The Global Risks Report 2016

Strategic Partner of the Global Risks Report 2016

Insight Report The Global Risks Report 2016 11th Edition The Global Risks Report 2016, 11th Edition is published by the World Economic Forum within the framework of The Global Competitiveness and Risks Team.

The information in this report, or on which this report is based, has been obtained from sources that the authors believe to be reliable and accurate. However, it has not been independently verified and no representation or warranty, express or implied, is made as to the accuracy or completeness of any information obtained from third parties. In addition, the statements in this report may provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to a historical fact or a current fact. These statements involve known and unknown risks, uncertainties and other factors which are not exhaustive. The companies contributing to this report operate in a continually changing environment and new risks emerge continually. Readers are cautioned not to place undue reliance on these statements. The companies contributing to this report undertake no obligation to publicly revise or update any statements, whether as a result of new information, future events or otherwise and they shall in no event be liable for any loss or damage arising in connection with the use of the information in this report.

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Tel.: +41 (0) 22 869 1212 Fax: +41 (0) 22 786 2744 [email protected] www.weforum.org Figure 1: The Global Risks Landscape 2016

Failure of climate-change mitigation and adaptation

Weapons of mass destruction Energy price shock Water crises Large-scale involuntary migration Biodiversity loss and Fiscal crises ecosystem collapse Profound social instability 5.0 Spread of infectious diseases Asset bubble Cyberattacks Food crises Unemployment or Interstate conflict underemployment Critical information infrastructure breakdown Terrorist attacks 4.76 Failure of financial average mechanism or institution

Extreme weather events

Deflation Adverse consequences of Data fraud 4.5 technological advances Natural catastrophes or theft Failure of State collapse or crisis national governance Unmanageable inflation

Man-made environmental catastrophes

Illicit trade

Failure of critical infrastructure 4.0

Failure of urban planning

3.5 4.0 4.5 5.0 5.5 4.87 average

Source: Global Risks Perception Survey 2015. Note: Survey respondents were asked to assess the likelihood and impact of the individual risks on a scale of 1 to 7, 1 representing a risk that is not likely to happen or have impact, and 7 a risk that is very likely to occur and have massive and devastating impacts. See Appendix B for more details. To ensure legibility, the names of the global risks are abbreviated; see Appendix A for the full name and description. Figure 2: The Global Risks Interconnections Map 2016

Natural catastrophes

Biodiversity loss and ecosystem collapse

Food crises

Extreme weather events Spread of infectious diseases

Man-made environmental catastrophes

Water crises Failure of climate-change mitigation and adaptation

Failure of critical infrastructure

Failure of urban planning

Profound social instability

Energy price shock

State collapse or crisis Large-scale Critical information involuntary migration infrastructure breakdown

Unmanageable inflation Adverse consequences of technological advances

Failure of national governance Interstate conflict

Fiscal crises Asset bubble

Weapons of mass destruction Unemployment or underemployment Cyberattacks

Deflation Terrorist attacks Illicit trade

Data fraud or theft Failure of financial mechanism or institution

Source: Global Risks Perception Survey 2015. Note: Survey respondents were asked to identify between three and six pairs of global risks they believe to be most interconnected. See Appendix B for more details. To ensure legibility, the names of the global risks are abbreviated; see Appendix A for the full name and description. Table A: Global Risks 2016

World Economic Forum Global Risk Report Graphics World Economic Forum Global Risk Report Graphics World Economic Forum Global Risk Report Graphics

1. Economic 1. Economic 2. Environmental 3. GeoPolitical 4. Societal

Asset bubble in a major Extreme weather events World Economic Forum Global Risk Report Graphics Failure of urban planning

World Economic Forum Global Risk Report Graphics World Economic Forum Global Risk Report Graphics 4. Societal 1.1 1.2economy1.3. 1.4. 1.9. 2.1. 2.2.(e.g. floods,2.3. storms, etc.) 3.3. 3.4. 3.5. 4.1. Risk: Asset bubble in a major Risk: Deflation in a major Risk: Failure of a major financial Risk: Failure/shortfall of critical Risk: Unmanageable inflation Risk: Extreme weather events Risk: Failure of climate-change Risk: Major biodiversity loss Risk: Large-scale terrorist attacks Risk: State collapse or crisis (e.g. Risk: Weapons of mass Risk: Failure of urban planning economy economy mechanism or institution infrastructure (e.g. floods, storms, etc.) mitigation and adaptation and ecosystem collapse (land civil conflict, military coup, failed destruction Unmanageable increase in the general Individuals or non-state groups with Poorly planned cities, urban sprawl and 1. Economic or ocean) states, etc.) Unsustainably overpriced assets such as Prolonged ultra-low inflation or deflation Collapse of a financial institution and/ Failure to adequately invest in, upgrade price level of goods and services in Major property, infrastructure and Governments and businesses fail to political or religious goals successfully Nuclear, chemical, biological and associated infrastructure create social, 1. Economic 2.key Enveconomies.ironme ntal commodities, housing, shares, etc. in a in a major economy or region. or malfunctioning of a financial system and secure infrastructure networks environmental damage as well as human Irreversible consequences for the inflict large-scale human or material State collapse of geopolitical importance radiological technologies and materials environmental and health challenges.

major economy or region. impacts the global economy. (e.g. energy, transportation and loss caused by extreme weather events. to mitigate climate change, protect environment, resulting in severely damage. due to internal violence, regional or global are deployed creating international crises World Economic Forum Global Risk Report Graphics communications) leads to pressure or a populations and help businesses depleted resources for humankind as instability, military coup, civil conﬂict, failed and potential for signiﬁcant destruction. Food crises breakdown with system-wide implications. impacted by climate change to adapt. well as industries. states, etc.

