Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
This work was prepared by the Global Risk Network of the World Economic Forum.
ISBN: 92-95044-15-0
978-92-95044-15-9
REF: 060109
Figure 1: Global Risks Landscape 2009: Likelihood with Severity by Economic Loss
250 billion-1 trillion more than 1 trillion
2 7 6
31
29 5
1
19
4
34
Severity (in US$)
13 3
50-250 billion
23 9 8
21
24 16 32
20
14 30
25 35
10-50 billion
18
10 17
22 15
26 36
11
27 28 12
2-10 billion
33
Likelihood
Based on an the assessment of risks over a 10 year time horizon by the Global Risk Network
Key: Boxes indicate change since last year’s assessment
Increased Decreased
ECONOMIC ENVIRONMENTAL
1 Food price volatility 20 Extreme climate change related weather
2 Oil and gas price spike 21 Droughts and desertification
3 Major fall in US$ 22 Loss of freshwater
4 Slowing Chinese economy (6%) 23 NatCat: Cyclone
5 Fiscal crises 24 NatCat: Earthquake
6 Asset price collapse 25 NatCat: Inland flooding
7 Retrenchment from globalization (developed) 26 NatCat: Coastal flooding
8 Retrenchment from globalization (emerging) 27 Air pollution
9 Regulation cost 28 Biodiversity loss
10 Underinvestment in infrastructure
SOCIETAL
GEOPOLITICAL 29 Pandemic
11 International terrorism 30 Infectious disease
12 Collapse of NPT 31 Chronic disease
13 US/Iran conflict 32 Liability regimes
14 US/DPRK conflict 33 Migration
15 Afghanistan instability
16 Transnational crime and corruption
TECHNOLOGICAL
17 Israel-Palestine conflict
34 CII breakdown
18 Violence in Iraq
35 Emergence of nanotechnology risks
19 Global governance gaps
36 Data fraud/loss
Contents
Preface 4
Executive Summary 5
Conclusion 26
2008 was an historic year. Financial disruptions triggered particularly pertinent to the current environment. Linking
by declining house prices in the US grew into a global to the discussion on the response to the financial crisis,
credit crisis of systemic proportions. By the second half the risk of over-regulation and lack of a coordinated
of the year, most advanced economies had entered a approach to regulation at a global level makes its first
recession. The downturn spilled over into emerging appearance in the assessment. The same is true of
markets, increasing the likelihood of a global contraction underinvestment in infrastructure, a risk that is highly
in 2009. Although the world has seen several financial interconnected with a number of economic,
crises, this one differs in two respects. First, it has environmental and societal risks. In terms of both
demonstrated just how tightly interconnected economic impact and loss of life, health risks, including
globalization has made the world and its systems. chronic and infectious diseases, as well as the ongoing
Second, this crisis was driven by developed economies risk of a major pandemic, continue to dominate.
using unprecedented levels of debt and leverage Conflicts, in particular intra-state conflict, and terrorism
throughout the financial system. Thus, risks that had continue to mar the lives of millions worldwide and their
been identified in the past two editions of this report – the effects reach far beyond the costs to the populations they
risk of a global meltdown in asset prices (2007) and the directly touch.
widespread mispricing of risk and the potential
implications of systemic financial risk (2008) – have Global Risks 2009 offers an assessment of how the focus
materialized with huge consequences. risks interconnect with others and how they may evolve
over time. It also raises many questions about the risk of
The focus of the report ignoring other potential crises when dealing with a current
This year’s report focuses on the effects of the global one. The events of 2008 underscored the importance of
financial crisis and its implications for those risks that two major ideas behind the work of the Global Risk
came to the fore of the Global Risk Network assessment Network: global risks can only be understood when
for 2009. They include: a sudden further drop in China’s explored in the context of their interlinkages with other
growth to 6% or below; deteriorating fiscal positions; risks and no one group acting alone can mitigate them
further asset price falls; increasing resource-related risks effectively. These aspects of global risks are also why
due to climate change; and the failure of global they pose such a challenge for policy-makers and
governance to mitigate global risks. The highly business leaders alike. However, as they try to resolve
interconnected nature of these risks means that their this situation as quickly as possible, leaders must be
impact is truly global. The economic outlook for 2009 is a mindful of the long-term implications of today’s decisions.
grim one for most economies; markets remain volatile,
liquidity has not returned, unemployment is rising, and
consumer and business confidence has fallen to record
lows. In this climate, risks become even more potent in
their impact and, as discussed in previous reports, the
tendency towards panic and short-term responses are
more pronounced. This report explores the dangers of
managing out of this crisis, without considering the
broader, long-term consequences of today’s decisions. It
also stresses the need for a determined, global focus on
balancing the response to the immediate challenges with
a concerted effort to mitigate longer term risks, not least
those relating to climate change and resources.
