Deep-Dives into Five Global Risks
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Between them, two economic risks account for the global risks of most concern for doing business in half of the 140 economies covered: unemployment or underemployment, and energy price shock. Third on the list is failure of national governance, which affects businesses in many ways, including the failure to stamp out illicit trade (Table 4.9).
The below deep-dives into the implications for business also explore asset bubbles, fourth on the global list, and cyberattacks, among the top three risks in 18 economies. While not exhaustive, these analyses of mechanisms through which these global risks affect businesses at the national level are intended to raise awareness of the need for action.
Unemployment or Underemployment
Unemployment or underemployment is perceived as the global risk of highest concern for doing business in 41 countries, and is among the top five global risks in 92 countries (Figure 4.2). Unemployment affects business in multiple ways, from holding back economic growth to threatening social stability. With a growing mismatch between the skills demanded by a fast-changing jobs market and those possessed by unemployed workers, businesses are struggling to recruit workers with the capabilities they need. Expected job growth is concentrated in occupations for which today’s workers are inadequately prepared.
Figure 4.2: Unemployment or Underemployment, rank

Source: Executive Opinion Survey 2015, World Economic Forum.
Note: The darker colour, the higher the concern.
Structural unemployment has increased in all major economies since the 2007 crisis. Even where growth has picked up, labour productivity and job creation often have not. Layoffs disproportionately affected middle-skilled jobs, while most job creation in the recovery has taken place in lower-wage jobs and in temporary and fixed-term employment. At the same time, technological disruptions and the move towards automation are accelerating change in the nature of work. Currently it is estimated that by the year 2020 nearly half of all current occupations could be affected by advances in robotics and machine learning.39
Given the unprecedented nature and pace of these displacements, large-scale reforms will be needed, both by government and business. Short-term, reactive measures based on past successes will not be enough: for example, efforts to place unemployed youth in apprenticeships in certain job categories may not be a high-value investment if that job category is likely to be obsolete in five years’ time as a result of automation or other disruptions, while growth comes from wholly new occupations. Three main reforms are needed.
First, the education systems must be redesigned to focus on learning to learn and collaboration. As knowledge-based work will increasingly be handled by technology, we need to educate future generations in skills where humans can still be expected to outperform machines – collaboration-based attributes such as teamwork, interaction, relationships and cultural sensitivity. In a more automated future, value will come from emotional and contextual intelligence.
Second, while businesses must work with educators and governments to help education systems keep up with the needs of the labour market, companies must also fundamentally re-think their role as consumers of ready-made human capital, obtaining pre-trained talent from schools, universities and other companies. Some companies understand this and are investing more in the continuous learning, re-skilling and up-skilling of their employees. Given the ongoing rapid changes in the skill sets required for many occupations, talent management is no longer the preserve of the human resources function but will be a critical part of any company’s growth and innovation strategy – especially with younger cohorts of workers increasingly valuing a sense of purpose and diversity of experiences in their working lives.
Third, governments must look beyond the education system to redesign the broader enabling environment for talent. Human capital development depends on a series of interventions across a person’s lifetime, including hiring and firing practices, women’s integration, retirement policies, visa regulations, social safety nets, and, in particular, regulatory support for entrepreneurship and small and medium-sized enterprises – one of the most under-utilized means of unleashing creativity, enhancing growth and generating employment. Such areas often go neglected by policy-makers because reforms are unlikely to pay off within the timeframe of political tenures.
Energy Price Shocks to the Global Economy
With lower oil prices making the headlines recently, the risk of energy price shocks to the global economy ranks first in 29 out of the 140 economies represented in the 2015 EOS and appears in the top five risks in 93 of them (Figure 4.3).
Figure 4.3: Energy Price Shock to the Global Economy, rank

Source: Executive Opinion Survey 2015, World Economic Forum.
Note: The darker colour, the higher the concern.
“Price shocks” can refer to either sudden increases or decreases in the price of energy – whether in the form of electricity, oil, natural gas or liquid fuels derived from these sources. From 2010 until June 2014 world oil prices were fairly stable, at around $110 a barrel for Brent crude; since then they have ranged between around US$45 to US$60, a plunge that surprised many. Natural gas prices, often indexed to oil, have followed a similar trajectory. This has resulted in significant shifts of wealth from oil and gas producers to consumers, meaning lower input costs for industry, lower inflation and more money available to spend in other sectors.
