Economic Forum's Risk Response Network has published a
fascinating, if sobering, overview of major risks that face the
world in the next decade: Global Risks 2012, 7th edition. They predict
that economic and societal factors are the most likely to cause
major problems, but these will be exacerbated by climate change,
water shortages and resulting agricultural challenges.
"Three distinct constellations of risks that present a very
serious threat to our future prosperity and security emerged from a
review of this year's set of risks.
"Case 1: Seeds of Dystopia Dystopia, the
opposite of a utopia, describes a place where life is full of
hardship and devoid of hope. Analysis of linkages across various
global risks reveals a constellation of fiscal, demographic and
societal risks signalling a dystopian future for much of humanity.
The interplay among these risks could result in a world where a
large youth population contends with chronic, high levels of
unemployment, while concurrently, the largest population of
retirees in history becomes dependent upon already heavily indebted
governments. Both young and old could face an income gap, as well
as a skills gap so wide as to threaten social and political
Case 2: How Safe are our Safeguards? As the
world grows increasingly complex and interdependent, the capacity
to manage the systems that underpin our prosperity and safety is
diminishing. The constellation of risks arising from emerging
technologies, financial interdependence, resource depletion and
climate change exposes the weak and brittle nature of existing
safeguards – the policies, norms, regulations or
institutions which serve as a protective system. Our safeguards may
no longer be fit to manage vital resources and ensure orderly
markets and public safety....
Case 3: The Dark Side of Connectivity. The
impacts of crime, terrorism and war in the virtual world have yet
to equal that of the physical world, but there is fear that this
could change. ..."
The top-five risks in terms of impact are expected to be:
"Major systemic financial failure
Water supply crises
Food shortage crises
Chronic fiscal imbalances, and
Extreme volatility in energy and agriculture prices."
The World Economic Forum calls for more flexible, more effective
regulations: "To improve management of uncertainty in a
complex world, it is necessary to accept that we will not
get safeguards right the first time. Regulations have
often been viewed as a way for authorities to signal to the public
that they are in control of a situation, but in a complex
system this control is often an illusion. While we should
start by considering counterfactuals in order to anticipate
possible outcomes of regulations, it is even more important to
define broader system safeguards. Such safeguards need to be
flexible and dynamic enough to adapt to changing information and
should closely involve stakeholders in the co-production of new
types of regulation...
Such a dynamic process of iteration between regulators and
practitioners at the cutting edge of knowledge exemplifies how
safeguards should ideally be defined. At the heart of this process
is a necessary understanding of who bears the risks and who reaps
potential benefits, so that incentives can be aligned in an
The report also includes a study of the Japanese earthquake, and
a snapshot of companies that proved most resilient. For example,
"Lawson stores continued to serve their communities, make
vital supplies available and minimize financial losses to the
company. This response has been attributed to the networked
managerial structure put in place as a result of lessons learned
from the 1995 Kobe earthquake disaster (see Figure 25). Each branch
office was required to assess emerging risks and draft detailed
disaster recovery plans twice a year; this will increase to three
times a year in 2012. For example, bicycles were stationed in
branch offices because they were the only functional means of
transport in the 1995 earthquake. It became mandatory to keep
stocks of emergency goods in branch offices, and the concentration
of distribution hubs was reassessed to allow for more effective
catering to disaster-struck evacuees. As the nature of crises can
never be fully anticipated, a network of employees who have access
to real-time coordinating mechanisms and the authority to make
decisions can be more valuable than teams of highly-trained,
specialized risk managers..."
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