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• House icons, which could also be interpreted as an • DeflationGraph displaying a decrease, to signify deflation • Bank icon with broken pilinlars, to suggest collapse a • Broken train trackmajor to suggest breakdown • Price tag featuring multiple dollar symbols to • Tornado • GlobFailuree with thermometer, representing the • Upside-dowofn fish with crossesclimate-change for eyes, • Building in target sight • Burning flag • Mushroom cloud, to represent nuclear/chemical 4.2.• Collection of urban buildings to represent an 4.3. 4.4. 4.5. upwards arrow. The house represents the asset, of financial institution of transportation networks represent high prices world climate representing environmental consequences 4.weapons Societal urban area whilst the arrow signifies the inflated price Risk: Food crises Risk: Large-scale involuntary Risk: Profound social instability Risk: Rapid and massive spread migration of infectious diseases Access to appropriate quantities and Major social movements or protests (e.g. quality of food and nutrition becomes Large-scale involuntary migration induced street riots, social unrest, etc.) disrupt Bacteria, viruses, parasites or fungi World Economic Forum Global Risk Report Graphics 1.1 1.2 1.3. 1.4. by conflict, disasters, environmental or political or social stability, negatively cause uncontrolled spread of infectious economy 1.9. 2.1. 2.2. 2.3. mitigation and adaptation a major scale. impacting populations and economic Risk: Asset bubble in a major Risk: Deflation in a major Risk: Failure of a major financial Risk: Failure/shortfall of critical economic reasons. diseases (for instance due to resistance to activity. antibiotics, antivirals and other treatments) economy economy mechanism or institution infrastructure World Economic Forum Global Risk Report Graphics Risk: Unmanageable inflation Risk: Extreme weather events Risk: Failure of climate-change Risk: Major biodiversity loss Large-scale involuntary leading to widespread fatalities and (e.g. floods, storms, etc.) mitigation and adaptation and ecosystem collapse (land Unsustainably overpriced assets such as Prolonged ultra-low inflation or deflation Collapse of a financial institution and/ Failure to adequately invest in, upgrade Unmanageable increase in the general economic disruption. or ocean) World Economic Forum Global Risk Report Graphics 1. Economic commodities, housing, shares, etc. in a in a major economy or region. or malfunctioning of a financial system and secure infrastructure networks price level of goods and services in Major property, infrastructure and Governments and businesses fail to IDEA IDEA IDEA IDEA major economy or region. impacts the global economy. (e.g. energy, transportation and key economies. environmental damage as well as human Irreversible consequences for the communications) leads to pressure or a loss caused by extreme weather events. to mitigate climate change, protect environment, resulting in severely • Wilted crop, to represent food crises • Passport/passport control icon to represent • Police figures with shields, to indicate dispute, • Virus breakdown with system-wide implications. 1. Economic 2. Environmental populations and help businesses depleted resources for humankind as 4.2. 4.3. 4.4.mmigrationigration and the crossing of borders 4.5.riots and social unrest impacted by climate change to adapt. well as industries. IDEA IDEA IDEA IDEA 4. Societal Risk: Food crises Risk: Large-scale involuntary Risk: Profound social instability Risk: Rapid and massive spread IDEA IDEA IDEA IDEA migration of infectious diseases • House icons, which could also be interpreted as an • Graph displaying a decrease, to signify deflation • Bank icon with broken pillars, to suggest collapse • Broken train track to suggest breakdown Access to appropriate quantities and Major social movements or protests (e.g. upwards arrow. The house represents the asset, of financial institution of transportation networks Failure of a major financial • Price tag featuring multiple dollar symbols to • Tornado • Globe with thermometer, representing the • UpMajorside-down fish with crosses for eyes, biodiversity loss and ecosystem whilst the arrow signifies the inflated price quality of food and nutrition becomes Large-scale involuntary migration induced street riots, social unrest, etc.) disrupt Bacteria, viruses, parasites or fungi represent high prices world climate representing environmental consequences by conflict, disasters, environmental or political or social stability, negatively cause uncontrolled spread of infectious a major scale. economic reasons. impacting populations and economic diseases (for instance due to resistance to activity. antibiotics, antivirals and other treatments)

