The World Economic Forum on last year released its Global Risks 2014 report. How Accurate has it been so far this year?
“Taking a 10-year outlook, the report assesses 31 risks that are global in nature and have the potential to cause significant negative impact across entire countries and industries if they take place,” is how the World Economic Forum describes the report in a statement accompanying its release.
“The risks are grouped under five classifications—economic, environmental, geopolitical, societal and technological—and measured in terms of their likelihood and potential impact,” the statement says.
The report canvasses the views of 700 experts from around the world. Ten of what the World Economic Forum calls the “global risks of highest concern” for 2014 are as follows:
•Fiscal crises in key economies
“Fiscal crises feature as the top risk in this year’s Global Risks report. Advanced economies remain in danger, while many emerging markets have seen credit growth in recent years, which could fuel financial crises. A fiscal crisis in any major economy could easily have cascading global impacts.”
•Structurally high unemployment/underemployment
“Unemployment appears second overall, as many people in both advanced and emerging economies struggle to find jobs. Young people are especially vulnerable—youth unemployment is as high as 50% in some countries and underemployment (with low-quality jobs) remains prevalent, especially in emerging and developing markets.”
“Environmental risks feature prominently on this year’s list. Water crises, for instance, rank as the third highest concern, illustrating a continued and growing awareness of the global water crisis as a result of mismanagement and increased competition for already scarce water resources.”
•Severe income disparity
“Closely associated in terms of societal risk, income disparity is also among the most worrying issues. Concerns have been raised about the squeezing effect the financial crisis had on the middle classes in developed economies, while globalization has brought about a polarization of incomes in emerging and developing economies.”
•Failure of climate change mitigation and adaptation
“Even as governments and corporations are called upon to speed up greenhouse gas reduction, it is clear that the race is on not only to mitigate climate change but also to adapt. Failure to adapt has the biggest effect on the most vulnerable, especially those in least developed countries.”
•Greater incidence of extreme weather events (e.g. floods, storms, fires)
“Climate change is the key driver of uncertain and changing weather patterns, causing an increased frequency of extreme weather events such as floods and droughts. The Global Risks 2014 report draws attention to the combined implications of these environmental risks on key development and security issues, such as food security and political and social instability, ranked 8th and 10th respectively.”
•Global governance failure
“The risk of global governance failure, which lies at the heart of the risk map, was viewed by respondents as one of the risks that is most connected to others. Weak or inadequate global institutions, agreements or networks, combined with competing national and political interests, impede attempts to cooperate on addressing global risks.”
“One of the top societal risks in the report, food crises occur when access to appropriate quantities and quality of food and nutrition becomes inadequate or unreliable. Food crises are strongly linked to the risk of climate change and related factors.”
•Failure of a major financial mechanism/institution
“Over five years after the collapse of Lehman Brothers, the failure of a major financial mechanism or institution also features among the risks that respondents are most concerned about, as uncertainty about the quality of many banks’ assets remains.”
•Profound political and social instability
“At number 10 is the risk that one or more systemically critical countries will experience significant erosion of trust and mutual obligations between states and citizens. This could lead to state collapse, internal violence, regional or global instability and, potentially, military conflict.”