In the lead up to it’s big annual event in Davos, the World Economic Forum’s Risk Response Network has published its Global Risks 2011 report. Here are some of the top-level highlights, taken verbatim from the report. I encourage people to read the entire report as each section is broken out into considerable detail including multiple scenarios. There’s also an overview at Business 21C.
“The world is in no position to face major new shocks.”
2 Cross-Cutting Risks:
1. Economic disparity: Wealth and income disparities, both within countries and between countries, threaten social and political stability as well as economic development.
2. Global governance failures: Weak or inadequate global institutions, agreements or networks, combined with competing national and political interests, impede attempts to cooperate on addressing global risks.
3 Important Risks in Focus:
1. The macroeconomic imbalances nexus: This cluster of three economic risks – global imbalances and currency volatility, fiscal crises and asset price collapse – is characterized by both internal imbalances (within countries) and external imbalances (between countries).
2. The illegal economy nexus: Illicit trade, organized crime and corruption are chronic risks that are perceived as highly likely to occur and of medium impact. As a highly interconnected nexus representing the illegal economy, however, experts see these risks as of central importance to the global risk landscape.
3. The water-food-energy nexus: Water security, food security and energy security are chronic impediments to economic growth and social stability. Food production requires water and energy; water extraction and distribution requires energy; and energy production requires water. Food prices are also highly sensitive to the cost of energy inputs through fertilizers, irrigation, transport and processing.
5 risks to watch:
1. Cyber-security: cyber theft, cyber espionage, cyber war, and cyber terrorism.
2. Demographic challenges: population “cluster bombs”, global graying and demographic dividends.
3. Resource security: extreme commodity price volatility and extreme energy price volatility.
4. Retrenchment from globalization: In many advanced economies strengthening political forces either directly or indirectly advocate retrenchment from globalization.
5. Weapons of mass destruction: the key WMD risk is felt by most experts to be that of nuclear proliferation, both among states and non-state actors, closely followed by the potential use of biological weapons.
3 ways for leaders to improve their response to complex and interdependent risks:
1. Proactively address the causes, rather than the symptoms, of global risk, identifying effective points of intervention in underlying structures and systems.
2. Devise coordinated response strategies to address the existence of difficult trade-offs and the threat of unintended consequences caused in part by increased interconnectedness.
3. Take a longer-term approach to assessment and response, particularly when seeking to manage global risks that emerge over decades rather than months or years.