Insight Report Global Risks 2014 Ninth Edition
Insight ReportGlobal Risks 2014Ninth Edition
Global Risks 2014, Ninth Edition is published bythe World Economic Forum.The information in this report, or on whichthis report is based, has been obtained fromsources that the authors believe to be reliableand accurate. However, it has not beenindependently verified and no representation orwarranty, express or implied, is made as to theaccuracy or completeness of any informationobtained from third parties. In addition, thestatements in this report may provide currentexpectations of future events based on certainassumptions and may include statements thatdo not directly relate to a historical or currentfact. These statements involve known andunknown risks, uncertainties and other factorswhich are not exhaustive. The companiescontributing to this report operate in a constantlychanging environment and new risks emergecontinually. Readers are cautioned not toplace undue reliance on these statements. Thecompanies contributing to this report undertakeno obligation to publicly revise or updateany statements, whether as a result of newinformation, future events or otherwise, and theyshall in no event be liable for any loss or damagearising from the use of the information in thisreport.World Economic ForumGenevaCopyright 2014By the World Economic ForumAll rights reserved. No part of this publicationmay be reproduced, stored in a retrieval system,or transmitted, in any form or by any means,electronic, mechanical, photocopying, orotherwise, without the prior permission of theWorld Economic Forum.ISBN-13: 92-95044-60-6ISBN-10: 978-92-95044-60-9REF: 090114This report and an interactive data platform areavailable at www.weforum.org/risks.World Economic Forum91-93 route de la CapiteCH-1223 Cologny/GenevaSwitzerlandTel.: 41 (0) 22 869 1212Fax: 41 (0) 22 786 2744contact@weforum.orgwww.weforum.org2Global Risks 2014
Global Risks 2014Ninth EditionWorld Economic Forum in collaboration with:Marsh & McLennan CompaniesSwiss ReZurich Insurance GroupNational University of SingaporeOxford Martin School, University of OxfordWharton Risk Management and Decision Processes Center, University of PennsylvaniaGlobal Risks 20143
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Contents7PrefaceKlaus Schwab9Executive Summary11Introduction12Part 1: Global Risks 2014: Understanding SystemicRisks in a Changing Global Environment26Part 2: Risks in Focus262.1 Introduction: Understanding Global Systemic Risk272.2 Instabilities in an Increasingly Multipolar World332.3 Generation Lost?382.4 Digital Disintegration422.5 Strategies for Managing Global Risks50Part 3: Towards Ten Years of the Global RisksReport52Conclusion53Appendix A: Definitions of Global Risks 201455Appendix B: Global Risks Perception Survey andMethodology 201457AcknowledgementsGlobal Risks 20145
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Prefacemitigate them and the critical role of theyounger generation. To do so, it offersdeep-dive analytical insights intointerconnected risks with the potentialto have systemic consequences in thegeopolitical, socio-economic anddigital spheres. The report features ananalysis of a survey of over 700 leadersand decision-makers from the WorldEconomic Forum’s globalmultistakeholder community on 31selected global risks. For the first time,survey respondents were askeddirectly to nominate their risks ofhighest concern, which placedeconomic and social issues firmly atthe top.Our lives are changing at anunprecedented pace. Transformationalshifts in our economic, environmental,geopolitical, societal and technologicalsystems offer unparalleledopportunities, but the interconnectionsamong them also imply enhancedsystemic risks. Stakeholders fromacross business, government and civilsociety face an evolving imperative inunderstanding and managingemerging global risks which, bydefinition, respect no nationalboundaries.Conceptual models are needed todefine, characterize and measure thepotential negative impacts ofinterconnected global risks. It is in thisspirit that I present the Global Risks2014 report, now in its ninth edition.This report aims to enhance ourunderstanding of how acomprehensive set of global risks isevolving, how their interaction can leadto unexpected and often systemicimpacts, and the trade-offs involved inmanaging them.Global Risks 2014 is a stimulus forreflection for policy-makers, chiefexecutive officers, senior executivesand thought leaders around the world.It is also a call to action to improveinternational efforts at coordination andcollaboration, going beyond thetraditional roles and responsibilities ofthe public and private sectors to equipinstitutions to understand, map,monitor, manage and mitigate globalrisks.The report emphasizes the importanceof understanding systemic risks,long-term thinking to address andI would like to thank the partners of theGlobal Risks 2014 report, withoutwhose expert contributions this reportwould not have been possible: Marsh &McLennan Companies, Swiss Re andZurich Insurance Group, as well as theNational University of Singapore,Oxford Martin School at the Universityof Oxford and the Wharton RiskManagement and Decision ProcessesCenter at the University ofPennsylvania. My appreciation alsogoes to the World Economic Forum’sNetwork of Global Agenda Councils fortheir important insights, under theleadership of Martina Gmür. I am alsograteful to Jennifer Blanke, ChiefEconomist, and the Global Risks 2014project team members Beñat BilbaoOsorio, Ciara Browne, GemmaCorrigan, Roberto Crotti, Attilio DiBattista, Gaëlle Dreyer, MargaretaDrzeniek Hanouz, Caroline Galvan,Thierry Geiger and Tania Gutknecht fortheir critical contributions to making thisreport possible.Moving from urgency-driven riskmanagement to more collaborativeefforts to strengthen risk resiliencewould benefit global society. Together,leaders from business, governmentand civil society have the foresight andcollaborative spirit to shape ourglobal future.Klaus SchwabFounder and Executive ChairmanWorld Economic ForumGlobal Risks 20147
