by: Ben J. Carnevale, Managing Editor
Given the continuity and compliance objectives of this website, it is not too often that we don’t have the topics of global risk, risk management and risk mitigation discussed in this blog. And, this posting will be no exception to that pattern.
This posting intends to provide an additional lens of insight into the world of perceived risks present in the global environment of the world in which we work, play and live.
This posting will offer a great reference source reading about global risk, how it might affect your company’s long term strategic growth and planning process or perhaps, even influence how your purchasing team builds its global supply base to support its platform of building faster, better and cheaper into this year’s purchasing plan and strategy.
This posting is going to tell you about the Global Risk Report of 2016 published by the World Economic Forum with valuable guidance of the members of the Global Risks 2016 Advisory Board, and, hopefully raise an interest for you to read it and find a better understanding of the presence of risk in the world where your company does its business.
As in previous years, the Report is based on the annual Global Risks Perception Survey, completed by almost 750 members of the World Economic Forum’s global multi-stakeholder community.
In addition to the special section exploring the evolving security landscape in an era of uncertainty, the Report also presents deep-dive discussions of risks to the stability of societies posed by the (dis)empowered citizen, who is empowered by technology but feels dis-empowered by traditional decision-making processes.
It also discusses the societal consequences of climate change with a focus on food and water crises and the threat of global pandemics.
Now in its 11th edition, The Global Risks Report 2016 draws attention to ways that global risks could evolve and interact in the next decade.
The year 2016 marks a forceful departure from past findings, as the risks about which the Report has been warning over the past decade are starting to manifest themselves in new, sometimes unexpected ways and are starting to harm people, institutions and economies.
The following are globally impacting risks to be watched:
- Warming climate is likely to raise this year’s temperature to 1° Celsius above the pre-industrial era.
- 60 million people, equivalent to the world’s 24th largest country and largest number in recent history, are going to be forcibly displaced, and
- crimes in cyberspace will cost the global economy an estimated US$445 billion,— higher than many economies’ national incomes.
In this context, the Report calls for action(s) to build resilience – the “resilience imperative” – and identifies practical examples of how it could be done.
Respondents were also asked which risks were related and could give rise to cascading risks. These risks emerged as the strongest potential threats:
(a) the potential for climate change to exacerbate water crises, with impacts including conflicts and more forced migration, calling for improved water governance to adapt to climate change and accommodate a growing population and economic development;
(b) the need to address the global refugee crisis, adding emphasis to policies that can build resilience in addition to responding to the immediate crisis; and
(c) the risks of failing to fully understand the risks around the Fourth Industrial Revolution and how this transition will impact countries, economies and people at a time of persistently sluggish growth.
Global Risk to Doing Business
Private sector respondents to the World Economic Forum’s Executive Opinion Survey were asked to identify their risks of highest concern for doing business in the next 10 years. The responses, from 140 economies, reveal patterns of concern at country and regional levels that can usefully inform initiatives to engage the private sector in building resilience to global risks.
On a global scale, two economic risks – unemployment and underemployment and energy price shocks – are mentioned as the top risks of highest concern for doing business in half of the 140 economies. These are followed by the failure of national governance, fiscal crises, asset bubbles and cyber-attacks.
Economic risks predominate in responses from Europe, including fiscal crises, unemployment, asset bubbles and energy prices – the latter also being the top concern in Canada – while executives in the United States are most concerned about cyber-related risks and attacks.
According to this Report, respondents from Central Asia and Russia worry about fiscal crises and unemployment, along with the risks of unmanageable inflation and interstate conflict. Environmental risks worry business leaders in East Asia and the Pacific, alongside energy prices, asset bubbles, and cyber-attacks.
In South Asia concerns also include energy prices, together with fiscal crises, unemployment and failure of national governance – which is the top concern in Latin America and the Caribbean – followed by energy prices shock and unemployment. Executives in the Middle East and North Africa likewise worry about energy prices, together with unemployment, terrorist attacks and interstate conflict. In Sub-Saharan Africa, the business community’s top concerns include unemployment, energy prices, the failure of national governance and the failure of critical infrastructure.
The increasing volatility, complexity and ambiguity of the world not only heightens uncertainty around the “which”, “when”, “where” and “who” of addressing global risks, but also clouds the solutions space.
This report stresses that we need clear thinking about new levers that will enable a wide range of stakeholders to jointly address global risks, which cannot be dealt with in a centralized way.
Taken together, this report calls for a resilience imperative – an urgent necessity to find new avenues and more opportunities to mitigate, adapt to and build resilience against global risks and threats through collaboration among different stakeholders.
One of the many conclusions and directives from this Report is that while the world has navigated previous eras of profound transitions resulting from converging economic, technological and geopolitical developments — today our world is facing a faster pace of change along with more complex interconnections.
Bottom line, the stakes have never been higher.
While attempting to evaluate, implement and maintain a sound risk management strategy, not every company will get the same benefits from reading this Report. However, as a single source of reference for global risk, this Report should be on the top of the reading list for 2016.
Click here to read this full report.