World Economic Forum’s Global Risk Report 2018 – A Critical Period of Intensified Risk

Yesterday saw the launch of the World Economic Forum’s Global Risks Report 2018. The Global Risks Report is published every year (now in its 13th edition) and gathers perspectives from many hundreds of experts and decision makers around the world on the perceived impact and likelihood of the most prevalent, long-term global risks: economic, social and political. It also looks at the underlying trends that could increase, or alter, those risks over a 10-year period.

While the report fundamentally is concerned with the future of human and societal development, we would suggest that for procurement professionals, this could be this year’s first step into understanding the possible risks to, and effects on, your critical supply chains. We predicted in the UK earlier last year that "the economic storm-clouds seem to be brewing somewhat. We’re not guaranteed a storm as yet, but the sensible person will at least be packing their metaphorical umbrella." While the global economic situation has probably picked up since then, the weather can change rapidly!

The 2018 report suggests that experts are preparing for another year of heightened risk, examining three main findings that have emerged from the survey as the greatest priorities, looking at their interconnections and the necessary actions to mitigate their risk. It finds that:

  • The structural and interconnected nature of risks in 2018 threaten the very system on which societies, economies and international relations are based.
  • The positive economic outlook gives leaders the opportunity to tackle systemic fragility affecting societies, economies, international relations and the environment.
  • Environmental risks dominate the Global Risk Perception Survey for the second year running; asked about risk trajectories in the coming year, 59% of answers pointed to increasing risks.

To begin with the report sets out a clear matrix of the top 10 risks in terms of ‘likelihood’ and the top 10 risks in terms of ‘impact,’ and segments them in terms of Economic, Geopolitical, Environmental, Societal and Technological risk.

The upper right-hand quartile is dominated by extreme weather events, natural disasters, failure to adapt to climate change, cyberattacks, water-related crisis, bio-diversity loss and large-scale involuntary migration, among others. This puts environmental and geo-political impacts at the forefront. (See Figure 1 in the report for the full matrix, which is followed by a rather complex graphic of all the interrelated connections between events and risk).

It does, however, give a clear table showing how these priorities have changed over 10 years (Figure 4), for instance in 2008 the top global risk likelihood was Asset Price Collapse (unsurprisingly) and that morphed over the years into Severe Income Disparity and finally environmental issues.

It warns that while a global economic recovery is now under way, this offers “new opportunities for progress that should not be squandered: the urgency of facing up to systemic challenges has, if anything, intensified amid proliferating indications of uncertainty, instability and fragility.”

The report is valuable reading for us in terms of the predictions over the economy, its vulnerabilities and upcoming challenges, threats to the food supply chain, the effects of AI, and trade wars. But probably the section most worth our attention is Risk Reassessment – where selected risk experts share their insights about the implications for business decision makers, governments and civil society and the development of our understanding of risk.

Roland Kupers, adviser on Complexity, Resilience and Energy Transition and a fellow at Oxford University, writes a section on fostering resilience in complex systems, including “bouncing back faster from a disturbance.”

Then Michele Wucker, author of The Gray Rhino: How to Recognize and Act on the Obvious Dangers We Ignore and a 2009 Young Global Leader of the World Economic Forum, talks about the need for organisations to pay more attention to cognitive bias in their risk management processes.

The full report can be downloaded here - The Global Risks Report 2018, free to access with no registration required. And the accompanying press release can be read here. There is also a recording of the launch press conference which can be accessed here.

And if you’d like to read more of Spend Matters opinion on supply chain risks, how to spot them and avoid the impact, we have produced a series of short, quick-to-read papers (in conjunction with experts riskmethods) covering natural disasters, geo-political risk, man-made risk, and corporate image and compliance risk. Find them here.

 

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