The Global Risk Landscape For 2013

Tyler Durden's picture

The World Economic Forum (WEF), during its Davos jaunt, created an intriguing set of 50 'global risks'. Of course these are from the perspective of the elitest of the elite but with more than 1000 respondents, the results seem all-encompassing. The global risk that respondents rated most likely to manifest over the next 10 years is severe income disparity, while the risk rated as having the highest impact if it were to manifest is major systemic financial failure. There are also two risks appearing in the top five of both impact and likelihood – chronic fiscal imbalances and water supply crisis. The report covers five key categories of 'risk' - which we will be posting on in the next few days - Economic, Environmental, Societal, Geopolitical, and Technological. In this first post we expose the 50 risks by magnitude and probability, how they have evolved over the past few years, and the importance of their inter-connectivity.

Click image for very large chart. The most 'worrying' risks are up and to the right (higher probability and high impact)... Chronic Fiscal Imbalances tops the chart along with Sever Income Disparity.

 

The Top 5 Global Risks by Impact have evolved notably over the past few years - but it appears 'economic' remains high, though 'societal' is catching up...

 

The Top 5 Global 'Most Likely' Risks have also evolved but Economic remains the most dominant...

 

and as every good central banker (and physicist) knows, every action has consequences and so here is the WEF's view on the interconnectedness of global risks...

 

Three Risk Cases

The report introduces three risk cases, based on an analysis of survey results, consultation with experts and further research. Each case represents an interesting constellation of global risks and explores their impact at the global and national levels. The three risk cases are:

Testing Economic and Environmental Resilience

Continued stress on the global economic system is positioned to absorb the attention of leaders for the foreseeable future. Meanwhile, the Earth’s environmental system is simultaneously coming under increasing stress. Future simultaneous shocks to both systems could trigger the “perfect global storm”, with potentially insurmountable consequences. On the economic front, global resilience is being tested by bold monetary and austere fiscal policies. On the environmental front, the Earth’s resilience is being tested by rising global temperatures and extreme weather events that are likely to become more frequent and severe. A sudden and massive collapse on one front is certain to doom the other’s chance of developing an effective, long-term solution. Given the likelihood of future financial crises and natural catastrophes, are there ways to build resilience in our economic and environmental systems at the same time?

Digital Wildfires in a Hyperconnected World

In 1938, thousands of Americans confused a radio adaptation of the H.G. Wells novel The War of the Worlds with an official news broadcast and panicked, in the belief that the United States had been invaded by Martians. Is it possible that the Internet could be the source of a comparable wave of panic, but with severe geopolitical consequences? Social media allows information to spread around the world at breakneck speed in an open system where norms and rules are starting to emerge but have not yet been defined. While the benefits of our hyperconnected communication systems are undisputed, they could potentially enable the viral spread of information that is either intentionally or unintentionally misleading or provocative. Imagine a real-world example of shouting “fire!” in a crowded theatre. In a virtual equivalent, damage can be done by rapid spread of misinformation even when correct information follows quickly. Are there ways for generators and consumers of social media to develop an ethos of responsibility and healthy scepticism to mitigate the risk of digital wildfires?

The Dangers of Hubris on Human Health

Health is a critical system that is constantly being challenged, be it by emerging pandemics or chronic illnesses. Scientific discoveries and emerging technologies allow us to face such challenges, but the medical successes of the past century may also be creating a false sense of security. Arguably, one of the most effective and common means to protect human life – the use of antibacterial and antimicrobial compounds (antibiotics) – may no longer be readily available in the near future. Every dose of antibiotics creates selective evolutionary pressures, as some bacteria survive to pass on the genetic mutations that enabled them to do so. Until now, new antibiotics have been developed to replace older, increasingly ineffective ones. However, human innovation may no longer be outpacing bacterial mutation. None of the new drugs currently in the development pipeline may be effective against certain new mutations of killer bacteria that could turn into a pandemic. Are there ways to stimulate the development of new antibiotics as well as align incentives to prevent their overuse, or are we in danger of returning to a pre-antibiotic era in which a scratch could be potentially fatal?

 

Source: WEF