Global Risk Report 2016–Qualitative Analysis (2)


 

1.  INTRODUCTION

In my previous posts on the World Economic Forum’s Global Risk Report 2016, I have concentrated on

  • the methodology of the report (corresponding to the Plan Risk Management process of Project Management),
  • the identification of risks (corresponding to the Identify Risks process of Project Management)

and now in this third series of posts, I am concentrating on the next topic,

  • the qualitative analysis of risks (corresponding to the Perform Qualitative Analysis process of Project Management)

This qualitative analysis is called “qualitative” because it does not fix a specific dollar amount to each risk (that would be “quantitative analysis”), but instead analyzes each risk according to some qualitative variable, usually something like likelihood, or impact

The respondents to the Global Risk Perception Survey 2015 were asked the following questions regarding the 29 risks that were identified.

  1. Which ten of the global risks have the highest probability of occurring in the next decade?
  2. Which ten of the global risks would have the greatest potential impact if they were to occur in the next decade?

In yesterday’s post, I discussed the result of asking the respondents to the survey the first question about the highest probability global risks.    In this post, I discuss the result of asking them the second question about the global risks with greatest potential impact.

2.   RISKS OF GREATEST IMPACT

The respondents were asked to assess each of the 29 risks (these risks are listed on the post dated 03/29/2016), based on the potential impact if they were to occur, on a scale from 1 to 7, with a “1” meaning that the risk will have little impact, and”7″ meaning that the risk is have a catastrophic impact.

Those 10 risks that rated as having the highest potential impact were as follows:

 Ranking Global Risk Category
1. Failure of climate change mitigation and adaptation Environmental
2. Weapons of mass destruction Geopolitical
3. Water crises Societal
4. Large-scale involuntary migration Societal
5. Energy price shock Economic
6 Biodiversity loss and ecosystem collapse Environmental
7. Fiscal crises Economic
8. Spread of infectious diseases Societal
9. Asset bubble Economic
10. Profound social instability Societal

Here are some things to notice about these risks.

a.  Most of the highest probability risks are environmental

Four out of the ten risks are societal:

  • Risk #3 Water crises
  • Risk #4 Large-scale involuntary migration
  • Risk #8 Spread of infectious diseases
  • Risk #10 Profound social instability

Of the remaining six risks, three are economic:

  • Risk #5 Energy-price shock
  • Risk #7 Fiscal crises
  • Risk #9 Asset bubble

Two are geopolitical:

  • Risk #7 Interstate conflict
  • Risk #6 Failure of national governance

Two are environmental:

  • Risk #1 Failure of climate change mitigation and adaptation
  • Risk #6 Biodiversity loss and ecosystem collapse

and the last one is geopolitical:

  • Risk #8  Weapons of mass destruction

There were no risks in the technological category that made it into the top 10 global risks of greatest potential impact.

b.   Highest-impact trends

The number one highest-impact risk was Failure of climate change mitigation and adaptation.    This has appeared on previous global risk reports in the list of top highest-impact risks, and has risen steadily in those lists until it is now the highest impact risk.

3.  COMBINED MEASURE:  PROBABILITY & IMPACT

If you take a look at the risks that have highest probability, and those that have the highest impact, if you multiply these risk factors you get the risks with the highest risk rating overall.   Here are the global risks with the

# Global Risk Risk Category
1 Large-scale involuntary migration Societal
2 Failure of climate change mitigation and adaptation Environmental
3 Water crises Societal
4 Interstate conflicts Geopolitical
5 Cyberattacks Technological
6 Unemployment or underemployment Economic

There is at least one crisis from each category on this list of risks of highest concern.   What is significant is that risks #1, #3 and #4 are all linked, which will be the subject of a future post.

 

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