Global Risk Report 2014–The Ecology of Risks

1.  Introduction

In the posts last week, I discussed the methodology of the risk report, and the ranking or prioritization of risks.   This qualitative analysis of risks used the factors of highest probability and greatest potential impact.   These two factors were then combined to create the risks of overall greatest concern. 

One observation of the list of the top risks that were created by the analysis was that many of the lists were linked.    Look at the top six risks in the list of risks of greatest concern, which is found on page 16 of the Global Risk Report 2014.

# Global Risk Risk Category
1 Fiscal crises in key   economies Economic
2 Structurally high   unemployment/underemployment Economic
3 Water crises Environmental
4 Severe income disparity Economic
5 Failure of climate change   mitigation and adaptation Environmental
6 Greater incidence of   extreme weather events (e.g. floods, storms, fires) Environmental

Note that risks #1, #2, and #4 are linked, and the fact that risks #3, #5, and #6 are linked.    The fact that the risks are interconnected is important because those measures which mitigate one risk, such as structural unemployment, may end up having a positive spillover effect on another risk, such as fiscal crises.   As more and more people go to work, the income that they receive will get translated into higher demand for consumer goods, which will stimulate businesses, and higher tax revenue for governments, which will reduce deficits.

Which of the 31 risks is the most interconnected to other risks?

2.  Most interconnected global risks

Although global governance failure is a risk that is not among listed as having the highest probability and/or impact, it is listed by the respondents to the Global Risk Report 2014 as having the most interconnectedness to other risks.  It connects with

  • economic risks:  fiscal crises, unemployment/underemployment, failures of economic institutions
  • societal risks:  political and social instability, income disparity
  • environmental risks:  climate change, extreme weather events, water crises, manmade environmental catastrophes
  • geopolitical risks:  corruption, terrorist attacks, interstate conflicts
  • technological risks:  cyber attacks

The lack of strong global governance makes it harder for the world to prevent and mitigate the consequences of these other global risks, which require an coordinated international response.

3.  Concern for 2014

One of the reasons why the fact that global governance failure is the most interconnected global risks is of concern to me is that in the United States, one of the influential factions of one of our political parties has as its goal “smaller government”, as if promoting governance failure is a virtue.

Of course, global governance can be done through other organizations than national governments, such as corporations, non-governmental organizations, and international organizations.    But the simple truth is that, if risks are linked together across the globe, people across the globe must link together to respond to them effectively.

The next posts will discuss some of the individual risks on the list of risks of highest concern.


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