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Outlook on the Global Agenda 2011

Outlook on
the Global
Agenda 2011
An initiative of the Risk Response Network

World Economic Forum - January 2011

From Risk to Opportunity:
Building a Response to the New Reality

Roadmap to the New Reality

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The third Summit on the Global Agenda brought together over 600 thought leaders from 60 countries and a myriad of disciplines to discuss the most relevant issues on the global, regional and industry agendas. The goal of the Summit was to convene multistakeholder groups of relevant experts to stimulate bold thinking and catalyse innovative discussions. Council Members also developed concrete action plans to address key risks and foster valuable opportunities.

This Outlook on the Global Agenda 2011, a new publication of the Network of Global Agenda Councils, provides an overview of the prevailing issues on the minds of our Global Agenda Council Members for the next 12-18 months as identified by the Global Agenda Survey and discussed during the Summit. The findings of the report emphasize the importance of rebalancing risks and opportunities and developing new thinking for a new era, a time characterized by highly complex and interconnected issues and challenges, yet also providing unique opportunities to develop collaborative solutions on a large scale.

To better understand and respond to these global risks and related opportunities, the World Economic Forum announced a new initiative during the Summit on the Global Agenda, the Risk Response Network (RRN), to which Global Agenda Council Members will contribute and thus help advance this global rebalancing. While the Risk Response Network offers one way in which the Global Agenda Councils and the broader global community will come together to respond to the new risk landscape, the World Economic Forum Annual Meeting 2011 in Davos-Klosters aims to catalyse this process on an even greater scale. The Meeting’s theme – Shared Norms for the New Reality – promises to address crucial questions to rebalance risks and opportunities and fashion a better future collaboratively.

Following the Annual Meeting 2011, the Global Agenda Councils will continue their collaboration and further elaborate their analysis and recommendations to address key challenges, publishing their main findings in Spring 2011 while continuing to integrate them in Forum activities on an ongoing basis.

I hope this publication will stimulate new thinking for the new reality.

Klaus Schwab
Founder and Executive Chairman
World Economic Forum

Network of Global Agenda Councils

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In 2008, the World Economic Forum created the Network of Global Agenda Councils, comprising groups on the foremost topics in the global arena. Each of these Councils convenes 15 to 20 relevant thought leaders from academia, government, business and other fields to capture the best knowledge on each key issue and integrate it into global collaboration and decision-making processes.

Specifically, the Councils monitor key trends, identify global risks, map interrelationships and address knowledge gaps. Equally important, they also put forward ideas and recommendations to address global challenges.

Council Members meet virtually and at the Summit on the Global Agenda in the United Arab Emirates. Moreover, they are fully integrated into the broader Forum community, contributing to initiatives, projects and events throughout the year. In a global environment marked by short-term orientation and silo-thinking, Councils foster interdisciplinary and long-range thinking to address the prevailing challenges on the global, regional and industry agendas.

The Network is composed of 72 Councils , allowing for the exploration of interlinkages among the different issues by encouraging active collaboration through the Forum’s state-of-the-art virtual interaction platform (WELCOM) for global decision-makers.

Previous year’s Global Agenda Summit reports are also available:
Global Agenda Council Reports 2010
Summit on the Global Agenda 2008

Roadmap

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The 21st century has seen a fundamental reshaping of the way business, civil society and governments operate. The economic crisis and its repercussions have accelerated the shift of economic and political power from the developed to the emerging nations and exposed a fragile world with limited capacity to respond to systemic risks. Technology and networks have tied individuals, states and non-state actors into an increasingly complex interdependence.

Today’s decision-makers and thought leaders must confront the new reality. They must define new ways of relating to each other, new forms of communication and contact, new operating frameworks and business models, new  norms, while coping with the challenges of the everyday, dealing with new sets of unknown unknowns, and navigating an unfamiliar landscape with a set of institutions and structures built for a different era. How does the new reality shape the global agenda and how does it affect the critical issues that influence the state of the world?

These core questions framed the World Economic Forum’s Summit on the Global Agenda 2010, held in Dubai from 29 November to 1 December. The Summit brought together over 600 experts from around the world, organized into 72 Global Agenda Councils, ranging from food security to ageing to systemic financial risk

This  Outlook on the Global Agenda 2011 provides an overview of the thematic discussions that took place at the Summit and incorporates the key findings of 570 Council Members from the Global Agenda Survey  conducted earlier this year.

The world’s largest formal brainstorm, the Summit drove Councils through a structured series of meetings, as follows.

The route through the Summit on the Global Agenda 2010

Council Members set the framework for discussion through a pre-meeting survey

Councils met individually to discuss, determine agendas and capture knowledge for progressing their issues

Councils formally met with others to discuss cooperation

Participants split into six groups to discuss different themes:

The challenge of a shifting balance of power:

  • The challenge of natural resource scarcity
  • The challenge of inclusive growth and equality
  • The challenge of economic uncertainty
  • The challenge of fragile states and new conflicts
  • The challenge of global risk management

Councils met to design workstreams to progress their issues through the next 12 months

Mandate for the New Reality

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The Summit on the Global Agenda 2010 outlined a mandate for the global agenda: institutions and decision-makers must find new forms of cooperation to actively rebalance risks and opportunities to secure a more stable and sustainable long-term future.

