While writing this piece the World Economic Forum (WEF) is about to convenein Davos, Switzerland, for its annual January meeting.
In the backdrop is The Global Risks Report 2016, the WEF’s acclaimed insight report that puts the delicate issue of global risks into perspective. The report is compiled thanks to the feedback the WEF receives from a 750-strong stakeholder community from around the world that is consulted through an annual Global Risks Perception Survey.
Respondents derive from a broad range of sectors, from academia, civil society and the business sector, cross-cutting a wide spectrum of age groups. In the lead to the 2016 report they were asked for an opinion about 29 global risks categorised into five distinct groups: societal, technological, economic, environmental and geopolitical.
Experts’ opinion about perceived risks was sought over a 10-year horizon, each risk being rated on two counts – the likelihood of occurrence and how negative, or destructive, would the resulting impact be should the event actually occur.
We manage risk on a daily basis spanning from the individual to the corporate levels at the highest levels of governance. Interest in risk issues has grown considerably in recent years in the wake of the so-called Fourth Industrial Revolution of modern times which, according to Klaus Schwab founder and executive chairman of the WEF, represents the emergence of the age of informatics and IT.
What started off in the late 18th century as the era of steam-powered machines, subsequently developed into the age of electricity and mass production towards the 1870s at the height of Victorian times; the latter was the ‘second industrial revolution’.
A hundred years later while Neil Armstrong was about to set that giant first step for mankind on the moon the age of electronics that led to modern times was born. It culminates into Schwab’s Fourth Industrial Revolution, now the age of cyberspace, Orwell’s Big Brother come true in the form of the World Wide Web.
It is almost amazing how in spite of the almost complete lack of governance in the wilderness out there, online, so many people feel more comfortable conversing through mobiles and laptops in preference to a friendly chat over a pint at the favourite pub in town square.
The WEF defines risk, a technical term after all, as “an uncertain event or condition that, if occurs, can cause significant negative impact for several countries or industries within the next ten years”. Risk therefore comprises two basic elements: the probability of occurrence of an event such as, say, extreme weather, mass migration, the collapse of the stock markets or perhaps a terror attack or a nuclear accident, together with the magnitude of the negative impact that would be expected to be incurred should the event actually occur.
Any form of risk assessment is about identifying potential vulnerabilities to which a system may be exposed and proposing mitigating measures to help manage worst-case scenarios. The subjective element inherent to risk assessment where one kind of impact may be perceived as more likely than others, or perhaps more catastrophic, is generally compensated by lessons learnt from previous situations and the level of expertise analysing the system.
WEF experts’ opinion remains that 2016 should not be envisaged as a landmark year for climate action
This latest WEF report assesses the ‘failure of climate change mitigation and adaptation’ as the most impactful global risk in the foreseeable future. ‘Weapons of mass destruction’ rank second and, very significantly, ‘water crisis’ ranks third. As far as the aspect of probability of occurrence is concerned it is reported that ‘large-scale involuntary migration’, followed by ‘extreme weather events’ and ‘failure of climate change mitigation and adaptation’ rank top in that order.
With regards to perceived likelihood, or probability, of occurrence, environment related matters have even surpassed the potential incidence of ‘interstate conflict with regional consequences’. This had ranked first in the same WEF analysis a year ago in 2015.
This should certainly not be interpreted as if there is any room for downplaying the geopolitical risks to which we are exposed as a consequence of the unprecedented escalation of terror in recent times. In fact, concern about the extent to which this phenomenon has the potential to impact in terms of interstate relations is a recurrent theme in the report.
Global environmental problems, more specifically climate-related, started to feature prominently in WEF analysis outcomes as from 2011. Back then, ‘storms and cyclones’, ‘flooding’, ‘biodiversity loss’ and ‘climate change’ ranked amongst the top five in that order in terms of likelihood, with ‘climate change’ placing as high as second in terms of impact.
The US National Oceanic and Atmospheric Administration (NOAA) lists a drought in the Horn of Africa that had affected an estimated 10 million people, record flooding in Thailand and Australia to the detriment of several other millions, and a minimum Arctic Sea ice extent observed in September as amongst the top 10 weather and climate events that year. The list also includes severe drought episodes in Europe and Central America. These events together with several others then and in more recent times carry a huge global economic cost.
We already know for sure that 2015 was the hottest year on record. 2016 is expected to be even hotter and the possible links with a more intense El Nino are being explored. The recent flooding events in the UK only serve to accentuate Sir Nicholas Stern’s conclusion some years ago that it is wiser – and less costly – to act now to mitigate on climate while making judicious investments to make adaptation more durable and robust for the immediate and longer terms.
Shifting the burden to future generations down the line will only make matters worse and therefore costlier with the global economy as a whole at the receiving end. And yet, WEF experts’ opinion remains that 2016 should not be envisaged as a landmark year for climate action.
While the Davos meeting convenes the International Monetary Fund (IMF) has issued its World Economic Outlook update signalling a clear message that the global economy is facing challenging times particularly as a result of the slowdown in China, economic distress in Russia and Brazil and also the plummeting price of oil to the detriment of the commodity producers in the Middle East.
That the IMF has issued a positive bill of health for the Maltese economy, described as ‘solid’ for the foreseeable future, far from renders our successes unassailable: ours remains a fragile economy that will always be very sensitive to repercussions arising from, say, global geopolitical risks and the perception of these by the world’s major economic stakeholders. Over this we have very little or no control.
What way forward does the WEF report offer? The answer is that while recognising that the management of global risks goes beyond the possibilities of any single actor or stakeholder, it is in the best interest of societies around the world to build resilience. For this to happen collaboration is key in all fields of governance, from the improvement of regulatory standards and systems to combat cybercrime, to the joint interstate political effort that is needed to tackle involuntary migration, to making a showpiece out of the Paris climate agreement with all the world nations honouring their obligations.
Resilience and bold collaboration will surely also be needed to counteract the socio-economic implications that inevitably arise from the terror risks modern societies particularly those in the western hemisphere now have to deal with.
Ultimately it is a question of deliverables-focused policymakers that should have the wisdom to construe the right policies at the right time, and being shrewd and strong enough to take decisions tough as they may be.
Alan Pulis specialises in environmental management.