World Economic Forum: Conflict Top Global Risk Factor

Joe DeCapua

January 15,2015

A new report says the world is a very risky place and many are not prepared for it. The World Economic Forum has released its Global Risks 2015 report that lists the greatest threats to stability over the next 10 years.

The report defines a global risk as an “uncertain event or condition that, if it occurs, can cause significant negative impact for several countries or industries within the next 10 years.”

Experts were surveyed about the world’s problems and decided the number one threat to world stability is – the risk of international conflict. The decision is based on likelihood and potential impact.

The World Economic Forum, the British risk assessment firm Marsh & McLennan and Zurich Insurance Group were the main partners in the report.

John Drzik, president of global risk and specialties for Marsh & McLennan Companies, said, “We also had [a] major contribution from academic partners. And then the survey results you’re referring to were a survey of over 800 experts from business, government, academia and NGOs -- people who know risk and could comment on the relative scale of different types of risk.”

The report contained two Top Five lists.

“The idea is to say which ones are more likely to happen and which ones will have the biggest impact if they do happen. And I tend to think the impact scale also tends to have more of a longer horizon to it," he said. "So you see the things that are on that list, like water crisis or climate change and so forth that’ll be longer developing risk, but if they do evolve in certain directions could have significant impact ; whereas some of the ones that are more frequent are perhaps more current. People are expecting things in the current environment to unfold and so tend to have a shorter term character to them.”

The complete top five in terms of likelihood were: interstate conflict with regional consequences; extreme weather events; failure of national governance; state collapse or crisis and high structural unemployment or underemployment.

As for the top five in terms of impact: water crises; rapid and massive spread of infectious diseases; weapons of mass destruction; interstate conflict and failure to adapt to climate change.

The report said, “2015 stands out as a year when geopolitical risks -- largely absent from the landscape of leading risks for the past half-decade -- return to the fore.”

Drzik said, “Geopolitical risk is rising and you see that with interstate conflict as the top risk on the likelihood side of the agenda. And then on the impact side of the analysis water crisis is a top risk. And I think another core theme within the report is the growth of societal risks.”

He said rising geopolitical risk was expected.

“It’s not a surprise when you look at what’s in the headlines these days – Russia and the West in a much different relationship than perhaps a year ago and then events in the Middle East, events in East Asia unfolding," he said. "It’s a prominent issue right now and very much more in the central stage right now than perhaps a couple of years ago where I think the list was dominated more by economic risks in the aftermath of the financial crisis.”

Drzik said that the growing threat of terrorist attacks also plays into it. Mitigating any of the risk factors, he said, will require collaboration among multiple stakeholders.

“It really does require an extensive dialogue amongst the stakeholders and then I think some very carefully designed international, as well as, national regulation and governance frameworks in order to grapple with some of these risks,” he said.

Drzik said, for example, recent cyber attacks – like that launched against SONY – have stirred much debate over how to prevent them. He said such risks affect governments, private industry and society as a whole. And then there are growing ethical concerns and implications regarding synthetic biology, nanotechnology and artificial intelligence.

Drzik said, however, geopolitical risks are causing some countries to become more “protectionist and isolated” from the global community. That could make reaching collaborative agreements to mitigate risks much more difficult.

He added that due to the findings of the Global Risks report there could be a higher level of anxiety and tension at the World Economic Forum annual meeting in Davos from January 21-24.