Global Risks 2013 - a closer look at the findings of the World Economic Forum

Overcoming global risks

Global Risks 2013, produced by the World Economic Forum, details the threats we could face in the next 10 years, and beyond. A survey of over 1,000 experts across the globe, from industry, government, academia and civil society, forms the backbone of the report, revealing the top 50 global risks that keep the world’s leaders awake at night. Richard Waterer of Marsh Risk Consulting considers the implications.

Broke is as good as a change

It is remarkable how quickly our world can be turned upside down. Consider the 2008 financial crisis, prior to which, just about every economist, politician and CEO believed that the West’s financial system was robust – it was common knowledge that central banks had mastered booms and busts. But everyone was wrong. The blind panic that petrified the financial system during the collapse of Lehman Brothers might have dissipated, but it’s not over: the spectre of the Great Depression haunts us all.

In fact, in Global Risks 2013, major systemic financial failure is considered by experts to be the number one threat that, if it comes to pass, would have the greatest impact on our world. Experts also rate chronic fiscal imbalances the second most likely to happen and the third highest by impact ­– in other words, experts think that within the next 10 years the world’s sovereign debt crises will reach their devastating endgame. That is a terrifying prospect.

And it’s not just the economies of the developed world that concern experts; a hard landing of an emerging economy was the fourth highest climber in both likelihood (from 37th to 21st) and impact (36th to 27th). And worryingly, experts aren’t convinced that regulators are best-placed to help; quite the opposite. The highest riser in risk upon last year in terms of its potential impact on the globe was the unforeseen negative consequences of regulation.

A perfect global storm

Environmental risks also concern experts. Rising greenhouse gas emissions are seen as the third likeliest threat, while a water supply crisis is seen as the fourth likeliest and the second highest in its potential impact.

The combined stress that economic and environmental systems are under is one of three broader risks that are considered Global Risks 2013 in greater detail. The fear is that a combination of economic and natural catastrophes could unleash a perfect global storm, with a massive collapse on one front undermining the world’s response to the other.

Another risk analysed in detail is the threat of massive digital misinformation. Recent “digital wildfires” on Twitter include: CNN reporting as fact a false Twitter rumour that the New York Stock Exchange trading floor was flooded during Superstorm Sandy, and a false rumour that President Bashar al-Assad of Syria had been injured or killed through a Twitter account pretending to be Vladimir Kolokoltsev (Russia’s Interior Minister). Alongside broader cyber risks, digital wildfires are a burning issue that no organisation should be remiss in putting out.

Hubris on human health is another key threat to come out of the report. The greatest risk to human health may come from antibiotic-resistant bacteria. As Dr Margaret Chan, Director General of the World Health Organization has said: “A post-antibiotic era means, in effect, an end to modern medicine as we know it. Things as common as strep throat or a child’s scratched knee could once again kill.”

Insurance isn’t the complete solution to every risk human’s face, but it is essential to help mitigate against the majority. In an uncertain world, it faces up to the twin threats of economic crises and environmental degradation by dispersing risk and encouraging best risk practice. The first step of coping with emerging risks is to know what might be – Global Risks 2013 represents experts’ latest insights on what these might be.

Richard Waterer is UK Leader of Marsh Risk Consulting, Richard.Waterer@marsh.com

Marsh & McLennan Companies, are a partner of the World Economic Forum’s Global Risks 2013 insight report.

Richard Waterer
UK Leader of Marsh Risk Consulting