This new reality is manifest by:

  • Global power shifts: economic and political power is no longer concentrated in the hands of the developed economies. Emerging markets have become centres of both economic growth and geo-political decision-making.
  • Economic uncertainty: There is a high degree of volatility and ambiguity across many markets in the short to medium term, which is likely to lead to irrational behaviour on the part of investors.
  • Resource scarcity: The strain of providing for a world with a population heading rapidly towards 7 billion and beyond threatens to undercut growth, create environmental problems, and cause social and political conflict.
  • Institutional weakness: Governments and global institutions that were fragile before the crisis have, by and large, become even more so in the face of global instability. The world is in no state to withstand further shocks.

Today’s global interconnectedness means that it is impossible for any stakeholder to address these challenges in isolation. The web of factors affecting global institutions and local communities has expanded, and its complexity multiplied. Negligence by a supplier in a foreign market can damage the reputation of a multinational headquartered on the other side of the globe. One nation’s regulatory changes could affect a cascade of businesses in many different sectors. Leadership today means navigating a larger, more complex set of issues and more complicated relationships.

While this new mandate provides context for the World Economic Forum’s Annual Meeting 2011 in Davos-Klosters, it does not clarify the end to which this rebalancing should be directed. What principles should guide the rebalancing? What does a more stable, sustainable assessment of risks and opportunities look like? The international community must address these questions to find solutions to the most challenging issues on the global agenda, to respond to new distributions of economic and political power, and to alter institutional relationships to effect the necessary changes.

This process requires recognizing that globalization, technological innovation and other drivers of the new reality have impacted communities around the world unevenly. On first glance, it is tempting to conclude that emerging economies are supplanting overspent developed nations. But this conclusion flattens differences among emerging markets and the variable impact of globalization and economic growth on countries, business sectors, communities and even families.

A more thoughtful analysis reveals that global rebalancing needs to be a long-term, collaborative process. It must enfranchise those excluded from global growth and encourage those who have prospered to continue doing so in a sustainable manner. The recent economic crisis demonstrated that systemic risks can no longer be tidily contained and addressed in a single ecosystem but require a multidisciplinary, multistakeholder effort to improve the global system’s overall resilience.

Population Growth

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The topic of population growth ran like a red thread through many of the discussions at this Summit on the Global Agenda, emerging as one of the key global challenges identified by the experts. Due to mortality decline and to the phenomenon of population momentum, national populations will continue to grow even as fertility remains on its downward trajectory and drops below the long-run replacement level of roughly 2.1 children per woman. Youth bulges are evident in some countries, especially in the Middle East, Sub-Saharan Africa, and parts of South-East, South and Central Asia, while elder shares are growing rapidly throughout North America and much of Europe and East Asia. These population shifts are critical determinants of income, consumption, social and political stability, environmental quality and the stock of natural resources. Population shifts are also seen as a major contributor to economic uncertainty, with education viewed as the most natural antidote to rapid population growth and its adverse repercussions.

Experts at the Summit on the Global Agenda reaffirmed the importance of high rates of population growth as a risk to the well-being of families and countries. Rapid population growth impacts a host of development indicators, such as health, physical and financial security, environmental sustainability, gender equity and educational progress, and is an especially great concern in politically fragile states and ecologically fragile geographies.

For the past several decades, the challenge of population growth has been insufficiently highlighted on the global agenda. This is due, in part, to political sensitivities surrounding the notion of fertility control and instruments for achieving such control. It is also due to the diversity of experience, with an increasing number of countries facing a future of negative population growth.

Global experience offers many lessons on ways to mitigate and manage rapid population growth. The most laudable successes have been achieved by programmes that reflect a judicious combination of government commitment and community-level engagement, and that respect the rights of individuals to decide freely and without coercion the number and spacing of their children.

Risks: Population Growth

  • Slower economic growth due to fewer workers, jobs and savers
  • The erosion of trust and social capital
  • Intergenerational inequities
  • Inadequate food, water supply, healthcare, education and other services in the poorest and most fragile countries
  • Poor infrastructure linked to migration from rural to urban areas
  • Increased pressure on all resources (water, food, minerals, energy)
  • Inability of pension systems to cope with ageing populations

Shifting Balance of Power

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In the aftermath of the global economic crisis, many developing economies have roared back to robust health, while Europe, America and Japan continue to stall. Lingering unemployment in the United States and the debt crisis in Europe have further fuelled perceptions that a weakened West is losing its vitality, just as China, India, Brazil and other emerging powers stride onto the international stage.

Pervading the Summit was a sense that a transition is under way, one that shifts the global balance of political and economic power away from the G7 countries towards a new class of developing world heavyweights. This shift will alter the culture and decision-making calculus in national capitals around the world and in corporate boardrooms large and small. It will change the lives of individuals, advantaging the mobile and globally minded at the expense of the sedentary and parochial.

The longer-term implications of this shift remain unclear, but discussion within the Summit moved beyond this broad view towards a finer understanding of this trend – and of its limits. There was a general sense that the complexities implied by this notion of “decoupling” – a deliberate move by developing countries, particularly China, to limit dependence for growth on access to Western economies – are underappreciated. China and other export-centric emerging states will try to rebalance their economies towards increased reliance for growth on domestic demand, but this is the work of a generation, not of a single five-year plan.

In addition, the current prevailing wisdom appears to be that leading emerging powers are moving forward at a common pace as developed world states remain collectively stagnant. These groups are seen respectively as the winners and losers from globalization’s progress. Summit participants challenged this simplification on two counts. First, the demise of developed states is greatly exaggerated. The financial crisis sharply accelerated the inevitable transition from a G7 international order to a G20 model, one that provides major emerging markets with seats at the world’s most important international bargaining table. Yet, leaders of the G7 countries still wield considerable influence within the G20 – and will continue to do so for the foreseeable future. In sectors from finance to food production and from innovation to public health, developed states remain at the forefront of funding, technology and expertise.

