Which are the global risks we face?

The annual meeting of the World Economic Forum in Davos held last January has left the 11th edition of its Global Risks Report.

The report (available here) provides the opinion of almost 750 experts on the impact and likelihood of occurrence of 29 global risks (economic, environmental, geopolitical, social and technological) in a 10-year time horizon view.

Throughout the Report is highlighted the threat to economic, social and environmental sustainability of our world that constitute the 29 risks analyzed.

What global risks are the most important?

As we can see in the following table which includes the evolution of risks since the first report of 2007, in terms of probability of occurrence the most likely risks are involuntary large-scale immigration, extreme weather events, the failure to mitigation and adaptation to climate change, conflicts between States with regional implications, and major natural disasters. Regarding significance of impacts of risks, the most important are the failure to mitigate and adapt to climate change, weapons of mass destruction, water crisis, involuntary large-scale immigration, and a severe change in the price of energy.

We can clearly note that the main risks are caused by climate change and its consequences (failure adaptation / mitigation, natural disasters, water crisis, and is also partly to blame for unwanted immigration of people that will grow with time as many countries suffer more intensely the serious consequences of climate change).

For further concern in the environmental field, we must not fail to see that in the risk of severe change in the price of energy (which a priori and superficially we could say that has positive consequences for countries that buy raw materials -or energy to generate them- and negative for those who sell) we can find a major handicap that would occur if the price of non-renewable energy became so cheap that economic incentives were lost for further implementing and researching in the field of renewable energy.

Less interest in clean energy would have certainly a very negative impact on climate change and therefore the consequences aforementioned aggravating the situation very much. Without going any further, with the lifting of international sanctions on Iranand its entry to peak performance in the oil market we may be living the first steps in that direction.

What is the evolution of global risks?

Regarding the evolution of global risks between the report from last year and this one, it is worth noting how has soared (both in terms of probability of occurrence and impact) the risk of involuntary migration at large scale with the challenges of social conflicts and humanitarian aid that entails. Other risks such as failure mitigation/adaptation of climate change, deflation, the change in the price of energy, loss of biodiversity and ecosystem collapse or a deep social instability have also increased in both probability of occurrence as in predictable impact, although in much lesser extent compared to involuntary migration.

Fortunately, other risks have decreased since last year, such as the spread of infectious diseases, the collapse of critical information infrastructure or the collapse or crisis of states.

Which risks are more pressing?

With regard at how the risks in terms of temporal proximity are seen, we can observe in the chart below that in the short term (18 months) and long term (10 years) there are many differences between the 5 more serious anticipated risks. While the short term is marked obviously by what we are living nowadays (involuntary migration, collapse or crisis states, conflict between states, unemployment or precarious employment, or failure of national governments), in the long run there are emerging another type of risks largely related to climate change as we mentioned above (water crisis, failure mitigation/adaptation to climate change, extreme weather events, food crises or deep social instability).

In view of these data, it is clear that many efforts have to be made to adapt and mitigate climate change, because of the consequences it has on other global risks. If climate change was not producing, other derivatives risks would not have the same degree of probability of occurrence or such a high impact. Previously we talked on the blog about whether we are willing to stop climate change, and we have also discussed whether the efforts and future commitments are sufficient or directly “we arrive too late.”

What global risks have more impact in doing business?

Concentrating on what risks are more threatening when doing business, the report reveals that they differ considerably from one country to another, although some patterns emerge. In developed economies, the economic risks such as asset bubbles and crises of scale are a priority on the agenda of business, and another concern is also present in technological risks, such as cyber attacks and data theft.

In the chart below we can see what are the main risks for businesses from a geographic perspective, data that are taken from the Opinion Survey Executives (EOS) which determines the vision of more than 13,000 executives in 140 countries on a wide range of socioeconomic issues.

Within these geographical differences, we can determine a ranking of what the risks most repeated when doing business are. The risk that appears most of the times as the main risk is unemployment or precarious employment, followed by changes in the price of energy.

Spain is one of those cases where unemployment or precarious employment is at the top of the list. The crisis of the past years along with the prospects for changes in occupations and sectors, low-skilled workers, pose a present and future quite worrying if the problem is not solved.

As the report says, education systems must be designed to focus on learning to learn and collaboration. As the knowledge-based work will be increasingly headed to technologic work, we must educate future generations in the skills where you can still expect humans to surpass the machines -attributes based on collaboration- such as teamwork, interaction, relationships and cultural sensitivity. In an increasingly automated future, the value will come from the emotional and contextual intelligence.

A modern society must face the future with determination, without looking away, far beyond countries and cultures, facing the risks and the challenges that these create, providing solutions and developing the technologies required to minimize the occurrence and impact of risks and overcoming the difficulties caused by the complexity of the problems, the large number of variables involved and the interconnection between them.

Not in vain, from solving or minimizing these risks depends the sustainability of society and the planet Earth.

Shall we get down to work or look the other way?

NOTE: This article was first published in spanish and can be found here.