Wednesday, January 12, 2011

The World Economic Forum's Global Risks Report

Just published, summarises the most crucial current global risks as:

- two "cross-cutting" ones (economic disparity and global governance failures);

- three "important" ones (“macroeconomic imbalances” - including not only savings and trade imbalances within and between countries, but also unfunded liabilities in developed countries, currency volatility, fiscal crises and asset price collapse arise from the tension between the increasing wealth and influence of emerging economies and high levels of debt in advanced economies; the “illegal economy” nexus - including state fragility, illicit trade, organized crime and corruption; and the “water-food-energy” nexus - due to rapidly rising global population and growing prosperity, demand for water, food and energy is expected to rise by 30-50% in the next two decades, while economic disparities incentivize short-term responses in production and consumption that undermine long-term sustainability. Shortages could cause social and political instability, geopolitical conflict and irreparable environmental damage; and

- Five risks "to watch":
• Cyber-security issues (ranging from the growing prevalence of cyber theft to the little-understood possibility of all-out cyber warfare)
• Demographic challenges adding to fiscal pressures in advanced economies and creating severe risks to social stability in emerging economies
• Resource security issues causing extreme price volatility and sustained price increases over the long run
• Retrenchment from globalization through populist responses to economic disparities, if emerging economies do not take up a leadership role
• Weapons of mass destruction, especially the possibility of renewed nuclear proliferation.

So, avoiding the question of duplication involved, if those are the issues, what are possible responses?

Well, the Report does not propose any response beyone referring readers to WEF's Risk Response Network.

The Report does, however, helpfully define the new capacities required to address global risks in terms of analysis as well as formal and informal response mechanisms:

First, interconnections between risks require us to better understand the systems behind risks as well as the risk context. It is no longer sufficient to simply assess operational risks in the corporate context or national security challenges in the government context. Identifying the central nodes in risk interconnections is crucial.

• Second, with global risks playing out both at the global and national levels and different stakeholders being affected in different ways, the world faces a significant challenge in coordinating national and global responses. Continued efforts are needed to create a common framework for assessing risks in a multistakeholder, collaborative environment.

• Third, while in an increasingly turbulent global environment there is the temptation to focus on the most recent risk event, it is important to take a long-term perspective to risk assessment and response. Long-term commitment is required to ensure that the effectiveness of the response matches the magnitude of global risks.

The Report concludes that addressing the two central risks in this report – economic disparity and global governance failures – could go a long way towards improving both
the effectiveness of risk response and overall resilience at the global level.

All that underlines that what the world lacks is not the intellectual resources, but rather the cultural and spiritual resources, with which to address the issues raised. Sphere: Related Content

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