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In the past week or so, I have done several posts on the first part of the Global Risk Report 2016, which came out earlier this year from the World Economic Forum.

The report is, to a large extent, similar in format to those created in previous years, which makes for an excellent way of checking up on recent trends of global risks.

One feature that was specifically commissioned for the Global Risk Report 2016, however, was a survey of the international security outlook for 2030.   International security is defined as “measures taken by state or non-state actors, individually or collectively, to ensure their survival and integrity against trans-boundary threats.”

The consensus in international relations that was achieved in the first 25 years after the Cold War created social, p0litical and economic progress for people in many countries around the world.  However, shifts in political and economic power are threatening the international security order, and these are being accelerated by:

• technological innovation (see previous post on Global Technological Risks)
• social fragmentation
• demographic shifts

The two shifts that have the potential of destabilizing current international relations are:

1. Frail or weakening states–these open up space for the rise of armed non-state actors (like ISIS) in the global security space, and present themselves as alternatives to state-based governance structures
2. Return of strategic competition between strong states with conflicting interests–this can be seen in the competition between the BRIC  countries (Brazil, Russia, India, China) on the one hand and US and NATO countries on the other.

The last post showed how these two shifts are interconnected by using the example of the challenge that Daesh (aka the Islamic State In Syria or ISIS) poses to the Middle East region and eventually to the entire world.

This post will discuss other examples of frail or weakening states creating a power vacuum which is being filled by terrorist groups or criminal enterprises.

1. Afghanistan–Gains made by US-coalition forces have been lost to resurgent Taliban and al-Qaeda fighters.    For more background, see the book Taliban by Ahmed Rashid.
2. Africa-violent and extremist groups like Boko Haram are at work in  parts of the Sahel, Northern Nigeria, the Horn of Africa, and the Central African Republic.   The security and social concerns brought about by these groups have had a dampening effect on economic growth in Africa.
3. Latin America–organized criminal gangs have gained influence over a steady stream of drugs that continue to flow from the region, thus fueling further expansion of their activities.

All of these security concerns brought about by criminal and/or terrorist activity have a common source in the failing governance of the states they were formed in.    Terrorist groups get support from the local populace to the extent that the people are disenchanted with the services they get from the government.    These groups sometimes offer services to the people in order to gain their loyalty, although the people often find that these services come at a high price in other ways.

The next part of the report on international security deals with the second of the two themes above, the strategic competition between strong states rather than the problems caused by weak states.    The example given to illustrate this are the security issues in the South China Sea.

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In the past week or so, I have done several posts on the first part of the Global Risk Report 2016, which came out earlier this year from the World Economic Forum.

The report is, to a large extent, similar in format to those created in previous years, which makes for an excellent way of checking up on recent trends of global risks.

One feature that was specifically commissioned for the Global Risk Report 2016, however, was a survey of the international security outlook for 2030.   International security is defined as “measures taken by state or non-state actors, individually or collectively, to ensure their survival and integrity against trans-boundary threats.”

The consensus in international relations that was achieved in the first 25 years after the Cold War created social, p0litical and economic progress for people in many countries around the world.  However, shifts in political and economic power are threatening the international security order, and these are being accelerated by:

• technological innovation (see previous post on Global Technological Risks)
• social fragmentation
• demographic shifts

The two shifts that have the potential of destabilizing current international relations are:

1. Frail or weakening states–these open up space for the rise of armed non-state actors (like ISIS) in the global security space, and present themselves as alternatives to state-based governance structures
2. Return of strategic competition between strong states with conflicting interests–this can be seen in the competition between the BRIC  countries (Brazil, Russia, India, China) on the one hand and US and NATO countries on the other.

This second section of the Global Risk Report shows how these two shifts are interconnected by using the example of the challenge that Daesh (aka the Islamic State In Syria or ISIS) poses to the Middle East region and eventually to the entire world.

The reason why Daesh poses a challenge to the entire world is because Daesh does not just recruit locally; it exploits the resentment and disillusionment of young people and recruits them from over 100 countries.    What are the causes of the formation of ISIS?

