RISKS ARE multiplying as a result of the “instabilities in an increasingly multipolar world.” These make the consequences of bad decision making and poor governance more severe and potentially disastrous. That puts a premium on competent and “strategically driven” leadership.
Global Risks 2014 is an analysis of a survey of over 700 world leaders and top businessmen from the World Economic Forum’s global multi-stakeholder community. From the report, growing “global risks” arise from demographic trends, societal issues, technological developments, environmental concerns, and economic mismanagement.
The demographic trends “flagged” consist of “overpopulation… unmanaged migration flows… and energy crises.” Specifically, the risk cited is “being unable to deal with rapid population growth and the growing burden of an ageing population.” According to the report, “Around 1 billion people, one-third of the world’s urban population, live in slums — a number that has been increasing in the current era of high and widening income inequalities. This growing population of urban poor is vulnerable to rising food prices and economic crises, posing significant risks of chronic social instability.” Further, there are the “costs of living longer” to be considered and, notably, the “risks related to longevity remain significant as medical advances increase life expectancy, posing funding challenges in retirement financing, long-term care and healthcare.”
Societal issues involve “the breakdown of social structures, the decline of trust in institutions, the lack of leadership and persisting gender inequalities.” Particularly highlighted are “ideological polarization, extremism — in particular those of a religious or political nature — and intra-state conflicts such as civil wars.” Also mentioned is “the future of the youth: the quality of and access to education, the marginalization of young generations and high rates of youth unemployment.” Quoting the Global Agenda Council on Youth Unemployment, “About 300 million young people — over 25% of the world’s youth population — have no productive work, according to World Bank estimates. Add low-paid rural and urban self-employed workers, and the estimates rise to 600 million. An unprecedented demographic ‘youth bulge’ is bringing more than 120 million new young people on to the job market each year, mostly in the developing world.”
Technological developments that add to global risk include “data mismanagement, loss of privacy, increase in surveillance, and possible abuse of new and more complex information technology.” Notes the report, “These risks are becoming potentially more impactful as social media transitioned from a purely social pastime into the corporate communications environment.” Crucially, “moving towards a risk-based approach for dealing with cyber threats and vulnerabilities will require improved methods to deal with such risks in line with broader enterprise risk management practices.” The report states, “A number of challenges must be overcome in such efforts. Not least of these is capturing the full range of potential vulnerabilities — connected supply chains, outsourcing and other factors make the idea of the ‘enterprise network’ somewhat fluid.”
Environmental concerns include “water crises, extreme weather events, natural catastrophes, man-made environmental catastrophes and climate change.” Says the report, climate change in particular is both “a key economic risk in itself and a multiplier of other risks.” In its 5th Assessment (released in late 2013), the Intergovernmental Panel on Climate Change (IPCC) states “that warming of the climate system is unequivocal and that each of the last three decades has been successively warmer at the earth’s surface than any preceding decade since 1850.” The Global Risks 2014 report notes, “The increased frequency of extreme weather events, such as storm surges and droughts, is consistent with the latest IPCC modelling. The damage to economic assets, such as city and industrial infrastructure, agriculture and key global supply chains, caused by such extreme weather events is becoming more evident, as is the fragility of the global logistics and mobility systems.” Well, super typhoon Yolanda demonstrated this quite emphatically.
Additionally, the report expresses concern with two different types of pollution: “First, plastic waste pollution could degrade marine ecosystems and spoil shorelines, posing a credible threat to ecosystems and human health. Second, endocrine disruptors in the environment have been linked to human health problems through interference with hormonal systems.” The report states that there is a need “to track the development and production of unconventional oil and natural gas resources, such as oil sands and shales, which require processes and technologies (e.g. fracking) that differ considerably from those used for conventional resources in terms of energy input, cost and environmental impact… Their impact and sustainability are being increasingly questioned.” Further, “Several emerging risks are associated with the use of new technology, such as the potential toxicity of nanomaterials, the future evolution and impact of 3-D printing, and uncertainty about the potential impact of widespread use of autonomous vehicles, which are capable of sensing their environment and navigating on their own. The potential for abuse, or an accident involving synthetic biology, could even pose an existential risk.”
Economic mismanagement poses a very real set of risks with global impact, a fact made crystal clear by the 2008 financial fiasco in the US. Specifically, today, the report states, “Risks relate to the facilitation of money laundering, corruption, illicit financial flows as well as volatility and susceptibility to security threats and market manipulation.” Also mentioned is the increased “volatility in asset prices, capital flows and exchange rates, and rising government debt” arising from shifts in economic policy from “ultra-loose monetary policy” to “tight monetary policy.”