#WEF Global Risks 2013 Edition–Fastest Growing Risks


I.  Introduction

The World Economic Forum’s Global Risk Report 2013 was published in November 2012.   Among other things, the report ranks global risks in terms of which have the most likelihood and which have the most potential impact if they do end occurring.    

An interesting feature added in this year’s report was a summary of those global risks which, even if not the most likelihood or most impactful, are those risks which are the fastest growing, and therefore deserve special attention.

The purpose of this post is to list those fastest-growing risks in both categories of likelihood and impact and to discuss them.  

II.   Fastest Growing Risks for 2013 in terms of Likelihood

Just as a reminder, the top five MOST LIKELY global risks for 2013 were the following (on a scale from 1 to 5, the higher the number, the greater the likelihood:

1.  Severe Income Disparity (4.22)—Economic

2.  Chronic Fiscal Imbalances (3.97)—Economic

3.  Rising Greenhouse Gas Emissions (3.94)—Environmental

4.  Water Supply Crisis (3.85)–Societal

5.  Mismanagement of population ageing (3.83)–Societal

In contrast, the top five FASTEST GROWING global risks for 2013 in terms of likelihood were the following.

1.  Unforeseen consequences of new life science technologies (2.68 → 3.11)

Specifically called out are possibilities of of genetic manipulation through synthetic biology leading to unintended consequences or biological weapons.

2.  Unforeseen consequences of climate change mitigation (2.80 → 3.23)

Climate change mitigation includes engineering strategies that, if they were to get out of control, could amplify rather than lessen climate problems.   Furthermore, not all mitigation strategies are readily reversible, and some can be only be fully validated if they are tested on a global scale, which of course increases the impact if the interventions create unforeseen consequences.   

3.  Unsustainable population growth (3.05 → 3.45)

This risk category is what the experts who wrote the Global Risk report call a “Center of Gravity”, meaning that it connects with risks from all of the five categories (economic, environmental, geopolitical, societal and technological).   Some of the earliest effects of climate change which we have already experienced are food and water shortages, which reduce the amount of global population that can be sustained with the given supply of those natural resources.

4.  Hard landing of an emerging economy (3.07 → 3.46)

The surprisingly low GDP reading for China of 7.7% growth in the first quarter of 2013 shows that the risk of a hard landing for the world’s second largest economy is growing.   

5.  Mismanagement of population ageing (3.44 -> 3.83)

The percentage of the population that are seniors will go from 22% at present to 32% by 2050 in the developed world, and in the same time frame the figures for seniors in the developing nations will go from 9% to 20%.   

III.   Fastest Growing Risks for 2013 in terms of Impact

Based on the responses from the experts, the top five MOST SEVERE global risks for 2013 were the following:

1.  Major Systemic Financial Failure (4.04)—Economic

2.  Water Supply Crisis (3.98)—Societal

3.  Chronic Fiscal Imbalances (3.97)—Economic

4.  Diffusion of Weapons of Mass Destruction (3.92)–Geopolitical

5.  Failure of climate change adaptation (3.90)–Environmental

In contrast, the top five FASTEST GROWING global risks for 2013 in terms of likelihood were the following (the scale is the same, from 1 to 5).

1.  Unforeseen negative consequences of regulation (2.77 → 3.18)

A theme emerged at the World Economic Forum that government regulators need to be conversant with the same risk management techniques as risk managers in the private sector.   However, the global financial crisis of 2008 was a result of the unforeseen negative consequences of deregulation, where some of the financial innovations created in its wake that were supposed to reduce risk ended up increasing it, with the public sector being the one that in many countries ended up footing the bill for the risk miscalculations of the private sector.   

2. Unilateral resource nationalization (3.02 → 3.40)

The example that comes to mind is China’s attempt to corner the market on certain rare earth metals that are used in the manufacture of electronics.    

3.  Chronic labour market imbalances (3.38 →  3.73)

In other words, unemployment rates.   The impact of these imbalances on society especially, in Europe, are growing increasingly severe as the global economy continues to face multiple challenges (China’s hard landing, and the protracted recession spurred on by austerity measures first in Europe and now in the United States).  

4.  Hard landing of an emerging economy (3.15 → 3.49)

As mentioned above, China’s GDP growth rate in the first quarter of 2013 was only 7.7%, which caused many to talk increasingly loudly about the possibility of a “hard landing” for what is the world’s second largest economy.    Note that this is also on the list of fastest growing risks in terms of LIKELIHOOD as well.    When a risk grows in both impact AND likelihood, it’s time to pay it a lot more attention.

5.  Mismanagement of population aging (3.36 → 3.67)

Again, this is a risk which also is on the list of fastest growing risks in terms of LIKELIHOOD.   Being a risk that connects all five global risk categories together, a so-called “Center of Gravity” on a map that portrays all the global risks and their interconnections, it is significant that this too is growing in the experts’ minds the fastest both in terms of likelihood AND impact.  

IV.  Conclusion

The five factors mentioned above (two technological, two societal, and one economic in the case of likelihood; three economic, one societal, and one geopolitical in the case of impact) are the factors which need to be paid attention to the most after the top five in either category of likelihood or impact, because they are growing the fastest and could, if left unchecked, be in the top five within the next year or so.

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