Second, there is tremendous diversity and a wide range of relative strengths and weaknesses within the emerging market class – if indeed emerging markets can be considered a single coherent asset class at all. There are enormous structural differences even within the so-called BRIC countries. There are winners and losers from globalization within each of these states. Nor is any grouping of emerging market states likely to form a coherent political bloc. The interests of these countries are no more likely to converge than those of developed states.

The challenge for the international community in 2011 and beyond is to look beyond artificial classifications of states towards a set of shared standards and values that are meaningful and robust enough to withstand the volatility and uncertainty that lie ahead during an era of transition.

Risks: Shifting Balance of Power

  • The fragility of the G20
  • Weak global governance
  • Greater protectionism and increasing trade conflicts
  • Currency wars
  • Economic uncertainty in Europe affecting its legitimacy as a leading power
  • Development of nuclear capacity
  • Military conflict

Natural Resource Scarcity

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The discussion around the theme of natural resource scarcity focused on the interrelated nature of consumer habits, population growth and sustainability. The highly interlinked nature of these issues is particularly challenging, requiring coordinated efforts among diverse stakeholders, yet there is a clear lack of effective incentive structures and sustained political will for successful solutions to be put in place.

Participants discussed a number of significant global trends that will intensify the demand for food, water and energy resources. These include:

Consumption and consumer behaviour: Informing, educating and empowering consumers are key approaches to changing behaviour. People must be convinced that conservation is important. A value shift is needed – from more to better consumption. But too often consumers are not aware of how much water or energy they are using or what impact their behaviour has on the environment. New metrics and standards are also increasingly needed so consumers across the world can measure their usage comparably and consistently.

Product labels that carry information about water and carbon footprints, or measuring tools that provide real-time feedback about household energy and water consumption are practical ways to help consumers make better choices in their day-to-day lives. These are challenges for product developers and manufacturers, and for utility companies.

Issues of consumption inequality also need to be resolved; while some consume too much, others still have too little. This issue requires global action to determine footprints and consumption in different areas of the world and recalibrate consumer behaviour.

Loss of biodiversity: A comprehensive ecosystem assessment is urgently needed so ecosystem services can be properly accounted for and valued. One promising initiative is the International Integrated Reporting Committee, which is developing a globally accepted framework for accounting for sustainability. The framework brings together financial, environmental, social and governance information in a clear, concise, consistent and comparable format. Better calculations of the life cycle and costs of alternative sources of energy should also be developed.

Land challenges: A global or regional system is needed to better manage land and all other resources. Land usage must be matched to the appropriate type of land. For example, land suitable for agriculture development should be used to increase food security and not for other purposes, such as real estate development. Segmenting land by usage will help governments and industry better understand the land challenge.

The system could be patterned after the UNESCO World Heritage Sites or something similar. However, making such a system viable will require the right incentives and the ability to reach commonly accepted metrics for measuring land usage.

Misaligned subsidies: Participants also pointed out that subsidies too often distort natural resource depletion. For example, subsidies still exist today for resources that are already depleted. These subsidies promote the wrong behaviour and must be eliminated. Targeted and rebalanced subsidies to support growing sustainable alternatives – such as wind power or solar energy – to market scale should be introduced. Innovation in energy efficiency can be spurred and a better investment climate created through well-designed subsidies for renewables uptake.

Resource wars: Natural resource scarcity is not only an issue of sustainability – it is also a potential source of conflict. The overuse of water, the contamination of the air and soil, the depletion of minerals and other problematic shortages can lead to diplomatic incidents or even disputes. Risks emerging from the lack of food and climate change or natural disasters are increasingly on the horizon, such that this angle of natural resource scarcity should also be made a priority in the months ahead.

Despite a number of critical challenges in this area, there is tremendous potential to create a wholly transformed green economy which could develop opportunities for sustainable growth. However, business leadership is critical to ensure the long-term sustainability of natural resources; participants agreed that business leaders should not wait for government to force regulations upon their industries, but should instead be taking the initiative to enable and foster opportunities to develop sustainable solutions. Large companies have a vested interest in being environmentally responsible all along the supply chain to ensure that the resources they need in the future will be available to them. Resource management as a sound business principle in the private sector needs to be impressed. Government- and private-run utility companies should be rewarded for responsible behaviour, including for conserving energy. Business leaders can also play an important and constructive role by demonstrating leadership commitment to develop market-based solutions and forming partnerships and collaborations with other relevant stakeholders to implement them.

Risks: Natural Resource Scarcity

  • Unpredictable commodity prices
  • Lack of access to resources, energy security and social licenses to operate
  • The collapse of global fish stocks
  • Irreplaceable biodiversity loss and ecosystem degradation
  • The struggle to balance water demand with supply
  • The rapid escalation in humanity’s environmental footprint
  • Increased piracy and illicit trade

Inclusive Growth and Equality

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Among specialists in economic development, from multilateral bankers to academics and civil society activists, the term “inclusive growth” has a specific meaning: income growth that accrues to every segment of society, from poor to rich, at roughly the same pace. It stands in contrast to “pro-poor growth,” which refers to income gains that occur disproportionately at the lower end of the income distribution.

The dominant focus of inclusive growth is on income gains that occur through employment and productivity improvements, not through redistributive tax and transfer policies. As such, the main instruments of inclusive growth are strengthening human capital via training, education, and the promotion and protection of good health; improving the competitiveness of capital and labour markets; and prudent macroeconomic management, openness to trade, and good governance.