First of all, the invasion of Iraq and the removal of Saddam Hussein in the naïve attempt to create a democracy in the Middle East.   Naïve not because the people of the Middle East are incapable of creating a democracy, but that such a democracy is not just a form of government; it requires institutions to support and nurture the growth and sustaining of this culture.   To put this into the terms of Spiral Dynamics, which classifies societies in terms of developmental stages, Iraqi was under the authoritarian rule of Saddam Hussein, which should be considered as the third or RED stage of development according to the model (the colors are arbitrarily assigned to make the model more accessible).    The fourth or BLUE stage of development which is based not on one-man authoritarian rule but what might be considered a feudal series of relationships.    It’s the stage where monarchy balanced by an aristocracy is a very common form of government.   The fifth of ORANGE stage of development is where representative democracy becomes possible with different branches of government.   The US, for example, is somewhere on the continuum between the fifth ORANGE stage and the sixth or GREEN stage of development, which is when more the individual is even more empowered, such as through social media, having a direct voice rather than just a representative one.   What the Bush administration wanted to do was leapfrog Iraqi society from the third or RED stage all the way to the fifth or ORANGE stage without creating the institutions that are required for this development.   A makeshift stock exchange was created with the magical thinking that this would somehow jumpstart a capitalist economy in this war-torn area.    Institutions like the Iraqi army that would have provided stability from one stage to the next were dismantled.    The result:   rather than going up stages of development, Iraqi societal development devolved from the RED or strong-man authoritarian rule back down to the second or PURPLE stage of development, where there is competition between tribes or in this case sects.   This is the state Iraq found itself in under the sway of sectarian strife between the Sunni and Shia.

When the Shiites took control over the country through the democratic process, they used their power not to create a government that would serve all constituencies in the country, as an ORANGE level democracy would do, but they started to use government powers to go after the Sunnis in the same way that the Shiites had been persecuted under Saddam Hussein, essentially using a democratic form to advance one tribal affiliation over another.   This caused a Sunni insurgency in the West of Iraq which spilled over into its neighbor Syria to the East, and contributed to the formation of ISIS in that country.

What is clear from the summary in the Global Risk Report is that whatever went INTO creating Daesh or ISIS, it will not be defeated simply by “bombing them out of existence” as some US presidential nominees have suggested.   In fact, you could say that ISIS to a certain extent has been bombed into existence, in a way that the Khmer Rouge were created as an unexpected byproduct of the bombing campaign in Cambodia and Laos during the Vietnam War.   Bombing campaigns may erase individuals among the Daesh leadership, but their create enough chaos because of collateral damage that they merely extend the vacuum in which a terrorist group like Daesh thrives.   Rather, Daesh can only be defeated if the civil war in which it is embroiled is ended.    However, major regional and global powers have been unable so far to be able to put aside differences and pragmatically find a political settlement.    It can only be suffocated socially and economically, not militarily or at least not SOLELY through military means.   For more concrete proposals for meeting the challenge of ISIS, I recommend the book ISIS:  The State of Terror, by J. M. Berger and Jessica Stern.

This requires a reversal of the second trend above, increasing cooperation between strong states, if the first trend, that of the rise of non-state actors like Daesh or ISIS, is also to be reversed.

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In the past week or so, I have done several posts on the first part of the Global Risk Report 2016, which came out earlier this year from the World Economic Forum.

The report is, to a large extent, similar in format to those created in previous years, which makes for an excellent way of checking up on recent trends of global risks.

One feature that was specifically commissioned for the Global Risk Report 2016, however, was a survey of the international security outlook for 2030.   International security is defined as “measures taken by state or non-state actors, individually or collectively, to ensure their survival and integrity against trans-boundary threats.”

The consensus in international relations that was achieved in the first 25 years after the Cold War created social, p0litical and economic progress for people in many countries around the world.  However, shifts in political and economic power are threatening the international security order, and these are being accelerated by:

• technological innovation (see previous post on Global Technological Risks)
• social fragmentation
• demographic shifts

The two shifts that have the potential of destabilizing current international relations are:

1. Frail or weakening states–these open up space for the rise of armed non-state actors (like ISIS) in the global security space, and present themselves as alternatives to state-based governance structures
2. Return of strategic competition between strong states with conflicting interests–this can be seen in the competition between the BRIC  countries (Brazil, Russia, India, China) on the one hand and US and NATO countries on the other.

Although these two phenomenon may seem different on the surface, the Global Risk Report 2016 says they are linked.   The first category are “asymmetrical” threats and the second category are classical threats.   However, the instability of states such as Somalia, Afghanistan, and Syria have led to the rise of both types of threats simultaneously.  For example, in the case of the Syria, the weakening of the Assad regime’s control over the country not only to the rise of non-state actors like ISIS (one of the asymmetric threats), but to increased competition between the United States and Russia to influence the situation.

The “battlefield” in Syria, if you can call it that, has blurred the distinction between zones of war and zones of peace, as well as the distinction between legitimate combatants, non-traditional adversaries and the civilians in the areas that are undergoing conflict.