World Economic Forum Global Risk Report Graphics leading to widespread fatalities and economic disruption. 1.1 1.2 1.3. 1.4.mechanism or institution collapse (land Risk: Asset bubble in a major Risk: Deflation in a major Risk: Failure of a major financial Risk: Failure/shortfall of critical World Economic Forum Global Risk Report Graphics IDEA IDEA IDEAProfoundIDEA social instability 1.9. 2.1. 2.2. 2.3. economy economy mechanism or institution infrastructure • Wilted crop, to represent food crises • Passport/passport control icon to represent • Police figures with shields, to indicate dispute, • Virus migration and the crossing of borders riots and social unrest 1. Economic Unsustainably overpriced assets such as Prolonged ultra-low inflation or deflation Collapse of a financial institution and/ Failure to adequately invest in, upgrade Risk: Unmanageable inflation Risk: Extreme weather events Risk: Failure of climate-change Risk: Major biodiversity loss commodities, housing, shares, etc. in a in a major economy or region. or malfunctioning of a financial system and secure infrastructure networks (e.g. floods, storms, etc.) mitigation and adaptation and ecosystem collapse (land 4.2. 4.3. 4.4. 4.5. major economy or region. impacts the global economy. (e.g. energy, transportation and Unmanageable increase in the general or ocean) or ocean) communications) leads to pressure or a price level of goods and services in Major property, infrastructure and Governments and businesses fail to 4. Societal Risk: Food crises Risk: Large-scale involuntary Risk: Profound social instability Risk: Rapid and massive spread key economies. environmental damage as well as human migration of infectious diseases breakdown with system-wide implications. WorldIrreversibl Economice con Forumsequen Glocebals fo Riskr the Report Graphics Access to appropriate quantities and Major social movements or protests (e.g. loss caused by extreme weather events. to mitigate climate change, protect environment, resulting in severely quality of food and nutrition becomes Large-scale involuntary migration induced street riots, social unrest, etc.) disrupt Bacteria, viruses, parasites or fungi populations and help businesses IDEA IDEA IDEA IDEA depleted resources for humankind as by conflict, disasters, environmental or political or social stability, negatively cause uncontrolled spread of infectious impacted by climate change to adapt. well as industries. a major scale. economic reasons. impacting populations and economic diseases (for instance due to resistance to • House icons, which could also be interpreted as an • Graph displaying a decrease, to signify deflation • Bank icon with broken pillars, to suggest collapse •Failure/shortfall Broken train track to suggest breakdown of critical activity. upwards arrow. The house represents the asset, of financial institution of transportation networks antibiotics, antivirals and other treatments) IDEA IDEA IDEA IDEA whilst the arrow signifies the inflated price leading to widespread fatalities and 2. Environmental 3. GeoPolitical economiRapidc disruption. and massive spread • Price tag featuring multiple dollar symbols to • Tornado • Globe with thermometer, representing the • Upside-down fish with crosses for eyes, represent high prices world climate representing environmental consequences IDEA IDEA WorldIDEA Economic Forum Global Risk Report Graphics IDEA 1.1 1.2 1.3. World1.4. Economic Forum Global Risk Report Graphics infrastructure Major natural catastrophes • Wilted crop, to represent food crises • Passport/passport control icon to represent • Police figures with shields, to indicate dispute, • Virus Risk: Asset bubble in a major Risk: Deflation in a major Risk: Failure of a major financial Risk: Failure/shortfall of critical migration and the crossing of borders riots and social unrest economy economy mechanism or institution infrastructure 4.2. 4.3. 4.4. 4.5. of infectious diseases Unsustainably overpriced assets such as Prolonged ultra-low inflation or deflation Collapse of a financial institution and/ Failure to adequately invest in, upgrade Risk: Food crises Risk: Large-scale involuntary Risk: Profound social instability Risk: Rapid and massive spread commodities, housing, shares, etc. in a in a major economy or region. or malfunctioning of a financial system and secure infrastructure networks migration 4.of infectiouSocietals diseases 5. Technological 1. Economic Access to appropriate quantities and Major social movements or protests (e.g. major economy or region. impacts the global economy. (e.g. energy, transportation and (e.g. earthquake, tsunami, quality of food and nutrition becomes street riots, social unrest, etc.) disrupt communications) leads to pressure or a Large-scale involuntary migration induced Bacteria, viruses, parasites or fungi political or social stability, negatively breakdown with system-wide implications. by conflict, disasters, environmental or cause uncontrolled spread of infectious a major scale. economic reasons. impacting populations and economic diseases (for instance due to resistance to 2.4. 2.5. 3.1. 3.2. activity. antibiotics, antivirals and other treatments) IDEA IDEA IDEA IDEA leading to widespread fatalities and • House icons, which could also be interpreted as an • Graph displaying a decrease, to signify deflation • Bank icon with broken pillars, to suggest collapse • Broken train track to suggest breakdown Risk: Major natural catastrophes Risk: Man-made environmental Risk: Failure of national Risk: Interstate conflict with economic disruption. upwards arrow. The house represents the asset, of financial institution of transportation networks Fiscal crises in key (e.g. earthquake, tsunami, catavolcanicstrophes (e.g. oil spill, governance (e.g.eruption, failure of rule regional consequences geomagnetic storms) whilst the arrow signifies the inflated price volcanic eruption, geomagnetic radioactive contamination, etc.) of law, corruption, political IDEA IDEA IDEAWorld Economic Forum Global Risk Report Graphics IDEA World Economic Forum Global Risk Report Graphics A bilateral or multilateral dispute between Water crises storms) deadlock, etc.) Failure to prevent major man-made states escalates into economic (e.g. trade/ • Wilted crop, to represent food crises • Passport/passport control icon to represent • Police figures with shields, to indicate dispute, • Virus Major property, infrastructure and catastrophes, causing harm to lives, Inability to govern a nation of geopolitical currency wars, resource nationalization), migration and the crossing of borders riots and social unrest environmental damage as well as human health, infrastructure, property, importance due to weak rule of law, military, cyber, societal or other conflict. economic activity and the environment. 4.6. 5.1. 5.2. 5.3. 1.5. 1.6.economies1.7. 1.8. human loss caused by geophysical corruption or political deadlock.

