The annual review of the worldwide threat profile by the World Economic Forum has been released and financial, societal and environmental risks all feature in the top 10 and global governance failure has emerged as a central risk.
The report assesses 31 global risks that have the potential to cause significant negative impact across countries and industries it they were to take place. The risks are grouped under five classifications – economic, environmental, geopolitical, societal and technological – and measured in terms of their likelihood and potential impact.
“Each risk considered in this report holds the potential for failure on a global scale; however, it is their interconnected nature that makes their negative implications so pronounced as together they can have an augmented effect,” stated Jennifer Blanke, Chief Economist at the World Economic Forum. “It is vitally important that stakeholders work together to address and adapt to the presence of global risks in our world today.”
The 10 global risks of the highest concern in 2014 are:
1. Fiscal crises in key economies
According to the report “advanced economies remain in danger, while many emerging markets have seen credit growth in recent years, which could fuel financial crises. A fiscal crisis in any major economy could easily have cascading global impacts."
2. Structurally high unemployment/underemployment
Unemployment takes second spot due to the amount of people in both advanced and ermging economies struggling to find jobs.
3. Water crises
Environmental risks feature prominently on this year's list. Water crises high placement in the chart highlights a continued and growing awareness of the “global water crisis as a result of mismanagement and increased competition for already scarce water resources”.
4. Severe income disparity
The report indicates income disparity has made the list due to concerns about the “squeezing effect the financial crisis had on the middle classes in developed economies, while globalisation has brought about a polarisation of incomes in emerging and developing economies”.
5. Failure of climate change mitigation and adaptation
6. Greater incidence of extreme weather events (e.g. floods, storms, fires)
7. Global governance failure
According to the report the risk of global governance failure was identified by respondents as one of the risks that is most connected to others.
8. Food crises
9. Failure of a major financial mechanism/institution
10. Profound political and social instability
The report states the risk here is that “one or more systemically critical countries will experience significant erosion of trust and mutual obligations between states and citizens. This could lead to state collapse, internal violence, regional or global instability and, potentially, military conflict”.
Other key findings from the report include:
• Female respondents perceived almost all global risks as both more likely and more impactful than males, especially in the environmental category.
• Younger individuals gave higher scores for the impact of almost all of the risks, particularly environmental risks, such as water crises, greater incidence of natural catastrophes, the loss of biodiversity and greater incidence of extreme weather events.
• The risks perceived to be most interconnected with other risks are macroeconomic – fiscal crises, and structural unemployment and underemployment.
• The decline of trust in institutions, lack of leadership, persisting gender inequalities and data mismanagement were among trends to watch, according to survey respondents.
• Experts added further concerns including various forms of pollution, and accidents or abuse involving new technologies, such as synthetic biology, automated vehicles and 3-D printing.