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Executive SummaryThe Global Risks 2014 report highlights how global risks arenot only interconnected but also have systemic impacts. Tomanage global risks effectively and build resilience to theirimpacts, better efforts are needed to understand, measureand foresee the evolution of interdependencies betweenrisks, supplementing traditional risk-management tools withnew concepts designed for uncertain environments. If globalrisks are not effectively addressed, their social, economicand political fallouts could be far-reaching, as exemplified bythe continuing impacts of the financial crisis of 2007-2008.The systemic nature of our most significant risks calls forprocedures and institutions that are globally coordinated yetlocally flexible. As international systems of finance, supplychains, health, energy, the Internet and the environmentbecome more complex and interdependent, their level ofresilience determines whether they become bulwarks ofglobal stability or amplifiers of cascading shocks.Strengthening resilience requires overcoming collectiveaction challenges through international cooperation amongbusiness, government and civil society.Box 1: Objectives of the Global Risks 2014 ReportThe world faces risks that can be addressed only bylong-term thinking and collaboration among business,governments and civil society. The Global Risks 2014report aims to support this process by:– exploring the nature of systemic risks– mapping 31 global risks according to the level ofconcern they arouse, their likelihood and potentialimpact, as well as the strength of theinterconnections between them– looking in-depth at the ways in which threeconstellations of global risk – centred on youth,cyberspace and geopolitics – could interplay andhave systemic impactMapping Global Risks in 2014Based on a survey of the World Economic Forum’smultistakeholder communities, the report maps 31 globalrisks according to level of concern, likelihood and impact andinterconnections among them.– The risks of highest concern to respondents are fiscalcrises in key economies, structurally high unemploymentand underemployment, and water crises (Table 1).Table 1: Ten Global Risks of Highest Concern in 2014No.Global Risk1Fiscal crises in key economies2Structurally high unemployment/underemployment3Water crises4Severe income disparity5Failure of climate change mitigation and adaptation6Greater incidence of extreme weather events(e.g. floods, storms, fires)7Global governance failure8Food crises9Failure of a major financial mechanism/institution10Profound political and social instabilitySource: Global Risks Perception Survey 2013-2014.Note: From a list of 31 risks, survey respondents were asked to identify the five theyare most concerned about.– The risks considered high impact and high likelihoodare mostly environmental and economic in nature: greaterincidence of extreme weather events, failure of climatechange mitigation and adaptation, water crises, severeincome disparity, structurally high unemployment andunderemployment and fiscal crises in key economies.Female respondents perceived almost all global risks asboth more likely and more impactful than did males,especially in the environmental category. Youngerindividuals gave higher scores for the impact of almost allof the risks, particularly environmental risks, such aswater crises, greater incidence of natural catastrophes,the loss of biodiversity and greater incidence of extremeweather events.– The risks perceived to be most interconnected withother risks are macroeconomic – fiscal crises, andstructural unemployment and underemployment – withstrong links between this macroeconomic risk nexus andsocial issues, such as rising income inequality andpolitical and social instability. The failure of globalgovernance emerges as a central risk that is connectedto many different issues. Mapping perceivedinterconnections between risks helps to understand thepotential transmission channels between them.– The decline of trust in institutions, lack of leadership,persisting gender inequalities and data mismanagementwere among trends to watch, according to surveyrespondents. Experts added further concerns includingvarious forms of pollution, and accidents or abuseinvolving new technologies, such as synthetic biology,automated vehicles and 3-D printing.Global Risks 20149