disasters such as earthquakes, Risk: Water crises Risk: Adverse consequences Risk: Breakdown of critical Risk: Large-scale cyberattacks 3. GeoPolitical 4. Societal 5. Technological World Economic Forum Global Risk Report Graphics Risk: Fiscal crises in key Risk: High structural Risk: Illicit trade (e.g. illicit Risk: Severe energy price shock 2. Environmental volcanic activity, landslides, tsunamis of technological advances information infrastructure or geomagnetic storms. A significant decline in the available Large-scale cyberattacks or malware economies unemployment or financial flow, tax evasion, human (increase or decrease) and networks underemployment quality and quantity of fresh water Intended or unintended adverse causing large economic damages, Excessive debt burdens generate Energy price increases or decreases IDEA IDEA IDEA IDEA consequences of technological Cyber dependency increases vulnerability geopolitical tensions or widespread loss sovereign debt crises and/or A sustained high level of unemployment Large-scale activities outside the legal significantly and places further economic health and/or economic activity. advances such as artificial intelligence, of trust in the Internet. • Erupting volcano • RadMan-madeioactivity symbol • Broken scale, to signify the failure of the environmental• Crossed swords to represent conflict to outage of critical information liquidity crises. pressures on highly energy-dependent or underutilization of the productive framework such as illicit financial flow, tax rule of law geo-engineering and synthetic biology infrastructure (e.g. internet, satellites, 1. Economic capacity of the employed population industries and consumers. causinAdverseg human, environmental and etc.) and networks consequences causing widespread prevents the economy from attaining high and organized crime undermine social economic damage. disruption. levels of employment. interactions, regional or international collaboration and global growth. IDEA IDEA IDEA IDEA

High structural • Water droplet • Android-style robot to represent technology, • Wi-fi symbol to represent the internet • Bug, to represent a cyber-bug IDEA IDEA IDEA IDEA catastrophes (e.g. oil spill, and artificial intelligence and networks • Bag of money with hole, money falling out • Figures (people), with a downwards arrow • Prisoner icon, to represent illicit behaviour • Lightning bolt, to signify energy and shock 4.6. 5.1. 5.2.of technological5.3. advances between them to signify underutilization 2.4. 2.5. 3.1. 3.2. of people World Economic Forum Global Risk Report Graphics Risk: Water crises Risk: Adverse consequences Risk: Breakdown of critical Risk: Large-scale cyberattacks Risk: Major natural catastrophes Risk: Man-made environmental Risk: Failure of national Risk: Interstate conflict with of technological advances information infrastructure (e.g. earthquake, tsunami, catastrophes (e.g. oil spill, governance (e.g. failure of rule regional consequences A significant decline in the available Large-scale cyberattacks or malware unemployment or radioactive contamination, etc.) and networks volcanic eruption, geomagnetic radioactive contamination, etc.) of law, corruption, political quality and quantity of fresh water Intended or unintended adverse causing large economic damages, A bilateral or multilateral dispute between storms) deadlock, etc.) consequences of technological Cyber dependency increases vulnerability geopolitical tensions or widespread loss Failure to prevent major man-made states escalates into economic (e.g. trade/ 1.5. 1.6. 1.7. 1.8. health and/or economic activity. advances such as artificial intelligence, to outage of critical information of trust in the Internet. catastrophes, causing harm to lives, currency wars, resource nationalization), Major property, infrastructure and Inability to govern a nation of geopolitical 4. Societal 5. Technological geo-engineering and synthetic biology infrastructure (e.g. internet, satellites, human health, infrastructure, property, military, cyber, societal or other conflict. Risk: Fiscal crises in key Risk: High structural Risk: Illicit trade (e.g. illicit Risk: Severe energy price shock environmental damage as well as importance due to weak rule of law, causing human, environmental and etc.) and networks causing widespread World Economic Forum Global Risk Report Graphics economic activity and the environment. economies unemployment or financial flow, tax evasion, human (increase or decrease) human loss caused by geophysical corruption or political deadlock. economic damage. disruption. underemployment disasters such as earthquakes, underemployment Excessive debt burdens generate Energy price increases or decreases volcanic activity, landslides, tsunamis IDEA IDEA IDEA IDEA World Economic Forum Global Risk Report Graphics sovereign debt crises and/or significantly and places further economic or geomagnetic storms. Breakdown of critical A sustained high level of unemployment Large-scale activities outside the legal liquidity crises. or underutilization of the productive framework such as illicit financial flow, tax pressures on highly energy-dependent • Water droplet • Android-style robot to represent technology, • Wi-fi symbol to represent the internet • Bug, to represent a cyber-bug IDEA IDEA IDEA IDEA and artificial intelligence and networks capacity of the employed population industries and consumers. 2. Environmental 3. GeoPolitical prevents the economy from attaining high and organized crime undermine social • Erupting volcano • Radioactivity symbol • Broken scale, to signify the failure of the • Crossed swords to represent conflict levels of employment. interactions, regional or international Failure of national rule of law 1. Economic collaboration and global growth. information infrastructure IDEA IDEA IDEA IDEA

• Bag of money with hole, money falling out • Figures (people), with a downwards arrow • Prisoner icon, to represent illicit behaviour • Lightning bolt, to signify energy and shock World Economic Forum Global Risk Report Graphics 4.6. 5.1. 5.2. 5.3. between them to signify underutilization of people Illicit trade (e.g. illicit financial flow, tax governance (e.g. failure of rule Risk: Water crises Risk: Adverse consequences Risk: Breakdown of critical Risk: Large-scale cyberattacks of technological advances information infrastructure A signiﬁcant decline in the available Large-scandale cyberattacks or malwarenetworks and networks quality and quantity of fresh water Intended or unintended adverse causing large economic damages, geopolitical tensions or widespread loss 4. Societal 5. Technological consequences of technological Cyber dependency increases vulnerability health and/or economic activity. advances such as artiﬁcial intelligence, to outage of critical information of trust in the Internet. 2.4. 2.5. 3.1. 3.2. evasion, human trafficking, organized of law, corruption, political geo-engineering and synthetic biology infrastructure (e.g. internet, satellites,