How the global risks landscape has evolved since China hard landing
last year Though the most recent World Bank forecast (November
The following risks came to the fore in the assessment 2008) suggests China will still achieve growth of 7.5% in
for 2009, both in terms of likelihood and severity and the 2009, given the importance of China in terms of its
degree to which they are “pivotal” risks, i.e. that they are potential to be a source of global growth and given its
at the nexus of many risks. massive net-creditor position mainly with respect to the
US, a slowdown to 6% or below in China’s growth rate
Deteriorating fiscal positions would have significant impact on the already weak
The deterioration of fiscal balances in several major G8 global economy. This risk is highly connected to a fall in
countries and other economies was judged as the US dollar, to energy and food price risks, and to
increasing in both likelihood and severity. From the health risks.
interconnections map it can be seen that this risk is
linked to a number of other central economic, societal Asset price collapse
and economic risks: retrenchment from globalization, a Though the effects of sharply declining asset prices are
fall in the US dollar, further asset price declines, the rise already playing out, the assessment continues to place
of chronic diseases and underinvestment in public this risk as very high on both the likelihood and severity
infrastructure. scale across different asset classes and regions. Many
Node size: denotes severity, Node colours: red – economics; dark green – geopolitics; light green – environmental; purple – technology; blue – society
Lines: line thickness denotes the strength of the interlinkage. The direction of a thicker line segment indicates when one risk is the stronger in the relationship.
Proximity: the map shows risks that are tightly interlinked to many other risks as closer to one another.
>1,000,000
1
30
29
200,000-1,000,000
31
Severity (number of deaths)
24
40,000-200,000
18
14 13 26 20
19
25 21
8,000-40,000
10 33
12 15
22
11 17
23
1,600-8,000
16 34
35
Likelihood
Source: World Economic Forum 2009 Please see inside flap for key
experts expect the decline in asset prices to continue itself. The assessment places this gap as highly likely
over the coming months as the financial crisis unwinds and severe in its impact. As the interconnections map
further and the recession leads to bankruptcies and shows, weak global governance sits at a central position
credit defaults. between geopolitical, economic and environmental risks.
1.0
PK AF IN
IQ GE
Asian countries
Geopolitical, Environmental, Health, Technical risks
0.8 ET
ZW CN
SD
ID US
CD
0.6 AL
SN
TM UK
KW
0.4 SA
QA
African countries LY CA
HK
BR SG
NZ
0.2 AT
CH
NO
ISL
FI
SE
European countries
0.0
0.0 0.2 0.4 0.6 0.8 1.0
Economic risks
Looking at different clusters, the chart underscores regional clusters and outliers. It reveals a fairly high level of
cohesion with respect to economic risks among European countries. In contrast, the variation in risk exposures is far
larger along the domain that includes geopolitical, environmental, health and technological risks. A closer analysis of
the individual risks (not shown here) suggests that drivers for dispersion in Europe are mainly geopolitical and, to a
lesser degree, environmental risks, with particularly high exposures to geopolitical risks in countries of the former
Soviet Union.
The picture for Asia is reversed. Asian countries are much more diverse with respect to their exposures to economic
risks, but comparatively tightly clustered – however at a higher median risk level – when it comes to the geopolitical
and environmental risk dimensions.
African countries form, in general, a comparatively tight cluster with respect to environmental, geopolitical, health and
technological risks dimensions. Note that their median exposure is lower than that for Asian countries, and also that
Africa is not quite as strongly exposed to economic risks as is Asia. Though this chart should only be taken as a tool
to explore possible risk exposure, it does suggest that certain regions and countries have the potential to reduce their
overall risk exposure along one or the other axis.
8 | Global Risks 2009 * For a note on the tool behind this chart please see Appendix 2
2. The Financial Crisis and Global Risks
1Pension and healthcare reform is examined in a recent World Economic Forum study entitled Financing Demographic 9 | Global Risks 2009
Shifts: The Future of Pensions and Healthcare in a Rapidly Ageing World: Scenarios to 2030, World Economic Forum, 2008.
Figure 5: Country Exposure to Asset Bubbles and Economic Risks
1.0
Eastern European
LT
East Asian
Western European ZA PE
0.8
CL KR
BR
DZ NG CN
HK VN
EC NO PK US SG
CO TH
0.6 VE JP
Asset bubble risk
AR
PY
BO
0.4
Africa
SO LR
UZ
0.2 AF
0.0
0.0 0.2 0.4 0.6 0.8 1.0
Economic risks
Developing and emerging market countries are tightly clustered with respect to economic and asset bubble risks but
to different degrees. African countries, for example, have relatively fewer financial and real assets, and thus lower
exposure to asset bubbles. Even their overall exposure to economic risks is small, reflecting in part their lagging
integration into global markets.
In contrast, East Asia shows high exposures to economic and asset bubble risks; in fact, their overall exposure is very
similar to Japan and the US. Most Asian economies are heavily exposed to a hard landing in China. Asia is also
subject to risks related to the price of oil, dollar fluctuations and a retrenchment from globalization, with the latter
being especially acute for the small and open economies of Hong Kong SAR and Singapore.