Three Risks in FocusOf the many conceivable ways in which possibleinterconnections and interdependencies between globalrisks could play out systemically over the 10-year horizonconsidered by this report, three are explored in depth:– Instabilities in an increasingly multipolar world:Changing demographics, growing middle classes andfiscal constraints will place increasing domestic demandson governments, deepening requirements for internalreform and shaping international relations. Set against therise of regional powers, an era of greater economicpragmatism and national self-protection might increaseinter-state friction and aggravate a global governancevacuum. This may hinder progress on cross-cutting,long-term challenges, and lead to increased inefficienciesand friction costs in strategically important sectors, suchas healthcare, financial services and energy. Managingthis risk will require flexibility, fresh thinking andmultistakeholder communication.– Generation lost? The generation coming of age in the2010s faces high unemployment and precarious jobsituations, hampering their efforts to build a future andraising the risk of social unrest. In advanced economies,the large number of graduates from expensive andoutmoded educational systems – graduating with highdebts and mismatched skills – points to a need to adaptand integrate professional and academic education. Indeveloping countries, an estimated two-thirds of theyouth are not fulfilling their economic potential. Thegeneration of digital natives is full of ambition to improvethe world but feels disconnected from traditional politics;their ambition needs to be harnessed if systemic risks areto be addressed.– Digital disintegration: So far, cyberspace has provedresilient to attacks, but the underlying dynamic of theonline world has always been that it is easier to attackthan defend. The world may be only one disruptivetechnology away from attackers gaining a runawayadvantage, meaning the Internet would cease to be atrusted medium for communication or commerce. Freshthinking at all levels on how to preserve, protect andgovern the common good of a trusted cyberspace mustbe developed.Collaborative multistakeholder action is needed. Widevariance in how risks are identified and managed still exists.Businesses, governments and civil society alike can improvehow they approach risk by taking steps such as openinglines of communication with each other to build trust,systematically learning from others’ experiences, and findingways to incentivize long-term thinking. By offering aframework for decision-makers to look at risks in a holisticmanner, the Global Risks 2014 report aims to provide aplatform for dialogue and to stimulate action.10Global Risks 2014
IntroductionAccelerating change in the 21st century has boundcountries, economies and businesses ever more tightlytogether through better infrastructure, faster and moreefficient communication systems, and closer trade andinvestment links. Innovations such as the Internet andmobile phone have boosted productivity, created newbusiness opportunities and enhanced access to information.Economic growth has lifted millions of people out of poverty.Yet the same dynamic that lies behind these gains –everything being more connected and interdependent– also threatens to undermine them. Economic growth,for example, may be inexorably undermining its ownfoundations through its negative side-effects on ecosystems,biodiversity and the climate – effects that cannot be stoppedat national borders. Disruptions in the online environment arebecoming as impactful as those in the physical world, ifnot more.Since 2006, the Global Risks report has been callingattention to global risks that can be systemic in nature,causing breakdowns of entire systems and not only theircomponent parts.These risks can come from many sources. The greater theinterdependencies between countries and industries, thegreater the potential for events to bring about unforeseen,cascading consequences. The year 2013 alone witnesseda number of illustrations of such risks, bringing significantlosses in terms of both human life and wealth. The fiscalcrisis in the United States (US), the subsiding threat ofsovereign default in eurozone countries and popular protestsin emerging markets all presented economic risks farbeyond national borders. Typhoon Haiyan took a heavy tollon the Philippines, even as global leaders debated climatechange in Warsaw in November 2013. Syria’s refugee crisisdestabilized the entire Middle East. Revelations about dataleakage and new forms of espionage created geopoliticaltensions that may yet have far-reaching implications in theyears to come. These events have painfully emphasized thatthe world is not equipped to deal with global risks.This year, as in past editions, the Global Risks reportrepresents a step in a continuous process of improvinghow global risks and their interconnections can be puton decision-makers’ radar screens, to provide a basis fordialogue on how governments, business and civil societycan work together effectively to build resilience and mitigateany negative effects accruing from them.Part 1 of the report presents the results of this year’sGlobal Risks Perceptions Survey, enumerating the 10risks that respondents nominated as being of highestconcern and also those they thought were most likely andpotentially impactful. It also maps the strength of perceivedinterconnections among these risks to provide a holisticpicture of the complexity and broad framework needed tounderstand their full potential impact. Finally, it includes a“risks and trends to watch” section, noting additional issuesthat respondents and experts were concerned about.Part 2 selects and explores in detail three constellationsof global risks from the Risks Interconnections Map.