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?
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