10 | Global Risks 2009 * For a note on the tool behind this chart please see Appendix 2
Beware of unintended consequences Improving risk management
The risks associated with a decline in China’s growth, The credit crisis has revealed glaring gaps in risk
deteriorating fiscal positions and deflation illustrate the management. Banks, for example, learned at their peril
need for forward-looking policies. While it is essential for that the underestimation of liquidity had created severe
leaders to respond forcefully to the current financial systemic risk. Moreover, there was a significant lack of
market instability and the risk of a global recession, they clarity about the extent of risk exposure in each part of
must also be mindful of the implications that today’s the system and financial organizations were not proactive
decisions have in the long term. Risks related to enough in seeking out that information.
underinvestment in infrastructure, for example, or the
degradation of natural resources and climate change, However, identifying and understanding individual risks is
may be low in the short term, but these risks and not enough. Risk management must also account for
associated losses increase in a longer time horizon. interlinkages and remote possibilities. Low-probability,
high-severity events, such as the terrorist attacks of 9/11,
Policy-makers must also consider the unintended the Asia tsunami of 2004 and the current global credit
consequences arising from regulation and government crisis do happen. All of these events were considered
interventions. Market participants always react to outside the normal distribution of experience and all
incentives and one can argue that the growth of imposed high human and economic costs, which affect
unregulated and highly leveraged investment vehicles was people, regions and industries that are often quite far
in some part due to market participants’ activities removed from the epicentre of the catastrophe.
designed to avoid regulation that they perceived as
onerous. Indeed, this regulatory arbitrage added to the But this should be no reason for paralysis. Risk
opacity that made it difficult to spot the extent of the management that considers extreme events, employs
weaknesses in the system. Hence, future financial market stress testing and calibrates quantitative approaches with
regulation must strike a fine balance between fostering an informed qualitative judgments can make a difference.
environment conducive to innovation and reducing the Today’s arsenal of tools is impressive. But models have
risk of systemic failure. This calls inter alia for regulatory their limits and decision-makers need to be mindful of the
measures that reduce pro-cyclicality and assign assumptions, sensitivities and limitations of the models
accountability to reduce incentives for excessive risk used in the analysis and anticipation of risk, and of their
taking that can have disastrous results. own inherent biases.
An example from disaster mitigation So how might this concept be applied to encourage
Disaster preparedness and response planning is a good long-term thinking? One proposal in the context of
example of how people fail to take sufficient action even catastrophe risk financing is to move from the usual one-
though they know they are exposed to a serious risk. year contracts towards the development of longer term
Property owners, lenders, investors and government contracts. Similar strategies may also be appropriate to
agencies often ignore worst-case scenarios and do not encourage longer term thinking in other areas. For
invest adequately in infrastructure or enforce regulations example, the standard annual bonus system
designed to reduce the risk of catastrophes and implemented by many organizations could be modified
accidents. so that a more significant portion of managers’
remuneration packages are contingent on multi-year
How can one explain this behaviour? Part of the performance rather than on just the past 12 months.
response is that people rarely look at probability This might induce managers to consider more
estimates in choosing between alternatives and tend to systematically the potential consequences of their
ignore risks with perceived likelihoods falling below some immediate actions in the long run and to pay more
threshold of concern. For instance, despite the first attention to worst-case scenarios rather than hoping that
terrorist attack against the World Trade Center in 1993 they will not occur by the end of the current year.
which cost insurers several hundred million dollars,
terrorism risk continued to be included as an unnamed Furthermore, given the interconnectedness of the world
peril in most US commercial insurance policies. When today, actions taken in one part of the world can have
the 9/11 attacks occurred, insurers and reinsurers from ripple effects thousands of miles away and months and
all over the world had to pay US$ 35 billion of insured years after these decisions have been made. Innovative
losses. strategies will be crucial to help businesses and
individuals focus on the long term and to move beyond
There is another reason why many people do not act “it cannot happen to us” to “what if it occurs” – a
until after a crisis has occurred. Individuals and mentality better suited to the current climate of
corporations have short time horizons when planning for interdependent global risks.
the future so they may not fully weigh the long-term
benefits of investing today in loss reduction measures
that could benefit them in the future. The upfront costs
of mitigation loom disproportionately large relative to the
delayed expected benefits over time. Applied to
businesses, short-term horizons can translate into a
NIMTOF perspective (Not in My Term of Office). In other
words, if a major crisis occurs everyone hopes it is not
on their watch.
12 | Global Risks 2009 2Howard Kunreuther “Protective Decisions: Fear or Prudence” in Wharton on Making Decisions
(Stephen J. Hoch and Howard C. Kunreuther ed), Wiley 2001 http://opim.wharton.upenn.edu/risk/downloads/01-41-HK.pdf
Hedging Commodities Risk: Lessons Learned
Corporate commodity risk management clearly needs to
be more responsive to changing price levels and higher
than expected volatility. For most commodity users this
means a fundamental reassessment of their hedging
objectives over a longer period of time; the incorporation
of uncertainty in price and volatility forecasts; a better
understanding of exposures; and finding a more
sophisticated way of assessing the range of hedging
tools and approaches available to manage the
cashflow/earnings volatility. In other sectors, such as
energy and metals, these tools are already an integral
part of industry best practice but previously less-
exposed sectors, such as chemicals and fast-moving
consumers goods, are now looking at these tools.
• Insight: Financial innovation appeared to increase the • Investment: Financial markets depend on structures
financial system’s efficiency by spreading risks to a that support the flow of information and the timely
wide spectrum of market participants. However, the settlement of trades. Credit default swaps, for
failure to cut through the opaqueness of many example, were and continue to be traded over the
structured products and assess the multilayered counter only and the settlement of contracts used to
leverage pyramid created systemic risk. Hence, take weeks (now days). Hence, creating a central
forward-looking risk management must identify clearing facility for credit derivatives and enabling them
interlinkages and account for low probability/high to be traded on regulated exchanges would help
severity events. improve the market structure and reduce both
settlement and systemic risk.
