Q&A with the authors of Global Risks 2011

On January 12 the Forum released the sixth edition of its global risks report, Global Risks 2011. The level of interest in the Forum's risk work by the Forum community, media and general public reached record levels. Here are some of the most asked questions regarding the report, with answers provided by the Forum's team of risk experts.

Q – What is global risk and how does it relate to economic disparity?

The World Economic Forum’s definition is that for a threat to be considered a “global risk” it must have global geographic scope, cross-industry relevance, uncertainty as to how and when it will occur, high levels of economic and/or social impact, and it must require a multistakeholder approach to risk response.

As regards economic disparity, issues of equity at both the national and the international levels are becoming increasingly important. Politically, there are signs of resurgent nationalism and populism as well as social fragmentation. This makes economic disparity a cross-cutting global risk that both undermines our response capabilities and heightens the likelihood and impact of other global risks.

Kristel Van der Elst, Director and Head of Strategic Risk Foresight, Risk Response Network, Co-editor of Global Risks 2011

Q – Is economic disparity really a risk? After all, aren’t emerging economies simply catching up to their advanced counterparts?

Economic disparity plays out both between and within countries. Increasing ease of communication and access to information has made such inequalities more visible. Competition between countries can indeed be very positive, but it is also clear that some countries can "fall through the cracks" and, due to risk interconnections, create a range of challenges for other countries and indeed entire regions.

Within countries, there is increasing evidence that inequality is growing. This leads to different groups within countries having divergent economic interests, undermining a sense of broader national solidarity. The risks linked to inequality between groups relate to the ability of countries to respond effectively to local and global challenges, as well as the potential for social or political unrest.

Nicholas Davis, Associate Director and Deputy Head of Strategic Risk Foresight, Risk Response Network, Co-editor of Global Risks 2011

Q – What surprises me is the lack of interest and mobilization of the general public to monitor and ensure governments undertake projects that the society really needs, especially in the developed countries. How do you deal with such "global governance failure" where structure and systems exist, but the implementation does not reflect the need of the general public?

Recently there seems to be a growing disparity and somewhat disconnect between leaders and the general public. Oftentimes, effective global governance is held back by ineffective decision-making structures at the national level. The challenges we are facing now can no longer be dealt with by a single leader, stakeholder or country. Technological and social shifts have empowered the public and changed the nature of interaction with leaders. Increasing transparency such as through e-governments empowers the public to better understand issues and urge leaders to make changes. The key becomes to strike the right balance that enables to push the agenda forward in a sustainable manner.

Chiemi Hayashi, Associate Director and Deputy Head of Risks in Depth, Risk Response Network

 Q – Exactly what are the two risks facing the economy in general?

Neither the Forum nor Global Risks 2011 aspire to be predictive about the possibility or form of a future economic crisis. However, the report does highlight a series of risks that are perceived by experts as of both high likelihood and high impact with regards to the global economy. This is the focus of the report’s first nexus of risks, which focuses on macroeconomic imbalances. Imbalances both within advanced economies and between advanced and emerging economies raise the respective risks of fiscal crises and asset price collapse, which in turn are highly interconnected to economic disparity and global governance failures.

Stephan Mergenthaler, Project Manager, Strategic Risk Foresight, Risk Response Network

Q – Is there guidance about what would help mitigate the risks discussed in the report?

There are three important rules to keep in mind when approaching global risks. The first is that one should proactively address their causes rather than their symptoms, identifying effective points of intervention in underlying structures and systems. The second is that one must devise coordinated response strategies to address the existence of difficult trade-offs and the threat of unintended consequences caused in part by increased interconnectedness between risks. Finally, it is essential to take a longer-term approach to assessment and response, particularly when seeking to manage global risks that emerge over decades rather than months or years. These are the reasons that are leading the Forum to launch the Risk Response Network (RRN) later this month in Davos-Klosters.

Andrew D. Bishop, Project Associate, Strategic Risk Foresight, Risk Response Network