Because the two categories of threats above are linked, one conclusion to be drawn is that ISIS (aka Daesh) cannot be defeated as long as civil war rages in Syria, and major regional and global powers will need to find a political settlement.

The detailed recommendations by the World Economic Forum in the Global Risk Report 2016 to defeat ISIS will be described in the next post.

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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 changed the most since the last Global Risk Report
• The Paris Agreement as a risk response to the failure of climate-change mitigation and adaptation
• The risk responses to  Large-Scale Involuntary Immigration
• Economic risks
• Creating a culture of risk resilience

In looking over the first part of the Global Risk Report 2016, I wanted to make sure there were any areas that I hadn’t covered, and I did uncover one such area.   You see, I had covered geopolitical and social risks related to Large-Scale Involuntary Immigration and the risk responses to them which involved supporting immigration programs that help refugees assimilate into their new host countries.   I had covered environmental risks with the focus on the Paris Agreement as a way to mitigate against climate change.   Also, I had discussed the economic risks inherent in the slowdown of the global economy, and China’s economy in particular.

However, I had not yet addressed technological risks, which I will do in this post.

What are the major technological risks that the world faces at the present moment?

1. Cyber-related risks—cyberattacks are among the most likely and most potentially impactful risks for the next two to three years, and they are highest risk of concern for the region of North America.   Companies need to make an appropriate level of investment to enhance risk management against such cyberattacks, particularly in the two areas of mobile internet and machine-to-machine connections.
2. Exchange of data between countries and stakeholders—given the inherently international nature of data transfer between multinational companies, a corresponding international legal framework must be established to ensure privacy, transparency, encryption control, and intellectual property regimes.
3. Changes to the work environment—by 2022, 40% of US workers will have a probability of their jobs being automated.   To replace manual labor jobs that are most likely the first to be so automated, skills in STEM (science, technology, engineering and mathematics) are expected to increase in importance in the medium term, and skills in problem-solving, creativity, and social intelligence are expected to increase in importance in the long term.    Why?  Because jobs involving these skills will be difficult to automate, and thus will not become obsolete.
4. Widening wealth, income and social inequalities—4 out of the 7 billion people on this planet do not have access to the Internet, and will thus not benefit from technological innovation.    Because of the trend mentioned in paragraph 3, there will be diminishing returns to labor and this could exacerbate current trends towards wealth disparity.    This lowers aggregate demand and will depress the global economy for decades to come, and if continued, will contribute to the greater risks associated with social instability.

Any effort that can be made to bridge the technological gap will have to be accomplished, at least in part, through educational institutions, although public-private partnerships between business and government can also contribute to this effort.   Society will support technological innovation to the extent that the innovation is seen as a benefit to all the society’s members, and not just the elite few.

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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 changed the most since the last Global Risk Report
• The Paris Agreement as a risk response to the failure of climate-change mitigation and adaptation
• The risk responses to  Large-Scale Involuntary Immigration

I think one of the reasons why people don’t study global risks is because they feel helpless in the face of risks which are, after all, global in scope.    Of course, as an individual, there is not much one can in the face of a global risk like that of climate change, but working together as governments and societies, a risk response plan like the one developed in the recent Paris Agreement is a possibility.

That is why I am not enervated, but excited, when reading about risk response plans, because as a project manager, working on teams and directing teams is what I do for a living.   That is why I was glad to see that the Global Risk Report took one of the case studies and spent it not on a prominent global risk, but on identifying those characteristics of teams which were able to successfully navigate past global crises, like

• The earthquake in Chile in 2010
• The Ebola outbreak of 2014
• The earthquakes in Nepal in 2015

The Global Agenda Council (GAC) on Risk and Resilience studied the responses to these crises and came up with the following 4 leadership and institutional values which are important for weathering the storm of a crisis.

1. Clarify roles and responsibilities—when a crisis occurs, time is of the essence and you cannot waste any time trying to decide who has authority or who is in charge of resources.   All of these roles must be specified in a risk response plan way in advance, and must be clarified through training and exercises.
2. Develop crisis leadership characteristics—leaders must be transparent, responsible and accountable.   They must be able to articulate to the public a clear path forward in the case of an emergency
3. Leverage expertise—social networks with experts must be developed in advance that cross professional and institutional boundaries so that these expert “force-multipliers” can be on tap when a crisis rears its ugly head.
4. Create a culture of integrated risk management—the culture of risk management must span the whole organization, including the supply chains.    One way to create this culture is through the development of integrated planning for such risks.

