Global Risk Report 2016–Identifying Global Risks


`.  INTRODUCTION

The World Economic Forum puts out a Global Risk Report every year in January.   The first process in risk management is identifying risks.   The WEF identified 29 global risks through the Global Risk Perception survey, which were divided into 5 categories:  economic, environmental, geopolitical, social, and technological.

The definition of a global risk used is an occurrence that causes significant negative impact for several countries and industries, and that occurrence is something which expected to appear within the next 10 years.

2.  IDENTIFIED GLOBAL RISKS

Here is a chart of the  risks divided into the 5 categories mentioned above.   This is taken from Appendix A of the Global Risk Report 2016.

ECONOMIC RISKS

E1.  Asset bubble in a major economy Unsustainably overpriced assets such as commodities, housing, shares, etc. in a major economy or region.
E2.  Deflation in a major economy Prolonged ultra-low inflation or deflation in a major economy or region.
E3.  Failure of a major financial mechanism or institution Collapse of a financial institution and/or malfunctioning of financial system impacts the global economy.
E4.  Failure/shortfall of critical infrastructure Failure to adequately invest in, upgrade and secure infrastructure networks (e.g. energy, transportation and communications) leads to pressure or a breakdown with system-wide implications.
E5.  Fiscal crises in key economies Excessive debt burdens generate sovereign debt crises and/or liquidity crises.
E6.  High structural unemployment or underemployment A sustained high level of unemployment or underutilization of the productive capacity of the employed population prevents the economy from attaining high levels of employment.
E7.  Illicit trade (e.g. illicit financial flow, tax evasion, human trafficking, organized crime, etc. Large-scale activities outside the legal framework such as illicit financial flow, tax evasion, human trafficking, counterfeiting and organized crime undermine social interactions, regional or international collaboration and global growth.
E8. Severe energy price shock (increase or decrease) Energy price increases or decreases significantly and places further economic pressures on highly energy-dependent industries and consumers.
E9. Unmanageable inflation Unmanageable increase in the general price level of goods and services in key economies.
ENVIRONMENTAL RISKS
EV1.  Extreme weather events (e.g. floods, storms, etc.) Major property, infrastructure and environmental damage as well as human loss caused by extreme weather events.
EV2.  Failure of climate-change mitigation and adaptation Governments and businesses fail to enforce or enact effective measures to mitigate climate change, protect populations and help businesses impacted by climate change to adapt.
EV3.  Major biodiversity loss and ecosystem collapse (land or ocean) Irreversible consequences for the environment, resulting in severely depleted resources for humankind as well as for industries.
EV4.  Major natural catastrophes (e.g. earthquake, tsunami, volcanic eruption, geomagnetic storms) Major property, infrastructure and environmental damage as well as human loss caused by geophysical disasters such as earthquakes, volcanic activity, landslides, tsunamis or geomagnetic storms.
EV5.  Man-made environmental catastrophes (e.g. oil spill, radioactive contamination, etc.) Failure to prevent major man-made catastrophes, causing harm to lives, human health, infrastructure, property, economic activity and the environment.
GEOPOLITICAL RISKS
G1.  Failure of national governance (e.g. failure of rule of law, corruption, political deadlock, etc.) Inability to govern a nation of geopolitical importance due to weak rule of law, corruption or political deadlock.
G2.  Interstate conflict with regional consequences A bilateral or multilateral dispute between states escalates into economic (e.g. trade/currency wars, resource nationalization), military, cyber, societal or other conflict.
G3.  Large-scale terrorist attacks Individuals or non-state groups with political or religious goals successfully inflict large-scale human or material damage.
G4.  State collapse or crisis (e.g. civil conflict, military coup, failed states, etc.) State collapse of geopolitical importance due to internal violence, regional or global instability, military coup, civil conflict, failed states, etc.
G5. Weapons of mass destruction  Nuclear, chemical, biological and radiological technologies and materials are deployed creating international crises and potential for significant destruction.
SOCIETAL RISKS
S1.  Failure of urban planning Poorly planned cities, urban sprawl and associated infrastructure create social, environmental and health challenges.
S2. Food crises Access to appropriate quantities and quality of food and nutrition becomes inadequate, unaffordable or unreliable on a major scale.
S3.  Large-scale involuntary migration Large-scale involuntary migration induced by conflict, disasters, environmental or economic reasons.
S4.  Profound social instability Major social movements or protests (e.g. street riots, social unrest, etc.) disrupt political or social stability, negatively impacting populations and economic activity.
S5.  Rapid and massive spread of infectious diseases Bacteria, viruses, parasites or fungi cause uncontrolled spread of infectious diseases (for instance due to resistance to antibiotics, antivirals and other treatments) leading to widespread fatalities and economic disruption.
TECHNOLOGICAL   RISKS
T1.  Adverse consequences of technological advances Intended or unintended adverse consequences of technological advances such as artificial intelligence, geo-engineering and synthetic biology causing human, environmental and economic damage.
T2.  Breakdown of critical information infrastructure and networks Cyber dependency increases vulnerability to outage of critical information infrastructure (e.g. internet, satellites, etc.) and networks causing widespread disruption.
T3. Large-scale cyberattacks Large-scale cyberattacks or malware causing large economic damages, geopolitical tensions or widespread loss of trust in the Internet.
T4. Massive incident of data fraud/theft Wrongful exploitation of private or official data that takes place on an unprecedented scale.

3.  CONCLUSION

The majority of the 29 risks  divided between the five categories of economic (9), environmental (5), geopolitical (5), social (5), and technological (4) risks.   There are almost twice as many risks in the economic category than the other four categories, which have almost the same amount of risks.

The next step in risk management is performing qualitative analysis, which assigns to each risk a probability, and potential impact, to yield an overall risk factor.   That is the subject of the next post.

 

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