The outlook for oil prices is uncertain. On the supply side, one key factor is whether or not the Organization of the Petroleum Exporting Countries (OPEC) – and in particular Saudi Arabia – will continue with its strategy of not curtailing production despite price declines. Another factor is the extent to which investment will fall in response to low prices, leading to a potential rise in unemployment rate of oil-exporting countries. Key oil and gas producers are estimated to have cut over US$200 billion in capital expenditure on new projects, deferring oil and gas projects with reserves equating to 20 billion barrels of oil equivalent.40
If current low prices continue, the implications for oil-exporting countries may be severe. For instance, oil export losses in 2015 are expected to reach about US$300 billion in the Gulf Cooperation Council (GCC),41 which will have a heavy impact on governments’ budget balances. The International Monetary Fund expects more than 10 million people to be looking for work by 2020 in the region’s oil-exporting countries, which will challenge fiscal sustainability over the medium term. A combination of rising import prices hurting the populations of many oil-producing countries and a lack of job opportunities may lead to social instability.42
Whether demand for oil picks up depends on factors such as whether growth recovers in China and other emerging economies, as well as the extent to which economies become less fuel intensive as a consequence of new technology and energy-efficiency measures. It is possible that if prices start to recover, they could unexpectedly spike: with the current low prices leading to reduced investment and job losses, there is less slack in the system to deal with unanticipated demand increases.43
Such a price spike could lead to slower global output and disrupt business models. Even many developed countries are vulnerable – for example, geopolitical tensions threaten energy security in Europe, which gets around a quarter of its gas from Russia.44 Still, the risks of a price spike destabilizing society are greatest in less-developed economies, which are highly dependent on imports and have little scope for alternatives to take up the slack. Indeed, the risks associated with an undiversified energy sector are not limited to oil – for example, in 2008 water shortages caused by an extremely harsh winter impacted energy production in Tajikistan, which relies heavily on hydro power. Ramifications in that instance included interruptions in medical care for many people (power shortages and cold weather deprived more than 50% of the country’s hospitals of their water supply).45
Failure of National Governance
Failure of national governance is perceived as the highest risk to doing business by executives in 14 economies – half of them in Latin America, four in Sub-Saharan Africa, two in Eastern Europe and one in Asia (Figure 4.4). This risk captures the inability to efficiently govern a nation, which is caused by or results in factors such as weak rule of law, corruption, illicit trade, organized crime, impunity, and political deadlock. Weak national government is not the result only of poor governance; governance is a multi-faceted phenomenon in which business, civil society and the general public also play roles.
Figure 4.4: Failure of National Governance, rank

Source: Executive Opinion Survey 2015, World Economic Forum.
Note: The darker colour, the higher the concern.
As discussed in the most recent edition of the World Economic Forum’s Global Competitiveness Report, the consequences of failures of governance seriously undermine many countries’ competitiveness, job creation and economic development. Weak or failing national governance creates space for organized criminals and terrorists to profit from illegal trading in humans, weapons, counterfeit goods, and so on. The cross-sector and transnational nature of these illegal activities means they pose a risk to all, creating economic, social, and environmental damage at regional and global levels.
Businesses face additional risks as well as costs from operating in countries affected by poor governance. Both the risks and the costs arise from the difficulties of working in an unpredictable environment and complying with international standards when fragile governments do not themselves adhere to international regulatory regimes. These costs can be serious enough to become unsustainable in the long run.
One aspect of poor governance – illicit trade – can undermine corporate brands and supply chains, because logistics and transport sectors often unwittingly contribute to the spread of illicit goods. Illicit trade is estimated to cost the world economy up to US$2 trillion, although it is difficult to quantify accurately.46 Counterfeiting and piracy alone are estimated to amount to US$1.77 trillion in 2015,47 nearly 10% of world merchandise trade.48
The World Economic Forum’s Meta-Council on the Illicit Economy has published, in its State of the Illicit Economy report, a range of suggested ways in which technological improvements can be leveraged as solutions in this space:
- Big data. Sex traffickers have been uncovered by a collaboration among financial institutions, the Thomson Reuters Foundation, and New York prosecutors.49
- Satellite tracking. Illegal fishing is being tackled by the Eyes on the Seas project – a digital platform that helps governments to monitor the world’s oceans, backed by the Pew Charitable Trusts.50
- Crowdsourcing. In combination with big data and satellite tracking, Global Forest Watch is enabling the tracking of illegal forestry operations by using crowdsourcing to combine images and provide near-real time data on the world’s forests.51
- DNA analysis. A genetic library of life on Earth is being used to detect food fraud,52 while forensic laboratories are able to link stolen ivory to specific animals.53
- Encryption: Although organized criminals use encryption to evade detection, it can also be used to enable the secure sharing of information between law enforcement organizations and the private sector.