Inclusive growth is built on the premise that the pace and sustainability of income growth will be enhanced if it is broad-based in nature. Alternatively, income growth that derives from inherently unequal opportunities will tend to undermine long-run growth prospects by stifling incentives for broad swaths of the population, potentially sowing seeds of counterproductive conflict and instability.

So is “inclusive growth” the best lens through which to view and address the challenge of sustainable development? The consensus at the Summit seemed to favour taking a broader view of development than just the growth rate of income per capita and the distribution of that growth. There are myriad other indicators of the quality of life such as physical security, access to education and health services, income protection for the disabled, unemployed and elderly, access to clean energy, enjoyment of a clean environment and gender equity. The metrics exist, but there is a clear need to focus more attention on them.

Even during the current economic crisis, many countries, from Paraguay to India, have chalked up impressive rates of growth. However, the benefits to the lower echelons of society often seem inconsequential or at least slow to emerge. Participants agreed that inequality, if left to fester, could threaten national, regional and even global political and economic stability. Words like “revolution,” “chaos” and “destruction of capitalism” were mentioned during the discussions, which pointed to Somalia, Afghanistan and Haiti as states currently in the space between fragility and failure. Even in the case of robust democracies, it was stressed that politicians who fail to heed the call for improved living standards run the risk of being dumped at the polls.

Disparities both within and between countries must be considered, and national and global leaders will need to do more than just tweak the current system. They will have to make deep structural changes that would amount to a kind of revolution. Since the problem manifests itself on so many levels, in so many ways, it needs to be tackled with a multiplicity of strategies. This interlinked portfolio approach would attend to the special needs of the poor, children, women, the elderly, migrants, tribal and ethnic groups, members of certain castes and others. Early childhood and pre-natal care would come into play. It would touch on the areas of health, education, governance, population growth, microfinance and more. At the same time, the benefits of good economic opportunities must not be renounced just because they mainly benefit those at the upper end of the income distribution.

Environmental sustainability can no longer be traded off against economic development; the two must go hand-in-hand. Rather than look at the obligation to protect the environment as something negative, it was suggested that developing countries can leapfrog rich countries in terms of quality of life by avoiding some of the excesses and missteps of the latter. A clean and safe environment cannot be a luxury available only to the privileged.

Finally, reflecting a theme that recurred throughout the Summit, as with most other pressing challenges facing humankind, this is everybody’s problem. No set of stakeholders can solve it single-handedly. Government must take the lead, but our political leaders can only be successful if they can count on the ingenuity and energetic cooperation of the business community, civil society, academia and concerned people at large.

Risks: Inclusive Growth and Equality

  • Rising economic disparity within and between countries
  • Social and political instability
  • The lack of a sustainable social safety net in many countries
  • Unequal access to education affecting women’s empowerment and social development
  • Reduced productivity as a result of epidemics and chronic diseases
  • Disaffected youth becoming a disruptive force

Economic Uncertainty

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In the aftermath of the global financial and economic crisis, key emerging economic risks include the heightened threat of currency wars, fiscal crisis and persistent global imbalances, as well as the resulting economic uncertainty, in itself one of the most pressing challenges on the global agenda.

It was recognized that many governments are taking active steps to strengthen particular sectors of their economy, but such policies risk stoking protectionism. Protectionism compromises growth, and many decision-makers in the international community have recognized that a trade war will ultimately disadvantage nearly all stakeholders. This recognition has, by and large, prevented the emergence of widespread, aggressive protectionism; however, poorly designed capital controls could pose an even greater long-term threat to economic recovery.

Doubts also persist about the mitigation of systemic risks in the global economy. Governments, which intervened to save banks and other private sector entities, often transferred private-sector toxic assets to their own balance sheets. Markets have resumed relatively normal activity, but whether the fundamental problems have been addressed is another question. Imbalances in sovereign debt and the fragility of investors’ faith in governments contribute to economic uncertainty. The debt crisis in Greece and Ireland raises the spectre of a new systemic financial collapse.

Capital allocation decisions must continue and, increasingly, investments from developed economies have flowed into emerging markets. These markets typically offer more dramatic growth and have, thus far, generated strong returns for many investors. However, this trend contributes to economic uncertainty, as these markets are associated with volatility and potentially new systemic risks. In addition, growing demand in emerging markets could drive up commodity prices, and sudden price spikes – of crude oil or other raw materials – would dramatically complicate economic recovery.

A number of global institutions have the power to intervene, should these uncertainties threaten the world economy. Two such institutions – the G20 and the International Monetary Fund (IMF) – proved their relevance in responding to the financial crisis and, in recent months, they have been restructured to be more inclusive and reflective of new sources of economic and political power. However, Summit participants agreed it remains unclear whether these reforms will be sufficient to retain legitimacy to manage a new crisis. Furthermore, given high sovereign debts in many parts of the world, traditional monetary and fiscal policy options are likely to be unavailable.

These uncertainties paint a rather gloomy picture of economic recovery, at least in the short to medium term. One of the biggest determinants of global growth will be political will. If individual nations and the international community as a whole can muscle the political will to reform government spending, deleverage and adjust to “doing more with less,” then many of these uncertainties can be tamed. Fortunately, many policy-makers around the world have shown their understanding of the magnitude of these risks. In the EU, for example, interventions that would have been unthinkable one year ago have already taken place, with nations recognizing the collective need to stabilize the euro zone.