Risk: Major natural catastrophes Risk: Man-made environmental Risk: Failure of national Risk: Interstate conflict with causing human, environmental and etc.) and networks causing widespread economic damage. disruption. 1.5. 1.6. 1.7. 1.8. (e.g. earthquake, tsunami, catastrophes (e.g. oil spill, governance (e.g. failure of rule regional consequences volcanic eruption, geomagnetic radioactive contamination, etc.) of law, corruption, political A bilateral or multilateral dispute between IDEA IDEA IDEA IDEA Risk: Fiscal crises in key Risk: High structural Risk: Illicit trade (e.g. illicit Risk: Severe energy price shock storms) deadlock, etc.) World Economic Forum Global Risk Report Graphics states escalates into economic (e.g. trade/ economies unemployment or financial flow, tax evasion, human (increase or decrease) Failure to prevent major man-made • Water droplet • Android-style robot to represent technology, • Wi-fi symbol to represent the internet • Bug, to represent a cyber-bug World Economic Forum Global Risk Report Graphics crime, etc.) currency wars, resource nationalization), deadlock, etc.) World Economic Forum Global Risk Report Graphics underemployment Major property, infrastructure and catastrophes, causing harm to lives, Inability to govern a nation of geopolitical and artificial intelligence and networks Excessive debt burdens generate Energy price increases or decreases environmental damage as well as human health, infrastructure, property, importance due to weak rule of law, military, cyber, societal or other conflict. sovereign debt crises and/or significantly and places further economic economic activity and the environment. Large-scale cyberattacks A sustained high level of unemployment Large-scale activities outside the legal human loss caused by geophysical corruption or political deadlock. liquidity crises. or underutilization of the productive framework such as illicit financial flow, tax pressures on highly energy-dependent disasters such as earthquakes, capacity of the employed population industries and consumers. volcanic activity, landslides, tsunamis 3. GeoPolitical 1. Economic prevents the economy from attaining high and organized crime undermine social 2. Environmental or geomagnetic storms. levels of employment. interactions, regional or international 4.6. 5.1. 5.2. 5.5.3. Technological IDEA IDEA IDEA IDEA collaboration and global growth. Risk: Water crises Risk: Adverse consequences Risk: Breakdown of critical Risk: Large-scale cyberattacks • Erupting volcano • Radioactivity symbol • Broken scale, to signify the failure of the • Crossed swords to represent conflict of technological advances information infrastructure IDEA IDEA IDEA IDEA A significant decline in the available Large-scale cyberattacks or malware rule of law and networks quality and quantity of fresh water Intended or unintended adverse causing large economic damages, • Bag of money with hole, money falling out • Figures (people), with a downwards arrow • Prisoner icon, to represent illicit behaviour • Lightning bolt, to signify energy and shock geopolitical tensions or widespread loss between them to signify underutilization consequences of technological Cyber dependency increases vulnerability of people Severe energy price shock Interstate conflict with health and/or economic activity. advances such as artificial intelligence, of trust in the Internet. to outage of critical information geo-engineering and synthetic biology World Economic Forum Global Risk Report Graphics infrastructure (e.g. internet, satellites, causing human, environmental and etc.) and networks causing widespread Massive incident of data World Economic Forum Global Risk Report Graphics economic damage. disruption.

IDEA IDEA IDEA IDEA (increase or decrease) 2.4. 2.5. 3.1. 3.2. regional consequences 1.5. 1.6. 1.7. 1.8. • Water droplet • Android-style robot to represent technology, • Wi-fi symbol to represent the internet • Bug, to represent a cyber-bug 1. Economic 2. Environmental 5.4. Risk: Major natural catastrophes Risk: Man-made environmental Risk: Failure of national Risk: Interstate conflict with and artificial intelligence and networks fraud/theft Risk: Fiscal crises in key Risk: High structural Risk: Illicit trade (e.g. illicit Risk: Severe energy price shock 3. GeoPolitical 4. Societal (e.g. earthquake, tsunami, catastrophes (e.g. oil spill, governance (e.g. failure of rule regional consequences Risk: Massive incident of data economies unemployment or financial flow, tax evasion, human (increase or decrease) volcanic eruption, geomagnetic radioactive contamination, etc.) of law, corruption, political fraud/theft underemployment A bilateral or multilateral dispute between Excessive debt burdens generate Energy price increases or decreases storms) deadlock, etc.) Failure to prevent major man-made states escalates into economic (e.g. trade/ Wrongful exploitation of private or sovereign debt crises and/or A sustained high level of unemployment Large-scale activities outside the legal significantly and places further economic catastrophes, causing harm to lives, currency wars, resource nationalization), liquidity crises. or underutilization of the productive framework such as illicit financial flow, tax pressures on highly energy-dependent Major property, infrastructure and Inability to govern a nation of geopolitical human health, infrastructure, property, military, cyber, societal or other conflict. unprecedented scale. capacity of the employed population industries and consumers. environmental damage as well as importance due to weak rule of law, economic activity and the environment. prevents the economy from attaining high and organized crime undermine social human loss caused by geophysical corruption or political deadlock.

