GRC Professional - February 2015 Edition

SPECIAL FEATURE THE GLOBAL RISKS REPORT Interstate conflict is the greatest risk in the world today, according to a new report by the World Economic Forum. Daniel Sheehan. The effects of climate change are accelerating, and the uncertainty about the global geopolitical context and the effects it will have on international collaboration will remain. THE 10TH EDITION OF THE WORLD Economic Forum Global Risks report was published in February, and it highlights inter-state conflict and water shortages as the greatest risks the world faces. The report is based on the annual Global Risks Perception Survey, completed by almost 900 members of the World Economic Forum’s global stakeholder community. A global risk is defined in the report as being an uncertain event or condition that, if it occurs, can cause significant negative impact for several countries or industries within the next 10 years. Over the past 10 years, the Global Risks report has raised awareness of the dangers inherent in the interconnected nature of global risks and has called persistently for collaboration to address them. Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, says in the coming decade, the world will be even more intensely-shaped by transformative forces that are under way already. “The effects of climate change are accelerating, and the uncertainty about the global geopolitical context and the effects it will have on international collaboration will remain,” says Schwab. “At the same time, societies are increasingly under pressure from economic, political and social developments, including rising income inequality, but also increasing national sentiment. Last but not least, new technologies, such as the internet or emerging innovations will not bear fruit, if regulatory mechanisms at the international and national levels cannot be agreed upon.” 2015 Global Risks Interstate conflict has taken a significant leap up the risks ladder since 2014, arguably reflecting recent geopolitical conflicts that are fuelling geopolitical and social instability. Concerns about environmental and economic risks remain; in particular, ongoing failure to adapt to a changing climate, water crises and both unemployment and underemployment reflects growing awareness as to how little tangible action has been taken to address 22 GRC Professional • February 2015 these issues. At the same time, cyber-attack remains among the most likely high-impact risk. Perhaps unsurprisingly, given the Ebola outbreak last year, respondents also underscored the potentially devastating impact of the rapid and massive spread of infectious diseases. This reflects the need for a higher level of preparedness for major pandemics at both the country and international levels to address this important risk. In the geopolitical risks category, respondents identified weapons of mass destruction (WMDs), which include weapons containing nuclear, chemical, biological and radiological technologies, as the third most impactful risk, albeit as the second-least likely risk. If deployed, such weapons would create an international crisis, with huge human and economic costs. In the coming decades, technological advancements, greater access to scientific knowledge and the increased vulnerability of classified information to cyber threats enhance the risk of WMDs proliferation, particularly in fragile areas. This highlights the need for greater international collaboration to control the proliferation of WMDs. Among the economic risks, fiscal crises and unemployment are perceived as close to equally impactful and likely, as in last year’s report. Yet, other risks, like fiscal crisis, energy prices and failure of a financial institution, also rated higher this year. While the world has made progress in addressing and preventing financial crises, and small improvements in fiscal issues and unemployment have been achieved, the danger of complacency compared to other risks exists. Experts remain concerned about significant residual risks, which may have been overshadowed by other risks in the survey. Interestingly, the risk of social instability scores high in both the short and long term. This trend towards social fragility is one of five threads that stand out from the 2015 survey – along with growing concern about geopolitics, the possible overshadowing of economic risks by other more imminent risks, concern about unaddressed environmental risks and persisting vulnerabilities in cyberspace. •••

GRC Professional - February 2015 Edition | Page 24