2018 Global Risk Report by the WEF
Ref: World Economic Forum (2018). The Global Risk Report, 13th Edition.
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Summary
The tragedy of the commons means we often let chronic problems with dispersed responsibilities fester.
When risk cascades through a complex system, the danger is not of incremental damage but of “runaway collapse” or an abrupt transition to a new, suboptimal status quo.
In a deeply interconnected world, stresses and shocks propagate across systems in ways that evade forecasting. Climate change is linked to the Syrian Civil War, which is connected to heightened concern over immigration, which precipitated Brexit.
Hyperbolic discounting leads some decision makers to prioritize short term goals that end up hurting long term value. Structures such as short-term quarterly earnings cycles or relatively short-term political terms creating perverse incentives that magnify the hyperbolic discounting bias.
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Global Trends
Ageing Population
Changing climate
Degraded environment
Growing Middle Class in Emerging Economies
Increasing polarization of societies
Rising Chronic diseases
Rising Cyber Dependency
Rising Geographic Mobility
Rising income and wealth disparity
Decline in Commitment to Rules Based Multi-Lateralism
Erosion of support for Globalization and Growing support for protectionist policies
Rising Urbanization
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Geopolitical Risk
Failure of Regional or Global Governance
Re-establishing the state as the primary focus of power and legitimacy has become an increasingly attractive strategy for many countries.
The idea the “the system is rigged” has gained electoral traction in recent years, and research suggests that concerns about inequality rest on more fundamental worries about societal fairness.
The erosion of institutions of multilateral dialogue and decision-making damages the prospects of reaching new global agreements at a time when the need for cooperation looks more urgent than ever.
The danger of miscommunication and miscalculation between states is heightened by the absence of a clear rules-based international order or a settled balance of power.
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—Environmental Risks—
2018 was a year characterized by high impact hurricanes, extreme temperatures and the first rise in CO2 emissions for four years. We have been pushing our planet to the brink and the damage is becoming increasingly clear. Biodiversity is being lost at mass-extinction fates, agricultural systems are under strain and pollution of the air and sea has become an increasingly pressing threat to human health. A trend towards nation-state unilateralism may make it more difficult to sustain the long term, multilateral responses that are required to counter global warming and the degradation of the global environment.
Among the most pressing environmental challenges facing us are extreme weather events and temperatures; accelerating biodiversity loss; pollution of air, soil, and water; failures of climate-change mitigation and adaptation; and transition risks as we move to a low-Carbon future.
Land
Simultaneous Breadbasket Failures threaten sufficiency of global food supply.
The interaction of disruptors such as extreme weather, political instability, or crop diseases could result in a simultaneous blow to output in key food producing regions triggering global shortages and price spikes. The risk of a systematic breakdown could be further elevated by wider fragilities, including reduced crop diversity, competition for water from other sectors and geopolitical tensions.
Among the changes that could help are increasing crop diversity, establishing stress tests of choke points and other national and regional vulnerabilities, reducing waste along supply chains.
The prevalence of monoculture production heightens vulnerability to catastrophic breakdowns in the food system- more than 75% of the worlds food comes from just 12 plants and five animals’ species, according to the Food and Agriculture Organization of the UN.
The prevalence of monoculture production heightens vulnerability to catastrophic breakdowns in the food system- more than 75% of the worlds food comes from just 12 plants and five animals’ species, according to the Food and Agriculture Organization of the UN.
Biodiversity Loss
Biodiversity loss is now occurring at mass-extinction rates. The populations of vertebrate species declined by an estimated 58% between 1970-2012.
Pollution
Indoor and Outdoor Air Pollution are together responsible for >10% of all deaths globally each year.
More than 90% of the world’s population live in areas with levels of air pollution that exceed WHO guidelines.
The commission estimates the overall annual cost of pollution to the global economy at US $4.6T, equivalent to around 6.2% of output. Many of the associated risks to health are still not well understood. Research suggests, for example, that the huge volume of plastic waste in the worlds water- approximately 8M more tons every year- is finding its way into humans. People eating seafood could be ingesting up to 11,000 pieces of micro-plastic every year. Microplastic fibres are found in 83% of the worlds tap water. One concern is that these micro-fibres could bind with compounds containing toxic pesticides or metals, providing these toxins with a route into the body.