levels of employment. interactions, regional or international disasters such as earthquakes, IDEA

collaboration and global growth. volcanic activity, landslides, tsunamis or geomagnetic storms. • Cloud with a padlock in the middle, to represent Unmanageable inflation Large-scale terrorist attacks data and privacy/security IDEA IDEA IDEA IDEA IDEA IDEA IDEA IDEA • Bag of money with hole, money falling out • Figures (people), with a downwards arrow • Prisoner icon, to represent illicit behaviour 1.9.• Lightning bolt, to signify energy and shock 2.1. 2.2. 2.3. • Erupting volcano • Radioactivity symbol •World Broke Economicn scale, to Forum signify the G lofailurebal Risk of the Report Graphics • Crossed swords to represent conflict between them to signify underutilization 3.3. 3.4. 3.5. 4.1. rule of law of people Risk: Unmanageable inflation Risk: Extreme weather events Risk: Failure of climate-change Risk: Major biodiversity loss (e.g. floods, storms, etc.) mitigation and adaptation and ecosystem collapse (land Risk: Large-scale terrorist attacks Risk: State collapse or crisis (e.g. Risk: Weapons of mass Risk: Failure of urban planning Unmanageable increase in the general or ocean) civil conflict, military coup, failed destruction price level of goods and services in Major property, infrastructure and Governments and businesses fail to Individuals or non-state groups with Poorly planned cities, urban sprawl and states, etc.) key economies. environmental damage as well as human Irreversible consequences for the political or religious goals successfully Nuclear, chemical, biological and associated infrastructure create social,

loss caused by extreme weather events. to mitigate climate change, protect environment, resulting in severely 3. GeoPolitical inﬂict large-scale human or material State collapse of geopolitical importance radiologica4. Societall technologies and materials environmental and health challenges.

populations and help businesses depleted resources for humankind as damage. due to internal violence, regional or global are deployed creating international crises impacted by climate change to adapt. well as industries. instability, military coup, civil conflict, failed and potential for significant destruction. states,State etc. collapse or crisis (e.g. IDEA IDEA IDEA IDEA IDEA IDEA IDEA IDEA • Price tag featuring multiple dollar symbols to • Tornado • Globe with thermometer, representing the • Upside-down fish with crosses for eyes, represent high prices world climate representing environmental consequences • Building in target sight • Burning flag • Mushroom cloud, to represent nuclear/chemical • Collection of urban buildings to represent an civil conflict,weapons urban areamilitary coup, failed states,

3.3. 3.4. 3.5. 4.1. Risk: Large-scale terrorist attacks Risk: State collapse or crisis (e.g. Risk: Weapons of mass Risk: Failure of urban planning World Economic Forum Global Risk Report Graphics etc.) civil conﬂict, military coup, failed destruction Individuals or non-state groups with Poorly planned cities, urban sprawl and states, etc.) political or religious goals successfully Nuclear, chemical, biological and associated infrastructure create social, inﬂict large-scale human or material State collapse of geopolitical importance radiological technologies and materials environmental and health challenges. damage. due to internal violence, regional or global are deployed creating international crises

3. GeoPolitical instability, military coup, civil conﬂict, failed 4.and Societal potential for signiﬁcant destruction. states, etc.

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• Building in target sight • Burning flag • Mushroom cloud, to represent nuclear/chemical • Collection of urban buildings to represent an weaponsWeaponsurban area of mass destruction 3.3. 3.4. 3.5. 4.1. Risk: Large-scale terrorist attacks Risk: State collapse or crisis (e.g. Risk: Weapons of mass Risk: Failure of urban planning civil conflict, military coup, failed destruction Individuals or non-state groups with Poorly planned cities, urban sprawl and states, etc.) political or religious goals successfully Nuclear, chemical, biological and associated infrastructure create social, inflict large-scale human or material State collapse of geopolitical importance radiological technologies and materials environmental and health challenges. damage. due to internal violence, regional or global are deployed creating international crises instability, military coup, civil conflict, failed and potential for significant destruction. states, etc.

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• Building in target sight • Burning ﬂag • Mushroom cloud, to represent nuclear/chemical • Collection of urban buildings to represent an weapons urban area Table B: Trends 2015

Ageing population Rise of chronic diseases Changing landscape of international governance Rise of cyber dependency Climate change Rising geographic mobility Environmental degradation Rising income and wealth disparity Growing middle class in emerging economies Shifts in power Increasing national sentiment Urbanization Increasing polarization of societies

Figure 3: The Most Likely Global Risks 2016: A Regional Perspective The Most Likely Global Risks to Occur in Your Region 3rd st Ranking position Failure of 1 in each region national governance 2nd Central Asia Unemployment or Europe underemploymentTechnological including Russia Fiscal crisis

Data fraud Failure of national or theft Interstate governance conflict Large-scale involuntary Energy migration price shock Cyber attacks Profound Extreme social weather North America instability events Extreme weather Unemployment events Failure of national or under- governance Water crises employment Natural Middle East catastrophes and North Africa Failure of national governance East Asia and the Pacific

Failure of Water crises national governance Failure of national governance Profound Unemployment or South Asia social underemployment Risk category instability Sub-Saharan Extreme Latin America Africa Unemployment or weather Economic and the Caribbean underemployment events Unemployment or Environmental underemployment

