The World Economic Forum has released its 2015 annual report on Global Risks, and the key concerns are shifting. This tenth edition of the report takes a look at a broad range of risks categorized under economic, environmental, geopolitical, societal and technological, and in terms of their likelihood and their impact on the state of the world. In comparison, my prior article on the $10 Trillion risk to global talent availability is but one aspect (economic) of the larger view by the WEF.
Before I share more, here is the definition as supplied by the WEF:
A global risk is an uncertain event or condition that, if it occurs, can cause significant negative impact for several countries or industries within the
next 10 years.
Therefore it relates across borders (national, economic, organizational), and the view is focused on the mid-term, not necessarily this year, nor the next 50 years. The WEF does provide a view of the trends between the next 18 months and in 10 years. I last reported on this in 2013 looking more specifically at the Technological risks.
Figure 1 shows the WEF’s map of risks by likelihood and impact. The diamonds are colored to their respective category of risk: Economic (blue), Environmental (green), Geopolitical (orange), Societal (red), Technological (purple). I have also colorized their original asymmetric map with radii to highlight common ranges of these issues from least likely-impactful (green) through progressive ranges (yellow, orange) and then red. The more an issue reaches the top right corner, the more we should be concerned with it.
Figure 1. The Global Risks Landscape 2015 (modified from original source, WEF) For a Larger version click here.
For the first time in recent years, economic risks issues are not among the top concerns. Unfortunately, that emphasis has moved to geopolitical risks of conflict between nation states, and failure of states or governance. Environmental risks have also decreased significance, although one top issue of Water crises (a societal risk), I would also relate to the environment.
Figure 2 shows the last nine years of top 5 concerns by likelihood and by impact described in WEF Global Risks reports. Just looking at the color coding gives you a sense of shifting priorities. Technological risks only rarely appear in the top 5. While all risks are challenging, I think it is a good thing that they do not perennially reappear. It indicates that something is happening to either mitigate some of those risks, or, if you are more pessimistic, other new bigger issues are overtaking mindshare.
Figure 2 The Evolving Risks Landscape (2007 - 2015) (source: World Economic Forum) For a larger version, click here.
How spot on are these risk assessments? Which such highly interconnected relationships and their dynamic nature it is surely difficult to predict. Yet, Cyber attacks outlined in the 2014 report (released in January) squarely predicted the recent attacks on media and other institutions late last year.
One meta-trend that the report focuses on are the new risks of emerging technologies, in particular it highlights the issues of synthetic biology and the rise of artificial intelligence as new concerns. In synthetics, the focus is on known factors such as genetic modification, as well as the future possibility of creating entire new biological entities and life forms. Artificial Intelligence as it describes “could lead to enormously higher productivity and standards of living. On the other hand, if the transition is mishandled, the consequences could be catastrophic.”
In a way, they both seem to highlight a common concern: what can we do if these run out of control, evolving beyond predicted paths? The logical and moral issues once explored only in science fiction are starting to become real ones to face.
Figure 3: For Which Global Risks is Your Region Least Prepared? (Source: World Economic Forum) For a larger version, click here.
Yet, these are not universal across geographies (see Figure 3). Cyber attacks tend to be big concerns on the more advanced nations. Figure 3 shows just how parts of the world feel prepared for risks their top risks. A small note: Terrorists attacks aren’t in the top 3 in Europe and N. America where hear so much of it bantered in the news, but do rank high in Russia & Central Europe, and in South Asia.
Finally take a look at the more in-depth trends view per risk between 18 months and 10 years in Figure 4. This shows growth or shrinkage of the concern about the risk, not necessarily their likelihood. Water crises stands out here from being a relatively medium risk in the 18 month view to a very large one in 10 years. Food crises and profound social instability likewise follow.
Figure 4: Global Risks of Highest Concern for the Next 18 Months and 10 years (Source: World Economic Forum) For a larger version, click here.
Per my prior post on talent shortage, Figure 3 shows Europe feels least prepared for Unemployment and Underemployment as well as large scale migrations. Both are labor mobility concerns that concur with the
Similarly, within the WEF report, there is a sidebar on the fragility of global supply chains and how local disruptions such as the Ebola outbreak in West Africa, tensions in the Middle East and the dispute between Ukraine and the Russian Federation are breaking lines of commerce.
There is a great deal more to glean from this report, beyond just among those interested in macroeconomic and political trends. It highlights changes to where businesses can grow and how it will be affected. It covers a time frame which allows them to plan in advance, and it looks at the broad global scope where more of our businesses are playing that ever before.
