Global Risks 2005

Global Risks to the Business Environment

Executive summary
World Economic Forum

“This paper, the output of two workshops organized by the World Economic Forum in collaboration with Merrill Lynch, reviews major, global risks facing business leaders today, and examines how those risks differ from the challenges of the past. Some key points:

1) Global Risks and Business
At a time when risks not specific to business are having an unprecedented effect on the corporate world, it is crucial for business leaders to understand the environment in which their business operates, in order to survive, remain competitive and grasp opportunities.

2) An Increasingly Turbulent and Complex World
Today’s risks are much more interconnected than in the past. They are much more volatile and can disrupt markets throughout the world with almost instantaneous precision. Such risks can be difficult to anticipate and respond to, even for the most seasoned business leaders.

3) The Global Risks
We identify 36 “global” risks, classified into four categories: economic, geopolitical, societal and environmental. This report details the prevailing consensus reached at our workshop discussions as to the ten risks most likely to have a major or extreme impact on business:
• Instability in Iraq
• Terrorism
• Emerging fiscal crises
• Disruption in oil supplies
• Radical Islam
• Sudden decline in China’s growth
• Pandemics – infectious diseases
• Climate change
• Weapons of mass destruction (WMD)
• Unrestrained migration and related tensions

4) Risk Mapping – Connecting the “Dots” and Spotting the Patterns
In an interconnected world, global risks should not be considered on a stand-alone basis; it is important to understand how they can trigger, amplify or buffer one another.

5) Dealing with Global Risks
Seldom can global risks be addressed by a single business entity, industry or country, and many institutional mechanisms are proving fairly ineffectual as they struggle to cope with the challenge. There is also a large discrepancy between the immediate time horizon employed by most business and political leaders and the long-term approach required to tackle risks on a global scale. As a result, our capacity to address risk is jeopardized; a myopic tendency – or worse: denial – prevails. Finally, of equal concern is the problem that some major risks are being passed on to those least able to solve them – or with least responsibility for creating them.”

Global Risks to the Business Environment 2005