Part 3: Towards Ten Years of the Global Risks Report
As the report nears its 10th edition in 2015, this section reflects on the insights gathered from past reports on how to map and address global risks. These reflections provide a basis to reassess and update the approach and methodology, to ensure that the report remains at the cutting edge of collective understanding of global risks.
Defining and Identifying Global Risks
The number of global risks included in the Global Risks report series has changed over time. While 25 risks were included in 2006, 50 were identified in 2012 and 2013 and were then streamlined to 31 in this report. The systemic nature of global risks has been emphasized since the beginning, while the report’s 10-year time horizon has allowed for a focus on strategies and policies to anticipate and manage potential risks, rather than merely react to them.
In the coming year, a number of expert workshops will be held to review the definition of global risk – currently seen as an occurrence that causes significant negative impact for several countries and industries – to identify and understand their nature, and to enhance comprehension of the interconnections between them.
One challenge is to distinguish between a risk and a trend or a vulnerability. Technically, a risk is something that has not happened yet, whereas a trend or a vulnerability is already under way. Some global risks in this year’s report, such as severe income disparity, may be more accurately viewed as a trend or a vulnerability. In many cases, the distinction is far from clear – for example, opinions may differ on whether major loss of biodiversity is an event that could yet happen or a process that is already happening.
Another challenge is to determine a common level of granularity among global risks: Is a political collapse of a nation of geopolitical importance at the same conceptual level as overall global governance failure? Can the failure to mitigate climate change that threatens to make the earth increasingly uninhabitable be placed at the same level of gravity as a one-off, large-scale cyber attack?
Mapping Global Risks
Throughout the Global Risks report series, risks have been analysed on two dimensions: likelihood and impact. Both can be important when aiming to prioritize which risks to attempt to prevent (i.e. reducing the likelihood of the event) and/or mitigate (i.e. reducing the severity of the impact).
Experience has shown, however, that neither can be measured definitively. Initially, the report attempted to measure impact by assigning (when possible) actuarial values such as an estimated number of deaths or the economic impact in US dollars, based on expert input. This arguably had the advantage of being as objective a measure as possible, but had the disadvantage of relying heavily on assumptions and being unable to account for a range of outcomes – there are, for example, widely varying estimates of the financial impact of climate change depending on the level of temperature rise. Also, this approach cannot be extended to all risks: it is impossible to estimate the likely financial and human cost of, for example, biodiversity loss or geopolitical conflict.
Since 2009, the report has used expert surveys that ask respondents to estimate impact and likelihood. This has the advantage of being more applicable to risks of different natures, allowing for greater ease of comparison. On the downside, perception data can be skewed by cognitive biases of the kind discussed in Part 2.5 of this report, which predispose people to be more concerned with current headlines and recently-experienced risks. Nonetheless, this approach can highlight areas that are of most concern to different stakeholders, and potentially galvanize shared efforts to address them.
Towards a Multistakeholder Approach
The responsibility of preparing for, mitigating and building resilience against many of the risks discussed in this report remains fragmented and unclear. People in the best position to influence solutions to a risk may not be the ones who have most to lose from it. Questions surrounding who can and should take ownership of planning for the risk, and what is an acceptable level of risk, remain difficult to answer.
With these concerns in mind, the Global Risks report series has increasingly emphasized the importance of interconnectivity and the systemic nature of global risks, with the possibility of multiple simultaneous or sequential shocks. By their nature, global risks cross borders. No country, industry or organization can deal with them in isolation. They require collective thinking and responses, taking a long-term perspective. The report has increasingly moved towards providing a basis for discussion among stakeholders on how to mitigate risks, prepare for them and strengthen resilience in a collaborative fashion.
Looking Ahead to the 10th Anniversary
The adjustments to the survey and analysis in this year’s report are part of the ongoing efforts to provide a solid base for the World Economic Forum’s work on global risks in the future, and mirror the evolving nature of global risks. Drawing on the Forum’s multistakeholder community of business, academia, government and civil society, the methodology and analysis will be reviewed and improved during the course of 2014, in preparation for the report’s 10th anniversary in January 2015.