In my own mind, the disastrous reaction by the Bush administration to Hurricane and subsequent flooding in August of 2005 is an example of the breakdown of many of the above values.   The Department of Homeland Security had cut the Federal Emergency Management Agency (FEMA) budget, and reoriented its mission towards recovery from terrorist attacks rather than from natural disasters.

When Hurricane Katrina hit and the flood came, the immediate response was delayed due to miscommunication and insufficient planning, and the government was not even able to deliver promised supplies and transportation based on those plans.

Effective management of crises can create a force-multiplying effect in a positive direction, but it is equally true that ineffective management can create a force-multiplying effect in the other direction.

That’s why I recommend to all risk managers to read Box 1.5 on page 19 of the Global Risk Report to see if the values listed there are reflected in your own organization.    If not, why not create such a culture?   You may be thinking, I am just a drop in the ocean, but consider this:   what is an ocean if not just a multitude of drops.    By yourself, no, you cannot do very much, but if a multitude of drops work together, they can become a tsunami of change within the organization that can enable it to withstand any storm, on the physical or economic front.

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Today I had the wonderful experience of attending a TEDx event live at the Illinois Institute of Technology in Chicago.    The event consisted of a 20 TEDx talks given from people as diverse as Dr. Lillian Smestad talking about anti-matter research done at CERN to a fifth-grader named Kate Cesario who read her classmate’s poem about her experience about coming from war-torn Iraq to the United States which she called the “Everything Country.”

My favorite talks included:

• John Katsoudas—talked about how Nano Liquid Batteries can be the breakthrough that are needed to jump-start the market for purely electric vehicles
• Haydn Shaw—talked about millennials are not a problematic group to deal with if you realize they are just going through a problematic period called emerging adulthood, like every other generation has done before it
• Garrett Gray—on how to suppress the instinct which terms healthy competition into unhealthy competition
• Carl Seidman—on how his first “retirement” at 32 taught him that all of us will need to reinvert our career and our lives at least once in our lives, so we might as well do it voluntarily rather than being forced to do so.
• Ellen Schnur/Jim Mecir—talked about how the powers of improvisation can help you not only be more spontaneous, but can help you stop negative “self-talk” which can sabotage your efforts

The organizer, Amy Lee Segami, spent six months putting on the event with her team of IIT student volunteers.   I am still on an intellectual high after listening to an entire day’s worth of information and entertainment.   It is now my goal to BE on a TEDx talk next time around in 2017 …

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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 Paris Agreement as a risk response to the failure of climate-change mitigation and adaptation
• The risk responses to  Large-Scale Involuntary Immigration

The Global Risk Report focused in detail about the greatest risks the world now faces in the category of environmental risks (failure of climate-change mitigation and adaptation) and geopolitical/societal risks (large-scale involuntary immigration).   In this post, I will discuss the next category of risks that are of highest concern to those respondents of the Global Risk Perception Survey:   economic risks.

The economic risks which are of highest concern are:

• Fiscal crises in key economies
• Deflation of asset bubbles
• Structural unemployment and underemployment
• Global systematic financial crisis (similar to the one that occurred in 2008)

What is the central theme of these concerns?    The build-up of corporate and public debt in emerging countries, where corporate debt has risen by 26 percentage points in the last decade.

The Economist Intelligence Unit says that they rate the economic slowdown in China has a high likelihood (4 out of a 5-point scale) and a very high potential impact (5 out of a 5-point scale), for a total risk rating of 20 out of 25, the highest of any of the 10 risks they are following as of April 2016.

Capital is flowing out of the country, which has highlighted structural weaknesses in the country and has resulted in a depreciation in the Chinese renminbi currency’s exchange rate against the US dollar.   If the slowdown turns into a hard landing with a recession, this will have the following global effects:

• depressing of global commodity prices, leading to …
• huge detrimental impact on Latin American, Middle Eastern and Sub-Saharan African states that had benefited from the previous Chinese-driven boom in commodity prices
• severe effects on the Eu and US because of growing dependence of Western manufacturers and retailers on demand in China.

The crisis in emerging economies could spark volatility in global markets, which could lead to a global systematic financial crisis that would not be a repeat of what happened in 2008, but worse because the largest banks now have more concentration of financial capital, not less than, they did in the last crisis.

It is not just the impact of the crisis itself, but WHEN it occurs, which is important to watch.    One of the other risks that the Economist Intelligence Unit foresees is the impact of a financial crisis if it occurs before the November 2016 US Presidential Elections.   Under conditions, they predict that Hillary Clinton would beat Donald Trump in the presidential election, but under severe stress such as a terrorist attack or a financial crisis, the election of Donald Trump as president could become a reality.