Failure of critical Geopolitical infrastructure Societal

Technological

Source: Global Risks Perception Survey 2015. Note: Respondents were asked to select the three global risks that they believe are the most likely to occur in their region. For legibility reasons, the names of the global risks are abbreviated; see Appendix A for the full name and description. Oceania is not displayed because of the low number of respondents. Figure 4: The Risks-Trends Interconnections Map 2016

Rise of chronic diseases Rise of cyber dependency Rising geographic mobility Rising income and wealth disparity Shifts in power Urbanization

Source: Global Risks Perception Survey 2015. Note: Survey respondents were asked to select the three trends that are the most important in shaping global development in the next 10 years. For each of the three trends identified, respondents were asked to select the risks that are most strongly driven by those trends. See Appendix B for more details. To ensure legibility, the names of the global risks are abbreviated; see Appendix A for the full name and description. The Global Risks Report 2016 11th Edition

Strategic Partners Marsh & McLennan Companies Zurich Insurance Group

Academic Advisers National University of Singapore Oxford Martin School, University of Oxford Wharton Risk Management and Decision Processes Center, University of Pennsylvania

Contents

4 Preface By Klaus Schwab 6 Executive Summary 8 Introduction 10 Part 1: Global Risks 2016 11 Box 1.1: Methodology of The Global Risks Report 14 Box 1.2: The Paris Agreement: A Historic Turning Point on Climate Change 16 Box 1.3: Refugees in Malaysia 17 Box 1.4: China’s Financial Vulnerabilities and the Transition to the New Normal 19 Box 1.5: Pathways to Resilience: Effective Leadership and Institutional Values 24 Part 2: The Security Outlook 2030 24 Box 2.1: International Security Defined 25 Box 2.2: A Deep-Dive into International Security 27 Box 2.3: Public-Private Collaboration in Complex Crises 29 Box 2.4: The Seven Driving Forces of International Security 30 Box 2.5: Scenarios Methodology 38 Part 3: Risks in Focus 39 3.1 (Dis)Empowered Citizen 40 Box 3.1.1: The (Dis)Empowered Citizen: A Definition 42 Box 3.1.2: Digital Government Technologies: The (Persisting) Challenges of Inclusiveness and Engagement 50 3.2 Climate Change and Risks to Food Security 52 Box 3.2.1: Adaptation and Its Limits 53 Box 3.2.2: Reducing Food Waste 59 3.3 Global Disease Outbreaks 61 Box 3.3.1: Health Communication 62 Box 3.3.2: Developing an Ebola Vaccine: Reflections on the Current Regulatory Environment 63 Box 3.3.3: The Pandemic Emergency Financing Facility (PEF) 68 Part 4: Risks for Doing Business at a Glance 69 Box 4.1: The World Economic Forum’s Executive Opinion Survey 82 Conclusions 84 Appendices 85 Appendix A: Description of Global Risks and Trends 2016 88 Appendix B: Global Risks Perception Survey and Methodology 2015 90 Appendix C: The Executive and Opinion Survey 2015: Views of the Business Community on the Global Risks of Highest Concern for Doing Business 92 Acknowledgements The motivations underlying The Global Risks Report at its inception in 2006 Preface – to shed light on global risks and developments and help create a shared understanding of the most pressing issues confronting the world, the ways they interconnect and their potential negative impacts – are therefore more relevant than ever. A shared understanding of challenges is needed as a base for multistakeholder collaboration, which has seen increasing recognition as the most effective way to address global risks and build resilience against them. To further inspire action, this year’s Report, like last year’s, also contributes This 11th edition of The Global Risks to a shared understanding of the Report is published at a time of solution space, presenting examples of profound change. Global risks risk mitigation and resilience practices materialize in new and unexpected in the Risks in Focus section. In ways and are becoming more addition this year’s Global Risk Report imminent as their consequences reach includes a chapter dedicated to better people, institutions and economies. understanding the evolving We witness the effects of climate international security landscape and change in the rising frequency and improving outcomes. intensity of water shortages, floods and storms worldwide. Stable societies are As in previous years, the Report is becoming increasingly fragmented in based on the annual Global Risks many regions of the world, and we Perception Survey, completed by note a weak global economy that is almost 750 members of the World again facing headwinds. Economic Forum’s global multistakeholder community. In At the same time, advances in addition to the special section technology and rapid digitization are exploring the evolving security fundamentally transforming societies, landscape in an era of uncertainty, the economies and ways of doing Report presents deep-dive business. Often referred to as the discussions of risks to the stability of Fourth Industrial Revolution, this societies posed by the (dis)empowered development presents great citizen, who is empowered by opportunities for all actors involved and technology but feels disempowered by a previously unimagined solution traditional decision-making processes. space for some of the world’s most It also discusses the societal pressing problems. Yet it also presents consequences of climate change with elusive risks related to changing a focus on food and water crises and employment patterns, widening the threat of global pandemics. income inequality and rising cyber dependence. Managing the paradigm As one of the Forum’s flagship reports, shift and transition process will be The Global Risks Report has been a critical to securing stable economies collaborative effort since its first edition and ultimately thriving societies. in 2006. Produced by the Forum, it is Achieving this calls for greater able to draw on the unique expertise resilience as the key imperative for available within the Forum’s different action. Collaboration across countries, communities and knowledge networks areas of expertise and stakeholder as well as within the organization as a groups is necessary to effectively whole. It also builds firmly on the address global risks and deliver on the Forum’s ongoing research, projects, resilience imperative. Yet across every debates and initiatives. The insights sector of society, decision-makers are presented here are the result of struggling to find common ground as numerous discussions, consultations they are faced with heightened and workshops and reflect the views of volatility, uncertainty, leaders from our various communities interconnectedness and pace of through the Global Risks Perception change. Survey.

