing specific global risks, including:
• Linking energy security with considerations on climate change;
• Urgently beginning work on a successor to the Kyoto agreement with three central principles:
– Involvement of the United States and major developing countries (particularly China and India);
– Differential responsibilities for future emissions’ reduction dependent upon past emissions and stage of economic development; and,
– Common overall responsibility for climate change;
• Renewing terrorism insurance schemes scheduled to sunset in 2007 in some form; improve framework for public-private arrangements in other countries, and
• In order to prepare for a pandemic, governments should increase research into the identification of critical choke-points in the supply/value chain where skill sets are rare, interdependencies are greatest and the risk of triggering systemic failure is highest.
The core global risks:
Economic
• Oil price shock/energy supply interruptions
• US current account deficit/fall in US$
• Chinese economic hard landing
• Fiscal crises caused by demographic shift
• Blow up in asset prices/excessive indebtedness
Environmental
• Climate change
• Loss of freshwater services
• Natural catastrophe: Tropical storms
• Natural catastrophe: Earthquakes
• Natural catastrophe: Inland flooding
Geopolitical
• International terrorism
• Proliferation of weapons of mass destruction (WMD)
• Interstate and civil wars
• Failed and failing states
• Transnational crime and corruption
• Retrenchment from globalization
• Middle East instability
Societal
• Pandemics
• Infectious diseases in the developing world
• Chronic disease in the developed world
• Liability regimes
Technological
• Breakdown of critical information infrastructure (CII)
• Emergence of risks associated with nanotechnology.
Read the report.
•Date: 16th January 2007 • Region: World •Type: Article •Topic: BC statistics
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