Out-Law News 2 min. read
21 Jan 2015, 11:58 am
In its 10th annual report on global risks, WEF ranked inter-state conflict with regional consequences as the most likely global risk for the first time; ahead of extreme weather events, failure of national governance, state collapse and high structural unemployment or underemployment. It was also ranked as the fourth most serious risk in terms of impact behind water crises, infectious diseases and weapons of mass destruction, according to the report.
"Twenty-five years after the fall of the Berlin Wall, the world again faces the risk of major conflict between states," said WEF's lead economist, Margareta Drzeniek-Hanouz. "However, today the means to wage such conflict, whether through cyberattack, competition for resources or sanctions and other economic tools, is broader than ever. Addressing all these possible triggers and seeking to return the world to a path of partnership, rather than competition, should be a priority for leaders as we enter 2015."
The report, which was published ahead of WEF's annual meeting in Davos, Switzerland, analysed 28 potential global risks and the interconnections between those risks. These included scenarios where rapid urbanisation led to resource shortages and societal instability; and where inter-state conflicts resulted in lack of cooperation on environmental issues, such as a water crisis.
WEF grouped risks into five categories: economic, environmental, geopolitical, societal and technological. It found that geopolitical risks accounted for three of the five most likely, and two of those with the most potential impact, in 2015 despite having been "largely absent" from the list of leading risks for at least the past five years. Three of the geopolitical risks examined by WEF had intensified the most since 2014 in terms of likelihood and impact: inter-state conflict, weapons of mass destruction and terrorist attacks, it said.
The report also found that there were more high-ranking environmental risks than economic ones. WEF said that this was not so much because economic risks had decreased, but rather that the 900 experts surveyed as part of its research were unconvinced of the effectiveness of countries' preparations to cope with challenges related to extreme weather or climate change. Water crises, failure of climate change adaptation measures and biodiversity loss were all ranked within the top ten risks in terms of impact.
The rapid pace of technological innovation, from synthetic biology to artificial intelligence, had knock-on societal, economic and ethical implications, WEF said. A particular challenge for world leaders over the next decade would be to develop regulation that allowed the benefits of innovation to be felt while at the same time preventing its misuse, it said.
"Innovation is critical to global prosperity, but also creates new risks," said John Drzik of Marsh, one of the industry experts that contributed to the WEF report. "We must anticipate the issues that will arise from emerging technologies, and develop the safeguards and governance to prevent avoidable disasters."
The report's conclusions broadly reflected the concerns of global businesses, as set out in a report by insurance provider Allianz earlier this month. The Allianz report, which was based on a survey of businesses across 47 countries, identified business interruption and supply chain risk, natural catastrophes and the risk of fire or explosions as being of particular concern to businesses; with cyber risk, political upheaval and terrorism identified by survey respondents as being the top "emerging" risks over the next five years.
Earlier this week Pool Re, the UK's terrorism risk insurance guarantee scheme, confirmed to the Financial Times that it was "reviewing" the coverage that it provides to take account of "evolving" threats. Pool Re limits insurers' exposure to claims for property damage resulting from an act of terrorism, but does not cover business interruption losses unless this is as a result of property damage. In the US, lawmakers recently agreed an extension of the country's own terrorism risk insurance programme until the end of 2020 after provisions were left to lapse over the Christmas period.