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Every year the World Economic Forum meets in Davos, Switzerland, and puts out a Global Risk Report.   This year on January 14th the World Economic Forum they put out their 11th edition of the 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 read and/or downloaded at the following site:

https://www.zurichna.com/en/knowledge/articles/2016/01/global-risks-report-2016

1.  INTRODUCTION

I have followed these reports since 2012.  Like the reports for previous years, they give tremendous insights into the pressing problems around the globe, how they interact, and also how they evolve.    Understanding these global risks can give insights into the background behind the major events that will transpire during the year, including the upcoming US Presidential Election, 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 2016 (this post)
• The 29 global risks identified by the survey and the 5 risk categories they belong to
• Ten Global Risks of Highest Concern in 2016
• Global Risks Landscape 2016–maps risks according to their likelihood and potential impact
• Global Risks Interconnections Map 2016–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
• The Security Outlook 2030
• Risks in Focus–The (Dis)empowered Citizen, Climate Change and Risks to Food Security, Global Disease Outbreaks
• Risks for Business

2.  METHODOLOGY

Because I write posts on what the report tells us , I wanted to start today with a different question on how it was done.   For those with access to the Global Risk Report 2016, this is located on Appendix B:  Global Risks Perception Survey and Methodology, page 88.

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.    29 global risks were identified. 

b)  Categorize these 29 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 mid-September through October 2015 to almost a thousand decision-makers and leaders, and questions were asked about the 29 selected global risks.   There were a total of 742 usable responses.   (This survey method is known as the Delphi technique.)

c)  The respondents were asked to rate the likelihood of the risk occurring globally within the next 10 years and the impact of the risk if it were to occur, impact in this context having a broader meaning than simply economic impact.    The rating was done on a 1 to 7 scale (previous years have used a 1 to 5 scale).  This then became the basis for the Global Risks Landscape 2016 part of the report.

d) The respondents were asked to state which out of the 29 selected global risks were the top five that were of the most concern between the timeframe of 18 months and 10 years.

e)  The respondents were asked to identify three to six pairs of risks they believed were most strongly 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 2016 portion of the report.

f)   The respondents were asked to identify up to three risks which were most likely to occur in the region they were located.

This takes the global risk report to the next level of detail by showing regional risks.  

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

A 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.

To put it bluntly, if as a leader you don’t manage global risks, then global risks will end up managing you!

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