Individual companies can take some steps to protect their own operations, reputation or assets – but for businesses to build resilience against the risk of failure of national governance ultimately requires finding ways to contribute towards improving the overall situation. That includes setting an example for political leaders by upholding international best practice, frameworks and standards, and looking for ways to collaborate with governments and civil society on the development of more coherent policies and smart governance strategies.
It is clear that the problem cannot be resolved with policies alone, but requires the support of the business sector as well as awareness of the general public. Discussions need to move beyond political commitment – the public sector, private sector and civil society need to come together to build relationships, initiatives and mechanisms to curb the rates of illicit trade.
Asset Bubble
Executives in 11 economies, mostly in Europe and Asia, rate asset bubbles as their highest concern; it ranks among the top five risks in 40 countries, representing more than half of the world GDP (Figure 4.5). Far from affecting only speculators, the bursting of asset bubbles hits businesses across the whole economy – particularly where leverage induces contagion through the banking system. As business confidence falls, so do consumption, incomes and investment, which can lead to a prolonged recession.
Figure 4.5: Asset Bubble, rank

Source: Executive Opinion Survey 2015, World Economic Forum.
Note: The darker colour, the higher the concern.
The trigger for the global financial crisis, to take one example, was a widespread default on US subprime mortgages and loss of value of related securities. The bursting of the dot-com bubble in 2000–2002 destroyed US$5 trillion of stock market wealth in the United States (equivalent to half of annual GDP) in 30 months.54 Japan was mired in a low-growth deflationary environment for over two decades after this combined real estate and stock market bubbles burst in the early 1990s.
Recent global economic developments have increased both the likelihood and potential impact of bubbles. In many countries, monetary and fiscal policy after the financial crisis of 2007–2008 had some success in stimulating the economy to minimize the depth of the recession. However, as post-recession growth proved elusive, easy monetary policy was maintained or even stepped up. Low interest rates sent investors on a search for yield, creating an environment that is highly conducive to bubbles. The impact of another bubble bursting now in a major economy would be especially damaging because the weakness of the recovery and high levels of government debt mean there would be little remaining policy space for further stimulus.
Asset bubbles can never be identified with certainty while they are building up, as there is always a narrative of “this time is different”. Nonetheless, when attempting to evaluate the risk of a bubble bursting, three types of potential bubbles can be distinguished:
- Equity bubbles. These bubbles are often a side effect of low interest rates, as investors look to stock markets for higher yields than they can get from fixed income assets. Companies can use their highly-valued stock to make cross-border acquisitions – but when the bubble bursts, they can in turn become takeover targets for companies in other countries.
- Real estate bubbles. Real estate bubbles are not usually a major concern for companies while they are inflating, though they make office and factory space more expensive. However, because banks play a major role in real estate finance, the bursting of a real estate bubble can have catastrophic impacts on business finance, as seen recently in Ireland: with banks struggling, credit can dry up completely and companies find it hard to finance their operations.
- Government bond bubbles. Government bonds might be inflated by a quantitative easing of purchases by central banks and new liquidity requirements increasing demand among private sector banks. As prices are pushed up, yields go down, which drives investors into higher-yield corporate bonds, raising the risk of a bubble here, too. In the short term, this can be good news for corporate issuers – but the ending of quantitative easing programmes could rapidly make it harder for businesses to raise capital. Some observers have raised concerns about whether current market structures can deal with the resulting large swings in demand for bonds, potentially triggering severe volatility in the financial system.
The bursting of any of these three types of bubble can tip an economy into recession. For consumer-facing businesses without regional or global diversification, this is a concern that is not easily mitigated. Besides shoring up the balance sheet – for example, by issuing long-dated debt – and putting adequate credit lines in place, most mitigation mechanisms would be more strategic and affect the business model, such as alliances to tap more diversified markets.