• Information: Financial markets must always cope
with imperfect information and moral hazard. • Institutions: The global credit crisis demonstrated a
Transparency is the antidote to remedy deficiencies major governance gap and the need to improve
arising from the asymmetric distribution of information. prudential oversight and regulation. Financial market
The growth of the credit bubble can be partly traced stability is a public good, and globalized financial
back to the fact that investors were in the dark about markets require a globally coordinated effort to create
the magnitude of liabilities accumulated in structured and maintain this public good. The financial
investment vehicles due to their complexity and that architecture of the future must have an element that
they were not covered by the consolidated reporting transcends national borders. To ensure success its
of banks and broker-dealer institutions. institutions should include broad representation in rule-
making bodies, macro prudential surveillance and
have agreed procedures for systematic enforcement.
14 | Global Risks 2009 3This topic is discussed in greater depth in the World Economic Foum World Scenarios Series report The New Financial
Architecture: Scenarios to 2020, World Economic Forum 2009
Figure 7: Geopolitical risks and oil dependency
1.0
Oil producers
SO
IQ
IR IN
0.6
Geopolitical risks
NG EG CN
KZ TH
SA TW
KW AO
MX
QA UK
LY HR
0.4
FR
IT SP
AE
HK
SG
0.2 NZ
NO SI SE
LU
European FI
IS
consumers
0.0
0.0 0.2 0.4 0.6 0.8 1.0
Risk of oil price rise
• First, oil-producing and oil-consuming countries form two very distinct and separate clusters.
• Second, oil producers are exposed to geopolitical risks in varying degrees, with Norway on the low end and Iraq on
the high end of that particular risk spectrum. Mexico and Great Britain, although oil producers too, are set apart
and much closer to the oil-consuming countries of Europe.
• Third, it is worthwhile noting that Hong Kong SAR and Singapore are both clustered with the European countries
instead of with their geographic neighbours in East Asia. They demonstrate a lower exposure to geopolitical risk,
while maintaining a relatively high exposure to a rising oil price.
The analysis points to broad scope for collective action. High oil dependency exposes consumer countries indirectly
to geopolitical risk. Advanced economies in particular are shown to have a powerful incentive to reduce their oil
consumption not only for environmental reasons (to cut carbon emissions), but also for reduction of their indirect
exposure to geopolitical risk.
Demographics, resources and climate change production, through what is often referred to as a
Despite a slowdown in the rate of global population “second green revolution”, could also be used as an
growth, the world’s population is still growing and opportunity to introduce more water-efficient irrigation
expected to peak at 9 billion people in 2050, up from techniques and drought-resistant crops that require less
6.6 billion in 2006. The past decades have seen water. Nonetheless, as the global population grows, and
urbanization accelerate to the point where over half the water demand increases, the interest in fertile, water-rich
world’s population now live in cities, a trend that is land will rise. This will be compounded by shifting rainfall
expected to continue. These shifts are placing greater and drought patterns due to climate change. Farmers
pressure on resources and are contributing directly and from Europe to South-East Asia and Australia are
indirectly to the rising emissions linked to climate change already having to manage their crops and water
and the resulting consequences for the environment. differently as droughts are prolonged, or monsoons are
heavier but shorter in duration.
More intensive agricultural methods, greater
industrialization and growing energy needs, urbanization Competition for land and water
and rising incomes in emerging economies are already This demand on, and for, fertile land for food production
sources of pressure on water resources. Globally, and associated water resources is prompting some
agriculture accounts for 69% of all renewable water countries to take action to secure access to water both
consumption, industry for 23% and domestic use for within and beyond their borders. Countries such as
8%. The push to improve agricultural productivity in a Saudi Arabia and China have already made significant
number of countries will drive water consumption higher. investments in infrastructure and agricultural productivity
The flipside is that the focus on increasing agricultural to access land for food supplies in Kazakhstan and
an estimated US$ 1.3 trillion in investment to address Today’s infrastructure investment choices are key, as
ageing infrastructure: the Environmental Protection they represent a huge opportunity to spend on projects
Agency says there is a gap of between US$ 300 billion that will result in better, long-term resource management
and US$ 500 billion alone for waste water infrastructure. – from technology and plant choices to reduce
In November 2008, China announced a US$ 586 billion emissions and waste, to transport and building
package, most of which will go into infrastructure over development that will be more energy and land efficient.
the next two years. Over recent years, China’s A lack of investment now or investment in unsustainable
infrastructure spending has averaged 9% of its GDP. areas will result in further costs through climate change,
India’s public spending on infrastructure has historically poor living conditions in crowded cities and, ultimately,
represented 3.5% of GDP; it plans to increase this will be a drag on future growth. Governments will need
amount to 8% in 2012. Worldwide it is estimated that to spend effectively but they will also need to implement
the global economy needs about US$ 5 trillion for policies that encourage investors to understand the risks
infrastructure over the next five years alone – ranging and take a long-term view.
from transport networks to sanitation and power – just
to maintain the quality of the existing infrastructure
network and meet rising demand.