Risks: Economic Uncertainty

  • High debt levels and continued high deficits
  • Sovereign debt crises
  • Competitive quantitative easing by developed nations
  • Currency realignment
  • Manipulated exchange rates
  • Rising protectionism
  • A permanent increase in economic volatility

Fragile States and New Conflicts

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The increasing scarcity of natural resources, food insecurity, the nexus between population growth, urbanization and unemployment, coupled with decreasing development aid inflows from donors and illicit capital outflows from fragile states, can further destabilize a number of nations in the medium and long term. Economic and social disparities within and among fragile states can also become powerful drivers of conflict and state fragility.

The international community’s traditional engagement in fragile states, based on development aid and security responses, has failed in many respects. New models and norms of engagement must be developed. Each state is different, posing different challenges. Therein lies the complexity – no one-size-fits-all solution exists.

A revised concept of national sovereignty: The ability of the international community to respond to situations of state fragility has been limited by state sovereignty. This is a complex dynamic paralleled by the doctrine of promoting national interest – typically in fragile states there is no pursuit of genuine national public interest. The Responsibility to Protect concept, based on the principle that sovereignty is a responsibility rather than a right, is just beginning to challenge the notion of state sovereignty, even when not much of a state to speak of exists. In view of new global trends, it is necessary to re-examine the concept of state sovereignty in the 21st century and explore new models of shared responsibility.

Prevention and early action: An early and coordinated response that considers the underlying causes is crucial. Inaction is usually not an option because untreated underlying issues will come back to haunt the international community sooner rather than later.

The considered application of existing tools: The pursuit of democracy through elections can trigger violence and conflict, particularly in nations where there are no loyal oppositions, severely poor governance and institutional deficits. Similarly, the pursuit of justice, for example through International Criminal Tribunals, can be a “short-term irritant” to peace, although it is critical to eradicate the violence associated with fragile states.

Principles of engagement in fragile states: An important principle of engagement in fragile states is “do no harm”. Others include: intervene in an integrated way; focus on strengthening the government and civil society; intervene and try to support the security sector – if this sector cannot be reformed, interventions typically fail; take consistent, long-term approaches over time; and work with the consensus of the international community and neighbouring nations. With the increasing engagement of new powers in fragile states, it is necessary to develop new norms of engagement between them and external actors to ensure investment has positive impact on these states.

The redesign of aid systems and new financing mechanisms: Participants suggested that today’s new “politics of austerity” create opportunities to rethink the modalities of aid, which need a radical overhaul. It is time to look at new designs for aid and investment flows. As a major tipping point for potentially fragile states, corruption must also be tackled, along with the outflow of capital from such states. This would allow the retention of home-grown capital for development.

The management of natural resources: Unless managed in an efficient and accountable way, the proceeds from natural resources can fuel conflict and undermine governance structures. The dual-key approach (shared responsibility between the international and local communities) can be applied to the management of natural resource revenues in fragile states.

The enhancement of regional and local capacities: Regional organizations and powers need to take more responsibility to mitigate the risks of instability and economic disparity in fragile states. In considering the challenges, participants also noted that cross-border cooperation on issues such as water could create a foundation for peace and economic growth.

Risks: Fragile States and New Conflicts

  • Further corruption and the abuse of power for private gain
  • Greater capital flight
  • Large-scale disease pandemics
  • Food insecurity
  • Poor global support for weakened states
  • Increased havens for criminal and terrorist activity
  • Greater nexus between population growth, urbanization and unemployment
  • Rapid social change in areas of high population growth
  • The political, economic and social destabilization of fragile states leading to conflict

Global Risk Management

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It was clear from the discussion at the Summit on the Global Agenda that the 21st century is an age of risk. It is a time when the interconnectedness of all things is manifest in the tide of human affairs, and volatility – the expected change in state from one day, or one minute, to another – has amplified beyond control, leaving organizations and individuals searching for new ways to understand, manage, mitigate and respond to a variety of global risks. This session provided a common platform for the discussion of relevant risk areas and catalysing new opportunities for a coherent risk response.

Participants proposed a number of ideas that could improve the state of the world through a “Global Risk Management Leading Practices Exchange”. The ideas sought were real initiatives that, by pulling techniques from one practice area and applying them to another, could have a noticeable impact on the identification and management of a range of global risks. Examples included applying fire-fighting techniques to the management of financial risk or humanitarian disasters, drawing from logistics to improve disaster preparedness, and applying catastrophe bond structures to other types of financial risk. One participant suggested that the best innovation in risk management would be for risk managers to address risk without resorting to formal risk quantification using numbers. The formalization of quantitative risk management and ensuing responses have, in some cases, resulted in an overall weakening of systems by solving for one specific risk area as opposed to understanding the interconnected nature of systemic risk areas.

The concept of “mutual risk” was discussed as applied in Internet security where websites mirror each other so that, if one is attacked, it is supported by the very web of mutual dependence that makes much of our modern infrastructure very vulnerable. Under a mutual risk programme, countries would take responsibility for defending a web of others, logistics providers would support those that had lost distribution nodes or suffered other losses, companies would provide a network of support for competitors in the sure knowledge that the same would be provided for them were circumstances different.

The formalization of a model of social loss was also put forward: a risk can be valued by the difference between the wealth of society had the risk not materialized, and the post-risk world – what would have happened versus what actually happened. Under this model, risk management can be categorized into advance mitigation, the preparation of response and the preparation of recovery.

Other ideas included a “single open information source, a ‘wikidata’”, food stockpiling, a neutral risk assessment that minimizes hype and complacency, a “global risk management commons”, cross country real-time surveillance of emerging and re-emerging infectious diseases, and changing behaviour through the creative application of financial incentives.

