The Global Risks 2014 report highlights how global risks are not
only interconnected but also have systemic impacts. To manage
global risks effectively and build resilience to their impacts,
better efforts are needed to understand, measure and foresee the
evolution of interdependencies between risks, supplementing
traditional risk-management tools with new concepts designed for
uncertain environments. If global risks are not effectively
addressed, their social, economic and political fallouts could be
far-reaching, as exemplified by the continuing impacts of the
financial crisis of 2007-2008.
The systemic nature of our most significant risks calls for
procedures and institutions that are globally coordinated yet
locally flexible. As international systems of finance, supply
chains, health, energy, the Internet and the environment become
more complex and interdependent, their level of resilience
determines whether they become bulwarks of global stability or
amplifiers of cascading shocks. Strengthening resilience requires
overcoming collective action challenges through international
cooperation among business, government and civil society.
This year, the report includes a special section on "Strategies
for Managing Global Risks" based on findings from a Wharton
research project that interviewed over 100 high-level executives in
S&P 500 companies to examine the variety of ways in which firms
identify and manage risks. Based on these preliminary
findings, the report suggests strategies for firms and governments
to build resilience to shocks from systemic global risks that,
through interdependencies, may impact them in unexpected ways.
This inclusion is important as the community of risk thought
leaders moves beyond the tasks of identifying risks, increasingly
focusing on building resilience capacity that creates measurable
value for firms and countries. A critical component in preparing
for disasters is to create incentives that encourage risk managers
to engage in long-term deliberative thinking. Techniques such as
scenario analysis, stress tests and ranking/scoring metrics can
help overcome myopia, inherent in human decision-making. This new
mindset is entering the boardroom in a much more significant way
today than when the Global Risks initiative began almost 10 years
ago.
The Global Risks 2014 report can be found at: Global Risks Report 2014