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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 Paris Agreement as a response to the failure of global climate mitigation and adaptation
• Risk responses to Large-Scale Involuntary Immigration

Today I want to focus in on a refugee problem that does not get sufficient attention.   The third largest hotspots of involuntary immigration are Syria, Afghanistan, and Somalia.   However, there is a refugee crisis that is mounting in Southeast Asia, namely, the Rohingya refugees from Myanmar who are fleeing to the host country of Malaysia, with many choosing to go to final destination countries such as the United States.

This crisis is described in Box.1.3 in Part I of the Global Risk Report 2016.   It describes the Rohingya as stateless, but avoids the back story as to WHY they are stateless.   The government in Myanmar refuses to recognize their citizenship claiming that they are immigrants from Bangladesh, which is an historical fiction that the government tries to reinforce by forcing Rohingya to sign papers that list their ethnicity as “Bengali” in order for them to get any aid from the Myanmar government.

As if that were not bad enough, the Myanmar government has tried to ratchet up tensions between the Rohingya and the Rakkhine peoples based on religious and ethnic differences, which has led to violence against the former by the latter.   The Rohingya are a Muslim minority in a country whose majority are Buddhist.   To escape this attempt at ethnic cleansing, over 25,000 people departed from the Bay of Bengal in 2015 alone, with over 50,000 of them ending up in Malaysia.

This is problematic for two reasons:   1) Malaysia has not ratified key intergovernmental agreements regarding the treatment of refugees, 2) Malaysia does not have the legal or administrative framework for responding to refugees.

But the rest of the article focuses on the positive:   Rohingya refugees have begun to develop their own refugee-run community organizations, both in Malaysia and in destination countries like the United States.    For example, where I live in Chicago, IL, there is a Rohingya Culture Center opening up this Saturday, April 9th, open to all Rohinya refugees who are seeking advice and assistance on how to adapt to live in their new adopted countries.

Those who have come from Malaysia just a few years back and have assimilated enough that they have jobs and are sending their children to school are now helping those who have just arrived.   The first set of skills that newcomers need are language skills, and this is a big emphasis at the culture center, as well as practical advice on how to get and keep a job and what cultural expectations are for those in the workplace.

For those who are concerned about the assimilation of Muslim immigrants, there is a success story in the immigrants from Bosnia who settled in the St. Louis, MO area during the Clinton administration because of the ethnic cleansing going on in Serbia.   They have thrived, built their own community, and in doing so, have renovated many areas of the city of St. Louis which were on the decline.   This proves that giving enough support to the refugees so that they can help each other not only helps them thrive, but helps the neighborhoods thrive in which they are the newest residents.

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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 Paris Agreement as a response to the ailure of global climate mitigation and adaptation
• The risks Large-Scale Involuntary Immigration

The next topic I want to discuss is another of the highest risks of concern, namely Large-Scale Involuntary Migration.    It is of highest concern because it is seen as the global risk that is most likely to occur during the next 18 months according to the respondents of the Global Risk Perception Survey.    But of even greater significance is that this risk is tied to risks which are to continue to be likely to occur in the longer term over the next 10 years, mainly interstate conflict and state collapse as far as geopolitical risks are concerned, and as far as environmental risks go, water crises linked to climate change.    The number of people who are refugees in 2014 were 59.5 million, compared to 40 million displaced at the time of World War II.    More than half of these refugees are escaping three countries:  Syria, Afghanistan, and Somalia.   They are mostly going to Europe, which is why the risk of large-scale involuntary migration is listed as having the highest likelihood in that region.

Here are three factors which exacerbate this risk of large-scale involuntary migration.

1. People stay in host countries longer–the average duration of displacement was 9 years in the 1980s and has risen to 20 years in the mid-2000s
2. Global humanitarian assistance infrastructure is not able to effectively response to today’s extent of involuntary migration.
3. Most migrants move to other developing countries, which are even less equipped to handle them than developed countries.

All of these increase risks in the host and the destination countries.

What are some risk responses to these challenges?

Local business communities need to get involved in:

• Creating work permits and increasing access to jobs
• Supplying skills training, most of important of which are skills in communicating in the language of the host and/or destination country
• Giving access to schools and public health services
• Helping refugees transition into self-service

These sound like great goals, but the problem is even developed countries are facing an economy of slow growth that provides fewer resources for its own citizens, let alone people from other countries who are seeking to live there.

The next post will go into an overlooked source of risk of involuntary migration, namely the refugees from Myanmar who are relocating to Malaysia on their way to various destinations including the United States.

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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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