Participants agreed that resilient solutions need to be based on the power of interdisciplinary thinking – the ability to apply ideas and techniques from one area of human endeavour to another. Based on the importance of a comprehensive, global, multistakeholder approach, participants felt the World Economic Forum, with its ability to help apply private sector principles to social goals, could facilitate the real and pragmatic prospect of providing better understanding and concrete responses to the chaotic world of global risk. The first step in this tall order, which will also help advance the global rebalancing, is the creation of the Risk Response Network, announced at the Summit on the Global Agenda in Dubai.

Other Risks (identified weak signals)

  • The illicit economy: worth US$ 1.3 trillion in 2009 and growing
  • A weakening free market system
  • Conflict contagion
  • Cyber warfare
  • The fragmentation of the Internet

Risk Response Network

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During the Summit, the World Economic Forum introduced the Risk Response Network, a new initiative designed to bring the world’s foremost thought leaders together with top policy and decision-makers to better understand, mitigate and respond to global risks.

The Network of Global Agenda Councils will be an integral part of the new Risk Response Network, serving as an intellectual backbone and providing strategic insights to strengthen risk resilience in a world characterized by much higher volatility and much greater interdependence.

The Risk Response Network

The Risk Response Network (RRN) brings a rigorous approach to addressing the complexity of risk leaders are facing and enables them to capture the upside of those risks. It offers:

  • The most compelling insights
    Drawn from the World Economic Forum’s own knowledge generation and insight, including the Global Agenda Councils and a network of the world’s top universities and private sector content providers
  • The most relevant global decision-makers
    Through a new and unique community of Risk Officers from top corporations, governments and global risk regulating bodies
  • The most suitable tools and services
    By developing proprietary, custom-designed risk analytics and risk management processes, to enable decision-makers not only to better understand key risks in depth and in context, but also to respond to them proactively and to mobilize quickly in times of crisis

The discussions at the Summit on the Global Agenda 2010 highlighted the need for a preparatory, analytical and highly practical function for the global community to improve global risk management and, with it, the state of the world. Global Agenda Council Members will contribute to the RRN on an ongoing basis.

The RRN aims to build on these insights over the coming months and launch a series of initiatives and workstreams focused on a variety of global risks. We hope many of you will join the World Economic Forum’s initiative to collectively better understand and respond to the new world of risk.

Acknowledgements

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This Outlook on the Global Agenda 2011 provides an overview of the thematic discussions that took place at the Summit on the Global Agenda and includes a synthesis of Global Agenda Council Member contributions and ideas from the Global Agenda Survey conducted this term.

The World Economic Forum thanks everyone who played an important part in developing this report, particularly the Chairs and Members of the Network of Global Agenda Councils.

The Forum is also very grateful for the generous support provided by the Federal Government of the United Arab Emirates and the Government of Dubai for hosting the Summit on the Global Agenda 2010.

Last but not least, the Forum expresses sincere thanks to the World Economic Forum colleagues who provided their time, insights and continued guidance:

Founder and Executive Chairman

  • Klaus Schwab

Managing Directors

  • Robert Greenhill
  • Lee Howell
  • Adrian Monck
  • Gilbert Probst
  • Jean-Pierre Rosso (ex officio)
  • Richard Samans
  • Kevin Steinberg (ex officio)
  • Alois Zwinggi

Global Agenda Council Team

  • Martina Gmür, Head of the Network of Global Agenda Councils
  • Guillaume Amigues, Research Analyst
  • Olivia Bessat, Knowledge Manager
  • Lina Boren, Research Analyst
  • Tareq Bouchuiguir, Research Analyst
  • Kieran Gopaul, Research Analyst
  • Ethan Huntington, Research Analyst
  • Séverine Kaeser, Team Coordinator
  • Patrick McGee, Senior Research Analyst
  • Liana Melchenko, Associate Director
  • Tiffany Misrahi, Research Analyst
  • Oksana Myshlovska, Associate Director
  • Martin Nägele, Associate Director
  • Miguel Perez, Nominations & Member Engagement Manager
  • Florian  Reber, Research Analyst
  • Aida Rehouma, Senior Community Associate

Editor

  • Fabienne Stassen Fleming, Head of Knowledge Capture

Publication, design and layout

  • Kamal Kimaoui, Associate Director, Production and Design

Visualisation and digital content:

  • Michael Hanley, Editorial Director, Communications
  • Scott David, Information Design Consultant
  • Moritz Stefaner, Freelance Information Visualizer

Outlook on
the Global
Agenda 2011
An initiative of the Risk Response Network

World Economic Forum - January 2011

The Outlook on the Global Agenda 2011 brings together the ideas that came out of the world’s largest brainstorm, theSummit on the Global Agenda 2010 in Dubai. It outlines the shape of the new reality that will be discussed at the Annual Meeting of the World Economic Forum in Davos and through 2011. 

This new reality is manifest by:

  • Global power shifts: economic and political power is no longer concentrated in the hands of the developed economies. Emerging markets have become centres of both economic growth and geo-political decision-making.
  • Economic uncertainty: There is a high degree of volatility and ambiguity across many markets in the short to medium term, which is likely to lead to irrational behaviour on the part of investors.
  • Resource scarcity: The strain of providing for a world with a population heading rapidly towards 7 billion and beyond threatens to undercut growth, create environmental problems, and cause social and political conflict.
  • Institutional weakness: Governments and global institutions that were fragile before the crisis have, by and large, become even more so in the face of global instability. The world is in no state to withstand further shocks.

