Long term thinking can address global risk – WEF

The Global Economics Forum (GEF) Global Risks 2014 report says the world faces risks that can be addressed only by long-term thinking and collaboration among business, governments and civil society.

The report aims at supporting this process by exploring the nature of systemic risks and mapping 31 global risks according to the level of concern they arouse, their likelihood and potential impact as well as the strength of the interconnections between them.

It takes an in-depth look at the ways in which three constellations of global risk – centered on youth, cyberspace and geopolitics – could interplay and have systemic impact.

The report, which was made available to the Ghana News Agency, highlights how global risks are not only interconnected but also have systemic impacts.

It said to manage global risks effectively and build resilience to their impacts, better efforts were needed to understand, measure and foresee the evolution of interdependencies between risks, supplementing traditional risk-management tools with new concepts designed for uncertain environments.

According to it, if global risks are not effectively addressed, their social, economic and political fallouts could be far-reaching, as exemplified by the continuing impacts of the financial crisis of 2007-2008.

It said the systemic nature of our most significant risks call for procedures and institutions that are globally coordinated yet locally flexible.

“As international systems of finance, supply chains, health, energy, the Internet and the environment become more complex and interdependent, their level of resilience determines whether they become bulwarks of global stability or amplifiers of cascading shocks.”

“Strengthening resilience requires overcoming collective action challenges through international cooperation among business, government and civil society.”

The risks of highest concern to respondents are fiscal crises in key economies, structurally high unemployment and underemployment, water crises, severe income disparity and failure of climate change mitigation and adaptation.

The rest are greater incidence of extreme weather events like floods, storms and fires, global governance failure, food crises, failure of a major financial mechanism/institution and profound political and social instability.

The risks considered high impact and a high likelihood are mostly environmental and economic in nature: greater incidence of extreme weather events, failure of climate change mitigation and adaptation, water crises, severe income disparity, structurally high unemployment/underemployment and fiscal crises in key economies.

The report said the failure of global governance emerges as a central risk that is connected to many different issues.

It said changing demographics, growing middle classes and fiscal constraints would place increasing domestic demands on governments, deepening requirements for internal reform and shaping international relations.

It said businesses, governments and civil society alike, could improve how they approach risk by taking steps such as opening lines of communication with each other to build trust, systematically learning from others’ experiences and finding ways to incentivize long-term thinking.