2009 is a critical year for international climate change Importantly, it is developing nations who face the worst
issues. By year-end the countries at the Copenhagen consequences because they are more vulnerable to the
conference, which is a follow-up to the United Nations physical effects of climate change than developed
Framework Convention on Climate Change (UNFCCC) nations, due to their limited institutional frameworks and
Kyoto Protocol, must agree to a new protocol to ensure financial adaptive capacities:
that international efforts to reduce global greenhouse gas • In Africa alone, 75-250 million people will be
emissions continue beyond 2012. Recent studies exposed to water stress by 2020 (IPCC 4th report).
indicate climate change is occurring faster than The area suitable for agriculture will decrease and
expected. Without resolute action we could face reductions in yields could amount to 50% by 2020.
irreversible changes to the climate. There is pressure on • Towards the end of the 21st century, projected sea-
the discussions in Copenhagen to produce a concrete level rise and storms will affect low-lying coastal
result – a framework far more comprehensive, long term areas with large populations potentially triggering
and ambitious than the Kyoto Protocol, ironically at a migration of people.
time when the world economy is entering a major • Weather-related disasters disproportionately affect
economic slowdown. the agricultural sector in least developed countries
(subsistence farming) where most farmers have only
The four cornerstone issues that the 2009 climate limited access to financial means such as micro-
negotiations need to address are discussed below: credit and insurance solutions.
The financial crisis exposed fundamental flaws in global has advanced dialogue by encouraging debate among
governance. In an historic meeting of countries the scientific community resulting in improved awareness
representing 90% of world GDP, the G20 summit held in and a greater common understanding. On the other
November 2008 discussed ways to coordinate a hand, the Kyoto Protocol proved ineffective not only
response and the need for a global, collaborative solution because key governments failed to engage but also
to the financial crisis. Indeed, as governments and because it was unable to offer a framework
corporations face the immediate challenge of rekindling encompassing incentives and adaptation.
growth, there is a risk that other challenges such as
climate change, food security, poverty reduction, and Where better and more innovative governance has shown
failing and unstable states are pushed down the agenda, results is in the area of global health risks. For HIV/AIDS
perhaps increasing the severity of these risks in the long treatment, The Global Fund, a UN-backed public-private
run. Persistent governance gaps in many of these issues structure has succeeded in making antiretroviral drugs
will only serve to exacerbate the related risks. more easily available to populations at risk. The WHO has
developed an effective monitoring and information
Where are the gaps? network for pandemics that operates globally. The risk of
Whether in the economic or security arena, most of the infectious disease remains high but these examples
multilateral institutions that operate today were created in illustrate that new forms of governance can be effective
the period following World War II. Their mandates and even for some of the most borderless and tenacious of
capacities were not designed for the highly global risks.
interconnected, multi-polar and, in many ways, more
open world of today. Economic and demographic shifts On water-related risks however, there is currently little
have not been reflected in either their governance or oversight and shared understanding among governments
decision-making structures. Equally, the shift in the roles and business about not only environmental and security
between the public and private sectors has not been fully but also economic implications. In the absence of
taken on board. Global risks know no borders and global frameworks that offer a common base for national and
solutions are also beyond the realm of any one regional dialogue and action around water pricing,
government. Indeed, they will require not only sustainability and infrastructure, water-related risks may
intergovernmental collaboration but also public-private go unaddressed. As discussed in the previous section,
collaboration. Again, existing governance structures were water scarcity and quality are highly connected to energy,
not built to capitalize on the combined strengths of food and health risks. As a global good and a global risk,
government, business and civil society. water is perhaps an issue most in need of global
governance for mitigation.
Addressing global risks through better governance
At the World Economic Forum’s inaugural Summit on the Better governance to avoid retrenchment
Global Agenda in Dubai in November 2008, the Global The spread of the financial crisis and the resulting global
Agenda Council (GAC) on Global Governance made downturn has increased the risk of retrenchment from
some recommendations as to how to address globalization in developed and especially in developing
governance gaps. They included: fostering greater economies (as illustrated in Figure 11).
commitment and new leadership on global issues;
developing frameworks to draw on expertise and to Over the past several decades, globalization has meant
generate debate and awareness; marrying public countries and businesses building economic and societal
authority and regulatory capacity with incentives for the ties across the world, opening new markets, providing
private sector to innovate; reforming existing institutions, services, generating employment and reducing poverty.
specifically reforming the UN Security Council; exploring This momentum has raised hundreds of millions of
new mechanisms to provide necessary resources. people out of poverty but more progress is needed. A
global downturn will undoubtedly place greater pressures
Looking at the global risks tracked by the Global Risk on many economies, developed and developing, but
Network for the past five years with these retrenchment, in the form of economic protectionism or
recommendations in mind provides a gauge of how much unwillingness to engage on climate change, resource or
more can be done to improve governance. On climate security issues, could create even greater pressures. Now
change and resources, the picture is mixed. On the one seems like an appropriate time address governance gaps
hand, the Intergovernmental Panel on Climate Change and thus provide frameworks offering greater certainty to
In Global Risks 2008, principles of country risk Transparent data and clear communication of risks
management and the concept of a Country Risk Officer, to all stakeholders: Japan’s relatively small territory
first introduced in 2007, were explored. Many of the (378,000 square km) suffered 20% of the world’s
challenges facing international governance are similar: earthquakes between 1996 and 2005. Seventy-five per
broad range of risks, divergent incentives, multiple cent of Japan’s assets are concentrated in flood prone
stakeholders and limited resources. However, at a areas. The Central Disaster Management Council
country and international level, clear, transparent (CDMC) of Japan is an inter-ministerial body established
information and an integrated, comprehensive risk to formulate and promote a comprehensive national
assessment are essential. strategy for these and other risks. Data from the Japan
Metereological Society and local governments, funnelled
Countries are subject to a myriad of risks including through the CDMC, is used to clearly communicate risks
natural catastrophes, food safety, pandemics and and response to its constituents. In addition, Japan
terrorism. Their governments are charged with the provides various risk maps to stakeholders as a risk
responsibility of maintaining critical infrastructure mitigation measure.
consisting of water, energy, transportation and
communication while preserving lives and economic
livelihoods under increasing budgetary pressure. Despite
differences in organizational structures and risk priorities,
there are two principles highlighted in Global Risks 2008
that governments have applied in practice: integrated,
comprehensive, long-term risk assessment and
transparent, clear communication to all stakeholders.