Today’s global interconnectedness means that it is impossible for any stakeholder to address these challenges in isolation. The web of factors affecting global institutions and local communities has expanded, and its complexity multiplied. Leadership today means navigating a larger, more complex set of issues and more complicated relationships.

The Network of Global Agenda Councils: Water Security

This film is the first in a series that will address global issues and the impact of the Network of Global Agenda Councils.

The Global Agenda Council on Water Security, comprised of leading experts from business, government, academia and civil society, provides thought leadership to the Forum’s activities and events on the topic of water security. The current focus of the Water Security Council is the water-energy-food nexus, which poses significant strategic growth concerns to the global community.

This Council’s work demonstrates the strength of the Network of Global Agenda Councils as an incubator for ideas, providing a space for individuals from all backgrounds to create solutions and help solve one of the world’s most pressing issues: water security.

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href=”#data-explorer-interconnections/?re_layout=0&re_IDs=1″>Air
pollution

Global Agenda Council: href=”http://www.weforum.org/content/global-agenda-council-climate-change-2010″
target=”_blank”>Climate Change

href=”#data-explorer-interconnections/?re_layout=0&re_IDs=3″>Biodiversity
loss

Global Agenda Council: href=”http://www.weforum.org/content/global-agenda-council-ecosystems-biodiversity-2010″
target=”_blank”>Ecosystems & Biodiversity

Initiatives: href=”http://www.weforum.org/en/initiatives/DrivingSustainableConsumption/index.htm”
target=”_blank”>Sustainable Consumption Initiative

Reports: href=”http://www3.weforum.org/docs/WEF_AM10_PwC_Biodiversity_BriefingMaterial.pdf”
target=”_blank”>Biodiversity and Business Risk: A Global Risks Network Briefing

href=”#data-explorer-interconnections/?re_layout=0&re_IDs=4″>Chronic
diseases

Global Agenda Council: href=”http://www.weforum.org/content/global-agenda-council-chronic-diseases-well-being-2010″
target=”_blank”>Chronic Diseases & Well-being

Reports: href=”http://www3.weforum.org/docs/WEF_Scenario_TransformingHealthcare2030_Report_2009.pdf”
target=”_blank”>Transforming Pensions and Healthcare in a Rapidly Ageing World:
Opportunities and Collaborative Strategies (PDF)

‘#data-explorer-landscape’ }”
href=”#data-explorer-interconnections/?re_layout=0&re_IDs=6″>Corruption

Global
Agenda Council: href=”http://www.weforum.org/content/global-agenda-council-anti-corruption-2010″
target=”_blank”>Anti-corruption

Initiatives: href=”http://www.weforum.org/issues/partnering-against-corruption-initiative”
target=”_blank”>Partnership Against Corruption Initiative (PACI)

class=”{ target: ‘#data-explorer-landscape’ }”
href=”#data-explorer-interconnections/?re_layout=0&re_IDs=7″>Critical
information infrastructure breakdown

Global Agenda Council: href=”http://www.weforum.org/content/global-agenda-council-internet-security-2010″
target=”_blank”>Internet Security

Initiatives: href=”http://www.weforum.org/community/technology-pioneers”
target=”_blank”>Technology Pioneers

Reports: href=”http://www3.weforum.org/docs/WEF_GITR_Report_2010.pdf”
target=”_blank”>Global Information Technology Report 2009-2010
(PDF)

href=”#data-explorer-interconnections/?re_layout=0&re_IDs=8″>Demographic
challenges

Global Agenda Council: href=”http://www.weforum.org/content/global-agenda-council-population-growth-2010″
target=”_blank”>Population Growth

Reports: href=”http://www3.weforum.org/docs/WEF_Scenario_TransformingHealthcare2030_Report_2009.pdf”
target=”_blank”>Transforming Pensions and Healthcare in a Rapidly Ageing World:
Opportunities and Collaborative Strategies (PDF)

‘#data-explorer-landscape’ }”
href=”#data-explorer-interconnections/?re_layout=0&re_IDs=9″>Economic
disparity

Global Agenda Council: href=”http://www.weforum.org/content/global-agenda-council-poverty-economic-development-2010″
target=”_blank”>Poverty & Economic Development

target: ‘#data-explorer-landscape’ }”
href=”#data-explorer-interconnections/?re_layout=0&re_IDs=11″>Extreme
consumer price volatility

Global Agenda Council: href=”http://www.weforum.org/content/consumer-industry-agenda-council-2010″
target=”_blank”>Consumer (Industry Agenda Council)

Reports: href=”http://www3.weforum.org/docs/WEF_RedesigningBusinessValue_SustainableConsumption_Report_2010.pdf”
target=”_blank”>Redesigning Business Value: A Roadmap for Sustainable
Consumption (PDF)

href=”#data-explorer-interconnections/?re_layout=0&re_IDs=12″>Extreme energy
price volatility

Global Agenda Council: href=”http://www.weforum.org/content/global-agenda-council-energy-security-2010″
target=”_blank”>Energy Security

Initiatives: href=”http://www.weforum.org/en/initiatives/EnergyPovertyAction/index.htm”
target=”_blank”>Energy Poverty Action

Reports: href=”http://www3.weforum.org/docs/WEF_WaterAndEnergy21stCentury_Report.pdf”
target=”_blank”>Thirsty Energy: Water and Energy in the 21st Century
(PDF)

href=”http://www3.weforum.org/docs/WEF_IV_GreenInvesting_Report_2009.pdf”
target=”_blank”>Green Investing 2009: Towards a Clean Energy
Infrastructure

href=”#data-explorer-interconnections/?re_layout=0&re_IDs=13″>Fiscal
crises

Global Agenda Council: href=”http://www.weforum.org/content/global-agenda-council-fiscal-crises-2010″
target=”_blank”>Fiscal crises