Oceans
Having absorbed 93% of the increase in global temperatures between 1971 and 2010, the world’s oceans continue to get warmer and studies suggest that their capacity to absorb CO2 may be declining. Research also suggests that tropical forests are now releasing rather than absorbing CO2.
Deforestation
A record 29.7M hA of tree cover was lost in 2016.
More than 80% of the deforestation in the Amazon is accounted for by cattle ranching.
Pathogens
Antimicrobial Resistance (AMR)
AMR has two underlying drivers: The overuse and misuse of antibiotics in both human health systems and livestock management and no new classes of antibiotics have been invented since the 1980s.
AMR could exert a drag on Global GDP of ~ 1.1%- 3.8% between now and 2050 (2017 World Bank Study).
One key objective of these plans is to reduce excessive use of antibiotics, both in human’s health systems and in livestock and agriculture. In the US, 62% of the antibiotics use in agriculture are medically important for humans. And agriculture usage is rising shapely; the global use of antimicrobials in meat production is expected to grow by 67% between 2010 and 2030.
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Economic Risks
Assets Bubble Collapse due to unsustainably overpriced assets such as commodities, housing, shares, &c.
Unmanageable inflation or deflation in a major economy due to prolonged near zero inflation or deflation that leads to unmanageable increases in the general price levels of goods and services in key economies.
Stagnating incomes.
Excessive Debt burdens that generate sovereign debt crises and/or liquidity crises.
China, where debt issuance has surged to help deliver the high levels of growth the country’s plans require. The rapid expansion of debt in the Chinese economy is now one of the worlds clearest flashpoints for potential economic turmoil.
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Digital/Technological Risks
Breakdown of Critical Information Infrastructure and Networks
Large Scale Cyber Attacks
Ransomware Attacks: Cyber-attacks that lock targets out of their data and demands a ransom in return for restoring access; ~64% of all malicious emails.
Spear Fishing: Stealing data or installing malware using individually targeted email scams.
Massive Incident of Data Fraud/Theft
Deceptive News: According to one study, in the 3 months immediately prior to the 2016 US Presidential election, the top 20 false news stories outperformed- in terms of shares, reactions and comments- the top 20 stories from major news sources.
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Societal Risks
Failure of Urban Planning
Food Crises
Large Scale Involuntary Migration
Profound Social Instability
Rapid and Massive Spread of Infectious Diseases
Water Crises
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Future Risk Scenarios
Tragedy of the Commons with dispersed responsibilities.
Bilateral trade wars cascade and multilateral dispute resolution institutions are too weak to respond.
Collapse of Global Food Supply.
A new wave or populism threatens the social order in one or more mature liberal democracies.
AI piloted drone ships wipe out a large proportion of global fish stocks.
A cascading series of economic/financial crises overwhelm political and policy responses.
Bioengineering and cognition-enhancing drugs widen the gulf between haves and have-nots.
Self-Determination around contested borders sparks regional conflict.
Regulatory, cybersecurity and protectionist concerns lead to the fragmentation of the internet.
Small State Disruptions: A weak or collapsing state can become a locus of instability that radiates disorder or pulls in larger neighboring states; Libya and South Sudan, for example, have caused instability in neighboring countries, notably via flows of refugees and weapons.
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Potential Global Risk Mitigation Strategies
Increased Crop Diversity
Reduction of waste along supply chains.
Classification of certain Cyberweapons as prohibited WMD.
Structured Resilience: Redundancy, modularity, and requisite diversity to bounce back faster from a disturbance.
Encouraging structured debate and constructive dissent.
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Terminology
Availability Bias: Leads decision-makers to rely on examples and evidence that come immediately to mind. This draws people’s attention to emotionally salient events ahead of objectively more likely impactful events.
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Chronology
2019: The World Bank announces a moratorium on financing of upstream oil gas-related investments.-2018 GRR by WEF.
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