Whether through a committee of an existing body or a
newly formed international institution, a comprehensive
framework of risk assessment, carefully evaluating
The 36 risks were assessed in terms of their likelihood and their severity. In addressing likelihood, actuarial principles were applied where
sufficient data existed, though for certain risks only qualitative assessments based on expert opinion are possible. In assessing severity,
two indices were considered: destruction of assets/economic damage and human lives lost. Both of these latter indices were used,
resulting in separate analysis of risks by the two types of severity, though for some risks the lives lost criteria was deemed inapplicable. It
should also be noted that although some risks by definition evolve over a longer term (e.g. climate change) and others could happen in
the near term (e.g. oil price shock), the likelihood of all risks was evaluated with a 10-year time horizon.
The Global Risks “barometer” below shows how the qualitative 2009 assessment (completed in October 2008) of the likelihood and
severity of each risk compares with the 2008 assessment.
Key:
In the short term, slowing global demand and fears of a further drop
in global growth means the outlook for price spikes over the next 12
months is unlikely despite the OPEC in production in December
2008. The long-term trend is for rising demand and a potential return
to tighter conditions.
Though China’s domestic market could help compensate for its loss
of exports due to recession in the US and other markets, the
government will need to encourage private spending to boost
domestic consumption.
5 Fiscal crises
9 Regulation cost
This risk was included in the assessment for the first time for 2009.
10 Underinvestment in infrastructure
This risk was included in the assessment for the first time for 2009
11 International terrorism
The perceived risk has decreased overall internationally but the risk
remains relatively high in several countries such as Iraq, Afghanistan,
Pakistan and Somalia.
12 Collapse of NPT
13 US/Iran conflict
14 US/DPRK conflict
15 Afghanistan instability
Experts judged that a degree of progress had been made but that
the severity remains constant in cost and loss of life terms.
17 Israel-Palestine conflict
18 Violence in Iraq
This risk was included in the assessment for the first time for 2009.
22 Loss of freshwater
This risk rose over previous years, primarily due to flood plain
development and an expected increase in climate change-related
weather events but remains constant from 2008 to 2009.
This risk was included in the assessment for the first time for 2009.
27 Air pollution
This risk was included in the assessment for the first time for 2009.
28 Biodiversity loss
This risk was included in the assessment for the first time for 2009.
29 Pandemic
30 Infectious disease
31 Chronic disease
32 Liability regimes
33 Migration
This risk was included in the assessment for the first time for 2009.
# Techn
echnol
ological
ogical Risks Likelihood Severity
Severity Severity
US$ No. of
Deaths
36 Data fraud/loss
This risk was included in the assessment for the first time for 2009.
The Risks Interconnections Map (RIM) and two different continents. While these risks may have
perception survey regional or even local origin, their impact can potentially
A primary objective of the Global Risk Network is to be felt globally.
increase awareness and understanding of the
interlinkages among risks and the complexity this implies Cross-Industry Relevance: The risk has to affect three
for decisions about risk management and mitigation. The or more industries (including both primary and secondary
data used to build the Risk Interconnections Map (RIM) impact).
(see Figure 2) is drawn from two sources. The
connections and strengths are developed using data from Uncertainty: There is uncertainty about how the risk
the Global Risks Perception Survey. This Web-based manifests itself within 10 years combined with uncertainty
survey was completed by over 120 risk experts and about the magnitude of its impact (assessed in terms of
members of the Forum’s Global Agenda Councils. The likelihood and severity).
nodes on the RIM represent the same assessment data
for “severity” as the barometer. The thickness of the lines Economic Impact: The risk has the potential to cause
connecting the risks represent the strength of the economic damage of around US$ 10 billion.
relationship between them. Where the first part of a line
emanating from one risk is thicker it indicates that risk as Public Impact: The risk has the potential to cause major
the dominant one. human suffering and to trigger considerable public
pressure and global policy responses.
