Home / Uncategorized / The risks facing the world set for debate, again, at Davos

The biggest risk facing the world is income disparity but the risk likely to have most impact on the world, if it occurs, is that of a major systemic financial failure, according to a report prepared for the World Economic Forum which starts in Davos, Switzerland, tomorrow (January 22).

The 80-page report, distributed to Davos attendees – including heads of state as well as industry leaders and important NGO executives – and others last week, is the annual “Global Risks Report”. It is based on a survey of 1,000 business and political leaders and asks them to assess 50 nominated risks. The survey has been run for several years. The World Economic Forum, which includes a satellite “Summer Forum” in Dalian, China, later in the year, has been going on for 40 years.

The Forum has actually become a commercial enterprise. Not that there’s anything wrong with that. Discussions canvas a wide range of issues, which are respectfully reported, and perhaps raise the world’s mean level of consciousness in some areas. Or perhaps not. There are certainly no real outcomes.

But the annual risk survey is a different kettle of fish. It is overseen by a group of academics and consultants, including Marsh & McLennan and the Wharton Center for Risk Management at the University of Pennsylvania. It provides an interesting snapshot of what world political and business leaders are worried about. One suspects that you could probably build an index fund off the back of it and make money. There’s a thought.

Meantime, the latest survey revealed a rising concern, in terms of likelihood of occurrence, for, in order: severe income disparity; chronic fiscal imbalances; rising greenhouse gas emissions; water supply crises; and management of population ageing. In terms of the biggest impact, the concerns were, in order: major systemic financial failure; water supply crises; chronic fiscal imbalances; food shortage crises; and diffusions of weapons of mass destruction (war).

The biggest changes since the previous survey, in 2011, by likelihood, were: mismanagement of population ageing; hard landing of an emerging economy; and unsustainable population growth. By impact the biggest changes were: mismanagement of population ageing; chronic labour market imbalances; and hard landing of an emerging economy.

You can download the report here.

The issues that the world’s leaders believe we are facing are obviously the same or similar to the issues that the world’s pension funds are also facing – ageing, energy and resource depletion, financial failures, wages gaps and potential social unrest. Dialogue on these issues is worthwhile, but we need more than that. Fiduciaries have to make decisions now on behalf of their members. And that is not an easy task.