World Economy

Looming Global Risks

Looming Global Risks Looming Global Risks

Businesses are facing unparalleled geopolitical risks today, but one can mitigate those risks to shape a positive future.

Geopolitical risks have real repercussions for businesses, and the global scenario for 2016 will only increase vulnerabilities to investments and operations. These interconnected risks are not just emerging from the usual “hotspots” such as the Middle East, either. The strain will be felt worldwide: multiple governments in South America are under extreme stress; a worldwide commodities dip is rattling the foundations of even major economies, Bloomberg quoted The Global Risks Report 2016 as saying.

In the assessment of Jim Thomas, Head of Credit & Political Risk, Zurich Insurance Group, the state of play is challenging, but businesses that focus on becoming more resilient will be best positioned for future success.

This 11th edition of The Global Risks Report is published at a time of profound change. Global risks materialize in new and unexpected ways and are becoming more imminent as their consequences reach people, institutions and economies.

Over the past decade, The Global Risks Report has expanded its scope from analyzing the interconnected and rapidly evolving nature of global risks to also putting forward actionable solutions and calling for public-private collaboration in strengthening resilience.

Now in its 11th edition, the report describes a world in which risks are becoming more imminent and have wide-ranging impact: tensions between countries affect businesses; unresolved, protracted crises have resulted in the largest number of refugees globally since World War II; terrorist attacks take an increasing toll on human lives and stifle economies; droughts occur in California and floods in South Asia; and rapid advances in technologies are coupled with ever-growing cyber fragilities and persistent unemployment and underemployment.

Rising Cyber Connectivity

Implications of sweeping digitization (also termed the 'Fourth Industrial Revolution'), ranging from transformations that are the result of rising cyber connectivity to the potential effects of innovations on socioeconomic equality and global security, remain far from fully understood. At the same time, climate change is unequivocally happening, and there is no turning back time.

The increasing volatility, complexity and ambiguity of the world not only heightens uncertainty around the “which”, “when”, “where” and “who” of addressing global risks, but also clouds the solutions space. We need clear thinking about new levers that will enable a wide range of stakeholders to jointly address global risks, which cannot be dealt with in a centralized way.

Taken together, this calls for a resilience imperative–an urgent necessity to find new avenues and more opportunities to mitigate, adapt to and build resilience against global risks and threats through collaboration among different stakeholders.

This part of the report explores the Global Risks Landscape 2016 and the Global Risks Interconnections Map 2016 through a societal lens. Well-functioning societies are at the core of international security and are key to strengthening resilience.

One of the key risks related to the advancing digitization of societies concerns the tension between the ways in which technology is empowering citizens and the growing sense of political disempowerment felt by many of those citizens. Rising income disparity and a shortage of quality employment opportunities–that could be further exacerbated by the Fourth Industrial Revolution–along with extreme weather events and heightened migration flows are among the factors that could leave societies deeply unsettled.

The world has navigated previous eras of profound transitions resulting from converging economic, technological and geopolitical developments. But with a faster pace of change and more complex interconnections, the stakes have never been higher.