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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)
• the qualitative analysis of risks (corresponding to the Perform Qualitative Risk Analysis process of Project Management)
• the identification of regional risk trends
• the risks that have gone changed the most since the last Global Risk Report

The next topic I want to discuss is that of a risk response.   In traditional project management, the next process after Perform Qualitative Risk Analysis is to perfect Quantitative Risk Analysis.    The measurement of probabiliy goes from being on a 1 to 7 scale to being on a scale from 0 to 100%.

However, the biggest change comes in the measurement of impact, which goes from a subjective scale from 1 to 7 to an estimate of the damage in terms of actual dollars.   The group within the World Economic Forum that puts out the Global Risk Report each year decided that estimating a risk on what is, after all, a global scale, was just too difficult.

So the risk report goes on to focus on what practical measures can be taken to either mitigate the probability and/or impact of a risk; this is called a risk response.   A good example of such a global risk response is with regards to the risk that had the highest estimated potential impact and the third-highest likelihood of occurring within the 10 years, namely, the failure of climate-change mitigation and adaptation.

The latest Intergovernmental Panel on Climate Change (IPCC) report came out in November 24 reaffirmed that the phenomenon of climate change is unequivocal, with the world being on average already 1 degree Celsius warmer than it was in the 1950s.   Human influence, according to the report, is “extremely likely” to be the dominant cause.

Not only is the risk of the failure of climate-change mitigation and adaptation one of the risks of highest concern in and of itself, but it is the root cause of other risks, such as the water crises in the Middle East & North Africa as well as in South Asia, or extreme weather events in North America, South America, South Asia and East Asia & the Pacific (see Regional Risks post for more detailed information).

If climate-change risks are not mitigated, the results would be catastrophic.   An attempt to limit the warming to 2.7 degrees Celsius by the year 2100 was discussed at the Paris Climate Conference in December 2015, culminating in the adoption of the Paris Agreement on 12 December.

The Paris Agreement

195 countries signed the Paris Agreement, including the United States.   As of the publication of the Global Risk Report,  190 of these countries had submitted climate action plans, which cover up to 95% of total global emissions.

Here are some of the elements including in such plans.

• Increasing investments in renewables, such as solar (price of solar panels is down 75% since 2009), electricity (price of batteries for electric vehicles is down 50% since 2009), and wind (at grid parity now in 50 countries)
• Policy frameworks that include incentives to reduce carbon emissions
• Consolidation and scaling of public-private cooperative ventures to reduce carbon emissions

Creating incentives to reduce carbon emissions will help forward-looking businesses and governments  to capitalize on business opportunities that stem from innovation and implementation of solutions.

Adaptation

The Paris Agreement covers mitigation of the probability of climate change.   What about the mitigation of it impact?   This is a harder problem to address, which a lot of adaptation depends on a prediction of the pace of global warming.    The problem faced now is that there are several positive feedback loops that may create sudden increases in the rate of global warming.    One mentioned in the Global Risk Report 2016 is the Arctic feedback loop.

Step 1.   Increasing air temperatures melt ice

Step 2.   Melting ice causes more of the Arctic Ocean surface to be exposed

Step 3    Arctic ocean surface does not reflect sunlight as well as the ice does, which draws more heat into the ocean

Step 4   Increased ocean temperatures melt ice and cause increasing air temperatures

… which takes us back to Step 1.

One not mentioned in the Global Risk Report is the affect of melting ice on the surface of Greenland.   This is ice that is melting fresh water which flows into the Atlantic ocean salt water right where the Gulf Stream passes through on its way to warm Northern Europe.    If the increasing amount of fresh water that passes into the Gulf Stream disrupts that salt water current, then you could see temperatures in Northern Europe equivalent to those at the same latitude west of the Atlantic in Canada.

Failure to mitigate and adapt to global climate change could cause large-scale demographic responses through migration.    Look at what’s already happening based on the large-scale involuntary migration from the Middle East.    What if this were to happen not just in the Middle East, but across the globe?    That is why efforts on a risk response such as the Paris Agreement are important, albeit expensive to implement, because those costs however high pale in comparison to the costs of NOT implementing them.

This topic of large-scale involuntary migration is the next topic covered in the report, which I will cover in the next post.

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