Top Global Risks: Is the World Riskier?

Top3GlobalRisks

The world is slightly more at risk in 2013 than it was in 2012, according to Global Risks 2013, the eighth annual edition of this authoritative series on global risk from the World Economic Forum (WEF).

According to the 1,000-plus experts surveyed by WEF, almost all of the top 50 global risks identified in 2012 are deemed more likely to manifest in the next 10 years than they were in 2012. Many were seen as having greater potential impact than a year ago as well.

Building on the survey data, the WEF called out three constellations of interrelated risks that it considers most urgent for political and business leaders to consider:

  • The dysfunctional interplay between global economic and environmental issues
  • “Digital wildfires”—viral transmission of misinformation over social media
  • The rise of antibiotic-resistant superbugs, with potentially severe consequences for human health and food production

3 RISK CASES

To help leaders make sense of the complex picture of global risks, many of which are interconnected and/ or mutually reinforcing, the WEF has winnowed from the data three constellations of risks that “warrant urgent attention and action by global leaders.”

Unlike typical scenarios, these three risk cases do not set out a range of possible outcomes. Rather, they are “an exercise in sense- making,” which the WEF urges leaders to use to refine their understandings and develop their own scenarios:

  • The economy vs. the environment
  • Digital connectivity vs. digital duplicity
  • Human innovation vs. bacterial mutation

3 CHALLENGES OF CLIMATE CHANGE

Even with the best of will, leaders who want to move decisively to tackle climate change are faced with a daunting set of challenges:

  • Persistent economic fragility limits the availability of public resources.
  • No consensus exists on how fast or how much global climate is changing.
  • Like all complex systems, Earth’s climate is non-linear and unpredictable, so both the effectiveness and unintended consequences of mitigation strategies are highly uncertain.

3 WAYS TO THINK ABOUT RISK

Writing in the Harvard Business Review, Robert Kaplan and Anette Mikes have proposed a simple, practical taxonomy for helping business leaders think about risk. Organizations face three kinds of risks, they say:

  • Preventable risks—Internal risks that can be controlled, such as employees’ illegal or unethical actions
  • Strategy risks—Risks that a company voluntarily assumes in pursuit of its strategy
  • External risks—Risks that the WEF calls global risks: those that are complex and go beyond the company’s ability to manage or mitigate
3 BUSINESS IMPLICATIONS
  • The WEF’s Global Risks reports have emerged as a vital input to organizational strategy, providing an authoritative perspective on key uncertainties that affect every organization’s operating environment. The WEF’s approach is also valuable in its support for practical solutions, via its associated Risk Response Network and Leading Practice Exchange, which support businesses in working with each other and with experts and governments to build resilience across the full panoply of global risks.
  • While so much about climate change is unknowable, two things are clear: (a) adaptation is by nature local and (b) businesses, like nation-states and individuals, will be responsible for funding their own adaptation efforts. This is why the WEF says, “For some businesses, investing in climate change mitigation now could be as much about enterprise risk management as about mitigating a global risk.” Even though the worst effects of climate change may not manifest for a decade or more, local impacts are already abundantly visible. Companies have a window of opportunity now to look seriously at how climate change could affect the regions where they operate—or plan to operate in the future—and they should begin to do so.
  • Many countries are making significant progress in preparing for climate change within their own borders, which is opening up opportunities for mitigation and adaptation innovation and partnerships. For example, at the 2012 G20 summit in Mexico, over 50 large companies—including Samsung, Walmart, Swiss Re, and Deutsche Bank—partnered with public agencies to form the Green Growth Action Alliance (G2A2) aimed at unlocking private investment for building green infrastructure.