Last week, the World Economic Forum took place in Davos (Switzerland). This 2016 meeting rounded up the world’s top leaders and experts to discuss major current economic issues affecting our world. The agenda of this year covered topics from environmental and health backgrounds to migration movements, also featuring several press-conferences with Presidents from all over the world, and some socio-economical questions such as: gender parity, fossil fuel industries, migration movements and security dilemmas among others. Click here to see Davos 2016 programme at close.
2016 Global Risks
“A global risk is an uncertain event or condition that, if it occurs, can cause significant negative impact for several countries or industries within the next 10 years.”
Figure 1: The Global Risks Report 2016 (11th Edition) – World Economic Forum
For the past few years, our world has become more interconnected. Fast-paced events take place all around the globe thanks mainly to breakthrough technologies. Political, economic and social changes have bowed to this development and factor into the phenomenon called Globalization. While progress is vast there are risks involved in the scale at which this occurs. The World Economic Forum has stressed the urgent imperative of resilience as an effective way to address global risks under a framework of cooperation between both the public and private sectors.
As Figure 1 indicates, interconnectedness does not mean unity; that is to say, that not every region in the world faces the same risks. Risks can be classified upon different categories:
- Economic: The economic sphere is noteworthy for high unemployment rates, energy prices, fiscal crises and asset bubbles.
- Environmental: Environmental risks are long term and carry more weight in light of the corresponding categories mentioned. For example, temperatures are likely to rise this year to 1° Celsius above the pre-industrial era temperature. In the coming months, extreme weather conditions, natural catastrophes and water crises have been recognized as potential outcomes. This can affect sourcing water and exhausting resources. It can also destroy economies.
- Geopolitical: Interstate conflicts along with detrimental actions of some national governments pose global risks. Growth in crime and terrorist organizations is rampant under these conditions and cause possible spill-over.
- Societal: Mass-migration movements and social tensions create instability to regions, especially those who are not equipped to deal with an influx of people.
- Technological: Breakthrough technologies can also cause vulnerabilities. The best examples are the rise in technological dependency and how vulnerable some societies are to cyberattacks.
Figure 2 shows the existing link between global risks. It is apt to consider that if a single piece of the chain breaks unmeasurable consequences can be triggered with domino effect. Last week the WEF reflected on how these risks can affect business specifically.
Figure 2: The Risks-Trends Interconnections Map 2016
As stated above, unemployment, energy price shock, fiscal rates and failure of national governance will affect businesses the most. Figure 3 demonstrates that global risks are beyond the capacities of any business, government or any stakeholder.
Figure 3: Global Risks of Highest Concern for Doing Business
There is no underestimating what the global risks above can do to a population of people and their livelihoods. The WEF highlighted the need for the private sector to build strong resilience. Joint policies and close collaboration with governments will be the only path towards tackling these dangers. Understanding the current global landscape is the first step to constructing a joint-action plan towards sustainability and growth in the future. The last economic recession is a more than an adequate example of the severity and importance of this point. The livelihoods of billions depend on it.
To view the full World Economic Forum report please click here.
World Trade Centre Dublin will publish four short summaries on different topics addressed in Davos last week. From the extensive list of Davos 2016 we have selected these four topics:
a) 2016 Global risks (Tuesday 26th January).
b) The Climate Crisis (Wednesday 27th January)
c) The Energy Industry (Thrusday 28th January).
d) Industry 4.0 (Monday 1st February).
Please stay tuned and keep up to date on our social media pages.
Macarena Ochoa Martínez
International Trade Associate – World Trade Centre