Weak economies, acute weather pose global risks
London, January 8, 2013
Fragile economies and extreme weather have combined to crank up the global risk dial in the past year, creating an increasingly dangerous mix, according to the World Economic Forum.
Despite Europe's avoidance of a euro break-up in 2012 and the US stepping back from its fiscal cliff, business leaders and academics fear politicians are failing to address fundamental problems.
That is the conclusion of the group's Global Risks 2013 report, which surveyed more than 1,000 experts and industry bosses and found they were slightly more pessimistic about the outlook for the decade ahead than a year ago.
“These global risks are essentially a health warning regarding our most critical systems,” warned Lee Howell, the editor of the report and managing director at the World Economic Forum.
"It reflects a loss of confidence in leadership from governments.
“National resilience to global risks needs to be a priority so that critical systems continue to function despite a major disturbance,” he added.
Axel P Lehmann, chief risk officer at Zurich Insurance Group, said: “With the growing cost of events like Superstorm Sandy, huge threats to island nations and coastal communities, and no resolution to greenhouse gas emissions, the writing is on the wall. It is time to act.”
Severe wealth gaps and unsustainable government finances were seen as the biggest economic threats facing the world, as they were last January. There was also a marked increase in focus on the dangers posed by severe weather.
The 80-page analysis of 50 risks for the next 10 years comes ahead of the World Economic Forum's (WEF) annual meeting in the Swiss ski resort of Davos from January 23 to 27 under the theme “Resilient Dynamism”.
Bringing together business leaders, politicians and central bankers, Davos has come to symbolise the modern globalised world dominated by successful multinational corporations.
Chief executives arriving on their private jets may still ooze confidence but "Davos man" - and most delegates are male - has plenty to worry about these days.
"Most of the risks have gone in the wrong direction in the past year," Howell told reporters on Tuesday.
On the economic front, eurozone instability will continue to shape global prospects in the coming years and the "associated risk of systemic financial failure, although limited, cannot be completely discarded," the report said.
Global Risks 2013 analyses three major risk cases of concern globally:
Health and hubris
Huge strides forward in health have left the world dangerously complacent. Rising resistance to antibiotics could push overburdened health systems to the brink, while a hyperconnected world allows pandemics to spread.
Economy and environment under stress
Urgent socioeconomic risks are derailing efforts to tackle climate change challenges. Inherent cognitive biases make the international community reluctant to deal with such a long-term threat, despite recent extreme weather events.
John Drzik, chief executive officer of Oliver Wyman Group, a part of Marsh & McLennan Companies, said: “Two storms – environmental and economic – are on a collision course.
“If we don't allocate the resources needed to mitigate the rising risk from severe weather events, global prosperity for future generations could be threatened. Political leaders, business leaders and scientists need to come together to manage these complex risks.”
From the printing press to the Internet, it has always been hard to predict how new technologies might shape society. While in many ways a force for good, the democratization of information can also have volatile and unpredictable consequences, as reflected in the riots provoked by an anti-Islam film on YouTube.
As the media’s traditional role as gatekeeper is eroded, this case considers how connectivity enables “digital wildfires” to spread, and asks what can be done to put them out.
The report as a whole groups the global risks into economic, environmental, geopolitical, societal and technological categories, which respondents were asked to rate in terms of likelihood and impact.
The data shows that younger respondents were more concerned by risks than older ones, while women were more pessimistic than men. On a regional basis, experts in North America tended to see risks as more likely than those in other regions.
The report also highlights “X Factors” – emerging concerns which warrant more research. These include the rogue deployment of geoengineering counter climate change, for example by injecting particles into the stratosphere.
Global Risks 2013 is the flagship initiative of the World Economic Forum’s Risk Response Network, which provides private and public sector leadership with an independent platform to build resilience by mapping, monitoring and managing global risks. - Reuters & TradeArabia News Service
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