Global Risks of High­est Con­cern Through Mid-2017

Global Risks 2016: The Re­silience Im­per­a­tive News cy­cles were driven by in­sta­bil­ity in 2015. A new re­port re­veals risks are more in­ter­con­nected than ever. What does this mean for busi­nesses?

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The chal­lenges posed by the ex­o­dus from Syria due to con­flict have in­serted them­selves into ev­ery nook at ev­ery level of global con­ver­sa­tion, from re­gions to coun­tries, to cities to small towns. The Middle East, how­ever, isn’t the only place where peo­ple are tak­ing flight. Ac­cord­ing to the UN, nearly 60 mil­lion peo­ple were dis­placed in 2014, and the trend is push­ing up­ward.

Such large-scale in­vol­un­tary mi­gra­tion is atop the list of top five global risks of high­est con­cern for the next 18 months, ac­cord­ing to the World Eco­nomic Fo­rum’s (WEF) just re­leased “The Global Risks Re­port 2016.” The re­port is based on a sur­vey of al­most 800 mem­bers of the WEF’S global mul­tistake­holder com­mu­nity. In the short term, the top three risks of high­est con­cern are re­lated to in­ter­na­tional se­cu­rity.

Over­all, says Ce­cilia Reyes, Chief Risk Of­fi­cer, Zurich In­sur­ance Group, a strate­gic part­ner in the WEF re­port, the emerg­ing trend is that global risks are “more el­e­vated and more in­ter­con­nected than we’ve ever seen be­fore, and de­mand a proac­tive and in­te­grated re­sponse to ad­dress po­ten­tial im­pacts to ob­jec­tives and growth op­por­tu­ni­ties. It’s now an im­per­a­tive to cre­ate greater re­silience in or­der to mit­i­gate global risks.”

The broad in­ter­con­nec­tiv­ity of risks ex­poses busi­nesses on a num­ber of fronts. For ex­am­ple, civil un­rest can in­ter­rupt sup­ply chains, halt­ing pro­duc­tion, dam­ag­ing as­sets or forc­ing com­pa­nies to aban­don them; cap­i­tal con­trols can pre­vent cur­rency ex­changes and con­ver­sions; and gov­ern­ments fo­cused on na­tional in­ter­ests may sud­denly ex­pro­pri­ate as­sets, de­fault on a con­tract or re­voke li­censes.

The busi­ness per­spec­tive

“Iden­ti­fy­ing and man­ag­ing dan­gers and op­por­tu­ni­ties must be a job for those at the very top of a busi­ness,” says Dr. Roger Barker, Di­rec­tor of Cor­po­rate Gov­er­nance, In­sti­tute of Di­rec­tors. “This isn’t a tick-box com­pli­ance ex­er­cise. Di­rec­tors should build in re­silience to ev­ery as­pect of an or­ga­ni­za­tion.”

Ac­cord­ing to Reyes, “the right so­lu­tions re­quire a holis­tic ap­proach that maps all spe­cific risks and their in­ter­de­pen­den­cies. In the near term, many com­pa­nies still need to re­cal­i­brate the weight­ing they use for political and sup­ply chain risk man­age­ment. They also need bet­ter in­sight of political risk man­age­ment mech­a­nisms, such as risk as­sess­ments for coun­tries or re­gions, sce­nario plan­ning and govern­ment and com­mu­nity re­la­tions pro­grams.”

“The Global Risks Re­port 2016” re­in­forces this view that busi­nesses must strengthen sce­nario and emer­gency plan­ning ca­pac­ity to an­a­lyze com­plex in­ter­de­pen­den­cies. For ex­am­ple, un­em­ploy­ment threat­ens to “de-skill” an en­tire gen­er­a­tion in parts of Europe, mak­ing it dif­fi­cult to find the tal­ent nec­es­sary for busi­nesses to com­pete.

“Gov­ern­ments, in­ter­na­tional or­ga­ni­za­tions and busi­nesses must work to­gether to mit­i­gate the ac­cel­er­at­ing process of risk in­ter­con­nect­ed­ness,” Reyes says. “Cre­at­ing re­silience against the im­me­di­ate and longterm ef­fects of th­ese risks can help de­liver com­pet­i­tive ad­van­tages to or­ga­ni­za­tions and strengthen com­mu­ni­ties.”

“Risks are more el­e­vated and more in­ter­con­nected than we’ve ever seen be­fore. It’s now an im­per­a­tive to cre­ate greater re­silience in or­der to mit­i­gate global risks.”

— Ce­cilia Reyes, Chief Risk Of­fi­cer, Zurich In­sur­ance Group

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