From a policy perspective, some studies suggest that the development of financial markets – with increased integration, sophistication of trading techniques, and removal of frictions to arbitrage – may be increasing the prevalence of bubbles.55 A fundamental rethink of regulation and contract design in financial markets could be necessary, to accept the inevitability of bubbles and seek to limit their scope.
Cyberattacks
From personal finances to business operations and national infrastructure, public and private services and amenities are increasingly managed via some form of computer network and are consequently vulnerable to attack. The Internet of Things is a growing reality, introducing new efficiencies as well as new vulnerabilities and interconnected consequences. Recent technological advances have been beneficial in many respects, but have also opened the door to a growing wave of cyberattacks – including economic espionage, cybercrime, and even state-sponsored exploits – that are increasingly perpetrated against businesses (Figure 4.6). In 2014, The Center for Strategic and International Studies and McAfee estimated that cybercrime alone cost the global economy US$ 445 billion.56 Businesses in all industries and of all sizes have been affected by the increased complexity, novelty and persistence of cyberattacks, with consequences ranging from the reputational to economic and legal. A sharp increase in high-profile cases in 2014 has continued into 2015, and shows no sign of slowing down.
Figure 4.6 Cyberattacks, rank

Source: Executive Opinion Survey 2015, World Economic Forum.
Note: The darker colour, the higher the concern.
The EOS results indicate that cyberattack is perceived as the risk of highest concern in eight economies: Estonia, Germany, Japan, Malaysia, the Netherlands, Singapore, Switzerland, and the United States. Public sector bodies in at least two of these countries have recently been disrupted by cyberattacks: the US Office of Personnel Management and the Japanese Pension Service. The 2015 Fortune 500 CEO survey found that cyber security came second when CEOs were asked about their companies’ biggest challenges.57
Attempts to detect and address attacks are made harder by their constantly evolving nature, as perpetrators quickly find new ways of executing them. Businesses trying to match this speed in their development of prevention and response methods are sometimes constrained by a poor understanding of the risk, a lack of technical talent, and inadequate security capabilities. Although CEOs worry about rising cyber risks, the ownership of and responsibility for the cyber risk is less clear. Who in the corporation is the actual owner of the risk? While there are many “C” level owners (CISO, CFO, CEO, CRO, Risk Management), each of these owners has differing but related interests and unfortunately often does not integrate risk or effectively collaborate on its management. Defining clear roles and responsibilities for cyber risk is crucial.
Outdated laws and regulations inhibit governments’ ability to capture criminals but also to expedite the often lengthy procedure of elaborating and implementing legal and regulatory frameworks to reflect evolving realities. The sophisticated threats of government-sponsored economic espionage also exceed the defensive capabilities of many commercial enterprises, which are more and more frequently looking to other governments to intervene. The G-20 recently took an unexpected, but applauded, step and collectively affirmed “that no country should conduct or support ICT-enabled theft of intellectual property, including trade secrets or other confidential business information, with the intent of providing competitive advantages to companies or commercial sectors.”58
Businesses are increasingly accepting the fact that they cannot hope to prevent all cyberattacks. The difficulty in preventing attacks is not outmatched by the difficulty in identifying and effectively mitigating them. Given the types of vulnerabilities utilized by attackers and their methods, many attacks and intrusions are not immediately discovered – some are recognized only months and in some cases years later. The emphasis needs to be on streamlining mechanisms for early detection, response and recovery, to mitigate and better manage the consequences – limiting the damage, and ensuring business continuity.
It is also becoming clearer that cybercrime cannot be fought unilaterally. Although businesses can follow standard industry practices or adopt individually tailored ways to deal with cybercrimes, cooperation throughout the value chain (because attacks can be made through supplier systems) and with law enforcement is also helpful, As is often the case, however, public-private partnership can be held back by lack of trust and misaligned incentives. Businesses may fear exposing their data and practices to competitors or to law enforcement agencies. And the private sector’s primary interest in rapid recovery and continuity of business operations may not align with the public sector’s primary interest in apprehending and prosecuting perpetrators. In addition, governments need to balance their investments in cyber offensive weapons and efforts to enhance capabilities for cybersecurity and defence.