A note on the regional risk maps produced by
Zurich Financial Services Multistakeholder Approach: The complexity of the risk
The analysis is based on a methodology and data set both in terms of its effects and its drivers as well as its
developed by Zurich Financial Services. The methodology interlinkages with other risks require a multistakeholder
is broadly comparable to statistical cluster analysis that approach for its mitigation.
partitions a data set into subsets (or clusters) with the
property that the data in each subset (cluster) share
common characteristics – in this case the characteristics The Global Risk Network
are risks. Countries with similar risks are close neighbours To refine its understanding of risk, the Global Risk
on the risk map; they form clusters. In contrast, countries Network conducted a series of workshops, interviews
that are dissimilar with respect to their risks are displayed and meetings throughout 2008 and expanded its work
comparatively far apart from each other; they are not part both globally and on a regional basis. This included the
of a cluster. publication of three regional reports, Africa@Risk,
Europe@Risk and India@Risk, as well as a topical report
The data set covers 160 countries; the 24 global risks are on emerging markets and high-growth companies, Global
grouped in five risk classes: economic, environmental, Growth@Risk.
health, geopolitical and technological risks. Hard data is
drawn from established public sources and incorporated Overall, the Global Risk Network identified this year a
into the model using parameters for high to low risk total of 36 specific risks to the international community
developed by Zurich Financial Services. The data used to over the next 10 years, using an updated taxonomy
determine the interconnections among the risks is drawn (compared with 31 risks featured in the 2008 taxonomy).
from the qualitative assessment data on those Risks that were previously aggregated for various
interconnections established for Global Risks 2008. purposes have been disaggregated throughout this report
for consistency and improved comparability year on year.
The criteria used to define global risks A number of risks on the previous year’s list have been
removed or rephrased because they failed to meet the
The criteria for global risks have been set as follows: criteria of the revised methodology, while the 2009 list
also features eight new additions.
Global Scope: To be considered global, a risk should
have the potential to affect (including both primary and
secondary impact) at least three world regions on at least
This report was prepared by the Global Risk Network of the Daniel M. Hofmann, Group Chief Economist
World Economic Forum in conjunction with its partners. Kerry Karageorgis, Development Director, Risk Assessment
Room
Global Risk Network Axel P. Lehmann, Chief Risk Officer, Member of the Group
Executive Committee
Irene Casanova, Associate Director, Global Risk Network Samuel Schenker, Research Assistant, Risk Assessment
Viktoria Ivarsson, Project Manager, Global Risks Report Room
Stéphane Oertel, Associate Director, Global Risk Network
Fiona Paua, Senior Director, Head of Global Agenda Council Expert Workshops
and Strategic Insight Teams
Pearl Samandari, Team Coordinator, Strategic Insight Teams Over the past year, the Global Risk Network has engaged
Sheana Tambourgi, Director, Head of the Global Risk with a wider group of experts in workshops and meetings
Network; Editor, Global Risks 2009 held in New York, London, Dalian, Delhi and Zurich. These
workshops, along with the risk assessment process and
Global Risks Report Partners meetings in Nigeria, Kenya, South Africa, China, Turkey and
India, have provided broad expertise and invaluable insight
Citigroup, USA for this report. They are an integral part of the Global Risk
John Ingraham, Managing Director, Head of Risk Network’s mandate to foster and support multistakeholder
Aggregation, Citigroup dialogues to improve understanding of global risks and to
increase the possibilities for risk mitigation.
Marsh & McLennan Companies (MMC)
Sara Dixter, Manager, Oliver Wyman (MMC), United Kingdom We would like to thank all of those who contributed for their
John Drzik, President and Chief Executive Officer, Oliver time and above all for their insights:
Wyman Group, MMC, USA
David Frediani, Senior Vice-President, International and Client Ahmet Akarli, Executive Director, Goldman Sachs
Development, MMC, USA International, United Kingdom
John J. Merkovsky, Managing Director, Marsh Risk Efkan Ala, Undersecretary of the Prime Ministry of Turkey
Consulting, MMC, USA Towfiq M. Al-Bastaki, Assistant General Manager, Risk
Roland Rechtsteiner, Partner, Oliver Wyman (MMC), Management & Compliance Division, Shamil Bank of
Switzerland Bahrain, Bahrain
Alex Wittenberg, Partner, Oliver Wyman (MMC), USA Laura Alfaro, Associate Professor, Harvard Business School,
USA
Swiss Re Berrak Alkan, Editor, Chairman’s Office, Dogus Group, Turkey
Anwarul Hasan, Vice-President, Risk Management, Swiss Ross Anderson, Professor of Security Engineering, University
Re, Switzerland of Cambridge, United Kingdom
Kurt Karl, Senior Vice-President, Head of Economic Yilmaz Argüden, Chairman, ARGE Consulting, Turkey
Research & Consulting, Swiss Re American Holding Corp., Attila Askar, President, Koç University, Turkey
USA Curtis Baron, Director, Business Continuity, Europe,
Raj Singh, Chief Risk Officer, Member of the Executive Information Technology, Credit Suisse Securities (Europe) Ltd,
