The fifth edition of Global Risk Report 2010 of World Economic Forum was published in January 2010. I read it again recently to assess whether the risks predicted in the beginning of the year, prevailed during the year. I must say that the predictions were true and the world faced the risks during the year. As the next report will be published in January 2011, it is worthwhile to read 2010 report to adopt them in the annual risk management strategy of organizations.
The report contains covers 36 risks listed under five categories – economic, geopolitical, environmental, societal and technological risks. The major risks identified in the 2010 report are:
1) Global governance gaps
2) Fiscal crises
3) Chronic diseases
4) Under-investment in infrastructure
5) Further fall in asset prices
6) Chinese growth slowing to <6%
The risk interconnectedness maps (RIMs) presented in the report depict inter-relationships and connections between the various risks. For example, transnational crime and corruption will impact and be affected by governance gap, global retrenchment, fiscal crises, asset price collapse.
The report emphasizes the need to have global governance structures to manage and mitigate global risks. The effectiveness of the risk mitigation plans will depend on the various countries leaders ability to drive long-term changes while reconciling country specific agendas. As seen in the recent past, financial crises in USA and Europe had an impact on the rest of the world. This indicates that systematic risks have a global impact.
Afghanistan’s unstable political conditions impact the Indian sub-continent significantly and pose a threat to world security. The present situation has resulted from a long-term situation which was brewing for over a decade and was not dealt with effectively. This indicates that slow creeping risks have significant impact in the long run and should not be ignored.
Hence, in all categories of risks, governance structures and coöperation between countries is required to manage risk effectively.
On analyzing the various risk charts given in the appendix, risk managers can draw a country risk matrix. Risk managers working in organizations can further drill down to determine the organization level risk impact at macro level. From macro level risk analysis a risk strategy for the company in the 2-5 year time frame can be drawn. The analysis will help organization decision makers to understand the global and local risk impact on their business from long-term perspective. This will enable organizations to secure their business in the long run.
I recommend risk managers to read the report and build in the aspects mentioned in the report in the organization’s risk management strategy.
Please share your ideas on how the information in this report can be used more effectively by countries and organizations for risk management.