World Economic Forum Global Risk Report 2014–Methodology #WEF


On January 16th, the World Economic Forum which meets every year in Davos, Switzerland, put out its Global Risk Report, which describes those risks which have the highest likelihood of occurring and which would have the highest impact on the world if they do occur.   During the next week, I would like to delve into the details of the report, which can be found at the following site: http://www.weforum.org/reports/global-risks-2014-report.

1.  INTRODUCTION

Since I started this blog in April 2012, I have followed these reports in 2012, 2013 and now this year’s report because they give an insight into the pressing problems around the globe, and how they interact.   Understanding these global risks can give insights into the background behind the major events that will transpire during the year, and so studying this report has become an essential tool in being prepared for what lies ahead.

Posts during this week and next week will go into the following topics:

  • Methodology of the Global Risk Report 2014
  • The 31 global risks identified by the survey and the 5 risk categories they belong to
  • Ten Global Risks of Highest Concern in 2014
  • Global Risks Landscape 2014–maps risks according to their likelihood and potential impact
  • Global Risks Interconnections Map–showing interdependencies of the 31 global risks
  • Risks and Trends to Watch–recent trends in global risks, and risks may become more important in the future
  • Three Risks in Focus–an in-depth discussion of economic insecurity, youth unemployment, and the integrity of the Internet
  • Strategies for Global Risk Management

2.  METHODOLOGY

Because I go into what the report tells us, I wanted to start today with a different question on how it was done.

a)  Identify global risks, which are risks that are global in geographic scope, cross-industry relevance, uncertainty as to how and when they will occur, and high levels of economic and/or social impact.    31 global risks were identified.

b)  Categorize these 31 global risks into five Risk Categories: economic, environmental, geopolitical, societal and technological.

This became the basis for the Global Risks Perception Survey, which was sent in October and November 2013 to over 700 decision-makers and leaders, and questions were asked about 31 selected global risks.

c)  First the respondents were asked to choose the five risks of highest concern globally and to rank them from 1 (relatively highest concern) to 5 (relatively lowest concern)–new for the 2014 report

d)  Then the respondents were asked to assess the likelihood and potential global impact for each of the 31 risks.   This then became the basis for the Global Risks Landscape 2014 part of the report.

e)   To see how the 31 risks were interconnected, the respondents were asked to identify three to six pairs of risks they believed were connected.   The strength of the interconnection of each pair of risks was determined by the number of respondents that had cited them.    This then became the basis for the Global Risks Interconnections Map part of the report.

f)   Then two open questions were asked of the respondents

Which risk of major global concern is missing from the list of 31 risks? (new for the 2014 report)

Which additional issue could potentially emerge as a risk of major global concern in the future?

The first question, as mentioned above, was the first time that respondents were asked to nominate their own risks as ones facing the world at present.   The second question forms a “watch list”, that is, risks which are both low in terms of probability and/or impact at the present, but which could migrate due to future trends of increased probability and/or impact to a position where they might become prominent global risks at some point.

For more technical detail into the composition of the respondents in terms of gender, age, geographical area, and stakeholder group (i.e., business, academia, NGOs, national governments, or international organizations), as well as details on how these responses were handled from a statistical basis, you can go to Appendix B of the report which is at the website mentioned at the top of the post.

3.  CONCLUSION

In the past two years, I have gone through the results in the Global Risks Landscape, but I think this year I would like to do a more in-depth study of every aspect of the Global Risk Report, because such a study will have benefit to myself in going through the material, and hopefully will have benefit to those readers of this blog who may benefit from my summary.

Having worked in the automotive industry and the insurance industry, and now having become a project manager, I have been fascinated throughout my career with the concept and practice of risk management.   Such a thorough study of this global risks report is an excellent exercise in understanding how to identify and analyze risks, but it also is an inspirational example of how risk management, rather than being just an academic exercise, can actually be of help to global leaders who are trying to cope with the world’s most intractable problems.     The more people that are informed about the nature of these problems, the less they will be tempted to react to them with a sense of passivity based on fear, and more with a sense of purposeful action.

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