Reports: href=”http://www3.weforum.org/docs/WEF_FutureGlobalFinancialSystem_Report_2010.pdf”
target=”_blank”>The Future of the Global Financial System – Navigating the
Challenges Ahead (PDF)

‘#data-explorer-landscape’ }”
href=”#data-explorer-interconnections/?re_layout=0&re_IDs=14″>Food
security

Global Agenda Council: href=”http://www.weforum.org/content/global-agenda-council-food-security-2010″
target=”_blank”>Food Security

Initiatives: href=”http://www.weforum.org/issues/agriculture-and-food-security”
target=”_blank”>Agriculture and Food Security

Reports: href=”http://www3.weforum.org/docs/WEF_FB_BAACH_SustainableFoodProduction_2008.pdf”
target=”_blank”>Business Solutions for Sustainable Food Production

href=”#data-explorer-interconnections/?re_layout=0&re_IDs=15″>Fragile
states

Global Agenda Council: href=”http://www.weforum.org/content/global-agenda-council-fragile-states-2010″
target=”_blank”>Fragile States

Global Agenda Council: href=”http://www.weforum.org/content/global-agenda-council-humanitarian-assistance-2010″
target=”_blank”>Humanitarian Assistance

Initiatives: href=”http://www.weforum.org/issues/humanitarian-assistance”
target=”_blank”>Humanitarian Assistance

‘#data-explorer-landscape’ }”
href=”#data-explorer-interconnections/?re_layout=0&re_IDs=18″>Global
governance failures

Global Agenda Council: href=”http://www.weforum.org/content/global-agenda-council-institutional-governance-systems-2010″
target=”_blank”>Institutional Governance Systems

Initiatives: href=”http://www.weforum.org/issues/global-redesign-initiative/index.html”
target=”_blank”>Global Redesign Initiative (GRI)

GRI Book: href=”http://www.scribd.com/doc/39238804/Global-Redesign-Strengthening-International-Cooperation-in-a-More-Interdependent-World”
target=”_blank”>Global Redesign: Strengthening International Cooperation in a
More Interdependent World

 

}” href=”#data-explorer-interconnections/?re_layout=0&re_IDs=21″>Illicit
trade

Global Agenda Council: href=”http://www.weforum.org/content/global-agenda-council-illicit-trade-2010″
target=”_blank”>Illicit Trade

‘#data-explorer-landscape’ }”
href=”#data-explorer-interconnections/?re_layout=0&re_IDs=26″>Migration

Global
Agenda Council: href=”http://www.weforum.org/content/global-agenda-council-migration-2010″
target=”_blank”>Migration

‘#data-explorer-landscape’ }”
href=”#data-explorer-interconnections/?re_layout=0&re_IDs=28″>Online data
and information security

Global Agenda Council: href=”http://www.weforum.org/content/global-agenda-council-internet-security-2010″
target=”_blank”>Internet Security

Initiatives: href=”http://www.weforum.org/community/technology-pioneers”
target=”_blank”>Technology Pioneers

Reports: href=”http://www3.weforum.org/docs/WEF_GITR_Report_2010.pdf”
target=”_blank”>Global Information Technology Report 2009-2010
(PDF)

href=”#data-explorer-interconnections/?re_layout=0&re_IDs=29″>Organized
crime

Global Agenda Council: href=”http://www.weforum.org/content/global-agenda-council-organized-crime-2010″
target=”_blank”>Organized Crime

target=”_blank”>Global Redesign Series: The Post-crisis Regulatory Environment

href=”#data-explorer-interconnections/?re_layout=0&re_IDs=31″>Retrenchment
from globalization

Global Agenda Council: href=”http://www.weforum.org/content/global-agenda-council-trade-2010″
target=”_blank”>Trade

Reports: href=”http://www3.weforum.org/docs/WEF_GlobalEnablingTrade_Report_2010.pdf”
target=”_blank”>The Global Enabling Trade Report (PDF)

‘#data-explorer-landscape’ }”
href=”#data-explorer-interconnections/?re_layout=0&re_IDs=34″>Terrorism

Global
Agenda Council: href=”http://www.weforum.org/content/global-agenda-council-terrorism-2010″
target=”_blank”>Terrorism

‘#data-explorer-landscape’ }”
href=”#data-explorer-interconnections/?re_layout=0&re_IDs=35″>Threats from
new technologies

Global Agenda Council: href=”http://www.weforum.org/content/global-agenda-council-internet-security-2010″
target=”_blank”>Internet Security

Initiatives: href=”http://www.weforum.org/community/technology-pioneers”
target=”_blank”>Technology Pioneers

Reports: href=”http://www3.weforum.org/docs/WEF_GITR_Report_2010.pdf”
target=”_blank”>Global Information Technology Report 2009-2010
(PDF)

href=”#data-explorer-interconnections/?re_layout=0&re_IDs=36″>Water
security

Global Agenda Council: href=”http://www.weforum.org/content/global-agenda-council-water-security-2010″
target=”_blank”>Water Security

Reports: href=”http://www3.weforum.org/docs/WEF_WaterInitiative_WaterPotential_Report_2008.pdf”
target=”_blank”>Realizing the Potential of Public-Private Partnership Projects
in Water (PDF)

href=”http://www.weforum.org/reports/thirsty-energy-water-and-energy-21st-century?fo=1″
target=”_blank”>Thirsty Energy: Water and Energy in the 21st Century