To put it mildly it has been an uneasy start to 2016. Global stock markets are plummeting, there are geopolitical tensions in Eastern Europe and on the Korean peninsula, a refugee crisis on the European doorstep that has instigated a global debate, horrific terror attacks, concerns about the economic health of China and uncertainty over the future unity of the European Union. And those are to name a few. It is sometimes easy to get lost in the here and now, and fail to see the bigger picture – whatever that is! So, it is against this backdrop that i have been trying to read up on some broader themes in industry, payments, technology, regulation and try to make sense of what is going on. It was while i was reading about the World Economic Forum happening in Davos, Switzerland, that i came across the Global Risks Report – 2016. Its pretty long (103 pages), but really interesting. The following is a very quick summary of some key global risks.
Global Risks – 2016
The Global Risks report is pretty interesting because it highlights:
- Key trends such as an ageing population, climate change, environmental deterioration, the growth of a middle class in developing countries and the dependence on digital services and technology
- The top 10 most likely global risks (see below)
- The top 10 global risks that would have the greatest impact (see below)
- The links between the risks and the impact they would have on societies
- 5 categories of risks – environmental, geopolitical, societal and technological
- Based on a survey, the impact and probability of 29 risks over a 10 year period
Read the report for in-depth details on the impact and likelihood of these global risks. But in this post, i thought it would be useful to have an overview of what the risks are. So here goes….
Economic Risks
1. A housing/commodity or share bubble in a major economy that pops! (Big Impact Risk: 9)
2. Very low inflation or deflation in a major economy over a long period of time
3. The collapse of a large financial institution or the failure of a financial system that would impact the global economy
4. The failure of a important infrastructure (energy, transportation, communication) network – which has repercussions on the wider economy
5. A major financial crisis in a influential economy (Big Impact Risk: 7)
6. High unemployment and / or inadequate use of the employed population over an extended period of time (Most likely Risk: 7)
7. Illegal activities such as illicit financial flow, tax evasion and organised crime (Most likely Risk: 10)
8. A sharp energy price increase / decrease (Big Impact Risk: 5)
9. Out of control inflation
Environmental Risks
10. Unusual and severe weather, and the associated damage such events can cause to the local environment and infrastructure (Most likely Risk: 2)
11. Inability of government, authorities and businesses to implement effective measures to counter and adapt to any climatic changes (Most likely Risk: 3) (Big Impact Risk: 1)
12. Environmental damage that could result in ecosystem damage or even loss (Big Impact Risk: 6)
13. Natural disasters such as a volcanic eruption, earthquake or tsunami (Most likely Risk: 5)
14. Man made environmental disasters such as an oil spill or radioactive contamination
Geopolitical Risks
15. Inability to govern, resulting in civil unrest, corruption and / or political gridlock
16. Local, national and international conflict (economic, military, cyber..) which results in regional tensions (Most likely Risk: 4)
17. Terrorist attacks
18. State collapse or in deep crisis – for example a military coup or civil conflict (Most likely Risk: 6)
19. Deployment of weapons of mass destruction (Big Impact Risk: 2)
Societal Risks
20. Badly planned cities resulting in social, health and environmental difficulties
21. Food crisis – where food is inadequate, unaffordable or unreliable
22. Mass migration due to civil conflict, natural disaster or economic uncertainty (Most likely Risk: 1) (Big Impact Risk: 4)
23. Social unrest resulting in social instability (Big Impact Risk: 10)
24. Disease resulting in death, and social and economic unrest (Big Impact Risk: 8)
25. Water crisis (Most likely Risk: 9) (Big Impact Risk: 3)
Technological Risks
26. Unforeseen and negative consequences of technology resulting in human, environmental and economic damage – this is the Terminator scenario!
27. Digital infrastructure and networks suffer an outage resulting in disruption
28. Widespread cyber-attacks
29. Data breaches – incorporating data fraud/theft (Most likely Risk: 8)