Board, Swiss Re, Switzerland United Kingdom
Teri Taylor, Director, Head of Emerging Risk Management, Guy Battle, Originator and Founder, Dcarbon8, United
Swiss Re, Switzerland Kingdom
Lisa Wyssbrod, Director, Senior Issue and Partnership Esther Baur, Director, Head Issue Management, Swiss Re,
Manager, Swiss Re, Switzerland Switzerland
Erik Berglöf, Chief Economist, European Bank for
The Wharton School, University of Pennsylvania, USA Reconstruction and Development (EBRD), London
Witold J. Henisz, Associate Professor of Management Kip Berkley-Herring, Group Risk Manager, BT Plc, United
Howard Kunreuther, Cecilia Yen Koo Professor; Co-Director, Kingdom
Risk Management and Decision Processes Center Simon Biggs, Director, Institute of Gerontology, King’s
Erwann Michel-Kerjan, Managing Director, Center for Risk College London, United Kingdom
Management and Decision Processes, Wharton School, Jaime de Bourbon Parme, Head, Crisis Response
University of Pennsylvania Operations, Ministry of Foreign Affairs, Netherlands
Philippe Brahin, Director, Head of Group Regulatory Affairs,
Zurich Financial Services, Switzerland Swiss Re, Switzerland
Roland Cochard, Research Assistant, Risk Assessment Ian Bremmer, President, Eurasia Group, USA
Room
50-250 billion
23 9 8
Armen Sarkissian, President and Founder, Eurasia House Global Competitiveness Network
21
24 16 32
International, United Kingdom Matthias Catón, Knowledge Manager, Global Agenda
20 Anthony Scaramucci, Managing Partner, Skybridge Capital, Council; Global Leadership Fellow
14 30 USA Brindusa Fidanza, Senior Project Manager, Environmental
Cuneyt Sezgin, Board Member, Garanti Bank, Turkey Initiatives; Global Leadership Fellow
25 35 18
10-50 billion
Daniel Shapiro, Director, Harvard International Negotiation Christoph Frei, Senior Director, Head of Energy Industries
10 17 Initiative, Harvard Law School, USA Lena Hagelstein, Programme Manager; Global
22 15 Dennis Snower, President, Kiel Institute for the World Leadership Fellow
26 36 Economy, Germany Randall Krantz, Associate Director, Environmental Initiatives
11
Andreas Spiegel, Vice-President, Senior Climate Change Johanna Lanitis, Project Associate, Energy Team
27 28 12 Advisor, Swiss Re, Switzerland Carina Larsfälten, Associate Director, Governments and
2-10 billion
Rory Stear, Executive Chairman, Freeplay Energy Plc, United Stakeholders
Kingdom Sylvia Lee, Associate Director, Environmental Initiatives;
33 Rolf Tanner, Director, Head of Political and Sustainability Risk Global Leadership Fellow
Management, Swiss Re, Switzerland Oksana Myshlovska, Knowledge Manager, Global
below 1% 1-5% 5-10% 10-20% above 20% Alper Ugural, Chief Risk Officer, Dogus Group, Turkey Agenda Council; Global Leadership Fellow
Sinan Ülgen, Chairman, Centre for Economic and Foreign Martin Nägele, Knowledge Manager, Global Agenda
Likelihood
Policy Studies (EDAM), Turkey Council; Global Leadership Fellow
Based on an the assessment of risks over a 10 year time horizon by the Global Risk Network
Gündüz Ulusoy, Faculty Member, Faculty of Engineering and Gareth Shepherd, Associate Director, Investors
Key: Boxes indicate change since last year’s assessment
Natural Sciences, Sabanci University, Turkey Community; Global Leadership Fellow
Increased Decreased Oya Unlü Kizil, Director, Corporate Communications, Koç Fabienne Stassen Fleming, Head of Knowledge Capture,
Holding AS, Turkey Global Agenda Councils
Stable New risk for 2009 Likelihood Severity Levent Veziroglu, Executive Vice-President (EVP), Office of Dominic Waughray, Senior Director, Head of
the Chairman, Dogus Group, Turkey Environmental Initiatives
Source: World Economic Forum 2009 Suna S. Vidinli, Chief Communications Officer, Calik Holding
AS, Turkey
Diego Visconti, International Chairman, Accenture, Italy
ECONOMIC ENVIRONMENTAL Bob Ward, Director, Public Policy, Risk Management
1 Food price volatility 20 Extreme climate change related weather Solutions, United Kingdom
2 Oil and gas price spike 21 Droughts and desertification Mark Weaser, Chief Investment Officer, Modern Terminals
3 Major fall in US$ 22 Loss of freshwater Ltd, Hong Kong SAR
4 Slowing Chinese economy (6%) 23 NatCat: Cyclone
Martin Weymann, Vice-President, Senior Risk Manager,
5 Fiscal crises 24 NatCat: Earthquake
Swiss Re, Switzerland
6 Asset price collapse 25 NatCat: Inland flooding
Carolyn Williams, Development Manager, The Institute of Risk
7 Retrenchment from globalization (developed) 26 NatCat: Coastal flooding
Management, United Kingdom
8 Retrenchment from globalization (emerging) 27 Air pollution
Patricia Wouters, Director, UNESCO Centre for Water Law,
9 Regulation cost 28 Biodiversity loss
10 Underinvestment in infrastructure Policy and Science, University of Dundee, United Kingdom
SOCIETAL Selcuk Yorgancioglu, Executive Director, Abraaj Capital,
GEOPOLITICAL 29 Pandemic United Arab Emirates
11 International terrorism 30 Infectious disease Linda Yueh, Fellow in Economics, University of Oxford,
12 Collapse of NPT 31 Chronic disease United Kingdom
13 US/Iran conflict 32 Liability regimes Simon Zadek, Chief Executive, AccountAbility, United
14 US/DPRK conflict 33 Migration Kingdom
15 Afghanistan instability
16 Transnational crime and corruption
TECHNOLOGICAL
17 Israel-Palestine conflict
34 CII breakdown
18 Violence in Iraq
35 Emergence of nanotechnology risks
19 Global governance gaps
36 Data fraud/loss
The World Economic Forum is an independent
international organization committed to improving
the state of the world by engaging leaders in
partnerships to shape global, regional and
industry agendas.