“Instabilities in an Increasingly Multipolar World” examinespossible interconnections among risks related to thechanging geopolitical order. “Generation Lost?” looks at howhigh rates of youth unemployment risk stoking social unrestand squandering human and economic potential, and howthe current situation will affect tomorrow’s youth. “DigitalDisintegration” imagines how cyberspace could becomeseverely affected through growing strength of attacks anddwindling trust, at a huge cost to economies and societies.The report also features contributions from several of theForum’s Global Agenda Councils, which bring togetherthought leaders from academia, business, government,international organizations and other civil societyorganizations to set the global agendas in their respectivefields. The Councils’ contributions explore a selectionof specific risks that rank highly on the Global RisksPerceptions Survey.The multistakeholder collaboration required to addressglobal risks should take place through effective mechanismsof global governance, as global risks can only be addressedat a global level. Addressing risks effectively takes not onlya common understanding of the issues and a willingnessto work together but also the building of mutual trust andnurturing of the capacity for long-term thinking – issuesfurther explored in the concluding section of Part 2.Part 3 analyses the main learnings from past Global Risksreports and looks ahead towards the 10th anniversary of thereport in 2015.To work together to prepare and mitigate risks andstrengthen resilience, leaders in business, politics and civilsociety all need to first identify, understand and monitor themost important global risks. The Global Risks 2014 reportaims to facilitate this process and provide a platformfor dialogue.Global Risks 201411
Part 1Part 2Part 1: Global Risks 2014:Understanding SystemicRisks in a Changing GlobalEnvironmentPart 3A global risk is defined as an occurrence that causessignificant negative impact for several countries andindustries over a time frame of up to 10 years. A keycharacteristic of global risks is their potential systemic nature– they have the potential to affect an entire system, asopposed to individual parts and components – as defined inBox 1.1 below.Box 1.1: What Is Systemic Risk?Systemic risk is the risk of “breakdowns in an entiresystem, as opposed to breakdowns in individual partsand components”.1 Systemic risks are characterized by:– modest tipping points combining indirectly toproduce large failures– risk-sharing or contagion, as one loss triggers a chainof others– “hysteresis”, or systems being unable to recoverequilibrium after a shockNote1Kaufman, G. G. and K. E. Scott. 2003. “What Is Systemic Risk, and DoBank Regulators Retard or Contribute to It?” Independent Review 7 (3):371–391. See quote on p. 371.Environmental RisksRisks in the environmental category include both naturaldisasters, such as earthquakes and geomagnetic storms,and man-made risks such as collapsing ecosystems,freshwater shortages, nuclear accidents and failure tomitigate or adapt to climate change.Geopolitical RisksThe geopolitical category covers the areas of politics,diplomacy, conflict, crime and global governance. Theserisks range from terrorism, disputes over resources and warto governance being undermined by corruption, organizedcrime and illicit trade.Societal RisksThe societal category captures risks related to social stability– such as severe income disparities, food crises anddysfunctional cities – and public health, such as pandemics,antibiotic-resistant bacteria and the rising burden of chronicdisease.Technological RisksThe technological category covers major risks related to thegrowing centrality of information and communi
Wharton Risk Management and Decision Processes Center, University of Pennsylvania . 4 Global Risks 2014. . Global Risks Perception Survey and Methodology 2014 57 Acknowledgements. 6 Global Risks 2014. . constellations of global risk – centred on youth, cyberspace and geopolitics – could interplay and
The Global Risks Report 2017, 12th Edition is published by the World Economic Forum within the framework of The Global Competitiveness and Risks Team. The information in this report, or on which this report is based, has been obtained from sources that the authors believe to be reliable and accurate. However, it has not been
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Managing electrical risks in the workplace Code of practice 2021 Page 7 of 60 1. Introduction 1.1 What are electrical risks? Electrical risks are risks of death, shock or other injury caused directly or indirectly by electricity. The most common electrical risks and causes of injury are: electric shock causing injury or death.
safety and public health risks), E. Hallerman (genetic risks), M.J. Phillips and R.P. Subasinghe (environmental risks), K.M.Y. Leung and D. Dudgeon (ecological risks), L.E. Kam and P. Leung (financial risks) and P.B. Bueno (social risks). Preparation and publication of this document were made possible with financial
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Here are a few suggested references for this course, [2,19,22]. The latter two references are downloadable if you are logging into MathSci net through your UCSD account. For a proof that all p{ variation paths have some extension to a rough path see, [21] and also see [9, Theorem 9.12 and Remark 9.13]. For other perspectives on the the theory, see [6] and also see Gubinelli [10,11] Also see .