4 The Global Risks Report 2016 With this in mind, I would like to thank Forum for their invaluable contributions our Strategic Partners, Marsh & to the Report. McLennan Companies and the Zurich Insurance Group, represented on the I would also like to thank Richard Steering Board by John Drzik, Samans, Managing Director; Jennifer President, Global Risk and Specialties, Blanke, Chief Economist; and Marsh & McLennan; and Cecilia Reyes, Margareta Drzeniek Hanouz, Head of Group Chief Risk Officer, Zurich Global Competitiveness and Risks for Insurance Group. Furthermore, I am their leadership on this effort as well as grateful to our academic advisers the The Global Risks Report 2016 project National University of Singapore, the team members Ciara Browne, Attilio Di Oxford Martin School at the University Battista, Caroline Galvan, Gaëlle Marti, of Oxford and the Wharton Risk and Stephanie Vérin for their Management and Decision Processes contributions. Center at the University of Pennsylvania. Last but not least, this Report would not have been possible without the The Report has also greatly benefited time and commitment of the from the dedication and valuable respondents who completed the guidance of the members of the Global Global Risks Perception Survey and Risks 2016 Advisory Board. Members the participants in the Changing are Rolf Alter, Organisation for International Security Landscapes Economic Co-operation and project. Development (OECD); Mario Blejer, Banco Hipotecario SA; Winnie Byanyima, Oxfam International; Marie-Valentine Florin, International Risk Governance Council (IRGC); Steven Kou, National University of Singapore; Julian Laird, Oxford Martin School; Pascal Lamy, Notre Europe - Jacques Delors Institute; Ursula von der Leyen, Federal Minister of Defence of Germany; Maleeha Lodhi Ambassador and Permanent Representative of Pakistan to the United Nations; Erwann Michel-Kerjan, The Wharton School, University of Pennsylvania; Nicolas Mueller, Federal Chancellery of Switzerland; Moisés Naím, Carnegie Endowment for International Peace; Jonathan Ostry, International Monetary Fund; Manuel Pulgar-Vidal Otalora, Minister of Environment of Peru; Nouriel Roubini, New York University; Anders Sandberg, University of Oxford; Richard Smith-Bingham, Marsh & McLennan Companies; Michelle Tuveson, Centre for Risk Studies, University of Cambridge; Steve Wilson, Zurich Insurance Group; and Sandra Wu Wen-Hsiu, Japan Asia Group Limited.

I am grateful to Espen Barth Eide, Managing Director and Anja Kaspersen, Head of International Security as well as Isabel de Sola, Andrej Kirn and Alex Williams for their contributions on international security, and to the International Security Klaus Schwab community and ecosystem of the Founder and Executive Chairman World Economic Forum

The Global Risks Report 2016 5 Now in its 11th edition, The Global Risks The Report also steps back and Report 2016 draws attention to ways explores how emerging global risks Executive that global risks could evolve and and major trends (see Box 1), such as interact in the next decade. The year climate change, the rise of cyber 2016 marks a forceful departure from dependence and income and wealth Summary past findings, as the risks about which disparity are impacting already-strained the Report has been warning over the societies by highlighting three clusters past decade are starting to manifest of risks as Risks in Focus. As resilience themselves in new, sometimes building is helped by the ability to unexpected ways and harm people, analyse global risks from the institutions and economies. Warming perspective of specific stakeholders, climate is likely to raise this year’s the Report also analyses the temperature to 1° Celsius above the significance of global risks to the pre-industrial era, 60 million people, business community at a regional and equivalent to the world’s 24th largest country-level. country and largest number in recent history, are forcibly displaced, and The Global Risks crimes in cyberspace cost the global economy an estimated US$445 billion,1 Perception Survey higher than many economies’ national incomes. In this context, the Report Almost 750 experts and decision- calls for action to build resilience – the makers in the World Economic Forum’s “resilience imperative” – and identifies multistakeholder communities practical examples of how it could be responded to this year’s Global Risks done. Perception Survey. Respondents are drawn from business, academia, civil society and the public sector and span different areas of expertise, Box 1: Definition of Global geographies and age groups. Risks and Trends The survey asked respondents to A global risk is an uncertain event consider 29 global risks – categorized as societal, technological, economic, or condition that, if it occurs, can environmental or geopolitical – over a cause significant negative impact 10-year time horizon, and rate each for several countries or industries according to their perceived likelihood within the next 10 years. of it occurring and impact if it does. A global trend is a long-term pattern that is currently taking place After its presence in the top five most and that could contribute to impactful risks for the past three years, amplifying global risks and/or the failure of climate change mitigation and adaptation has risen altering the relationship between to the top and is perceived in 2016 as them. the most impactful risk for the years to come, ahead of weapons of mass destruction, ranking 2nd, and water Geopolitical concerns remain crises, ranking 3rd. Large-scale prominent in the minds of respondents involuntary migration was also rated to the Global Risks Perception Survey among the top five for impact, as was for the second year in a row. The severe energy price shock (increase Report therefore delves into the or decrease). international security landscape and explores what drives this evolution and, The risk rated most likely was large- in particular, how it could be affected scale involuntary migration, with last by the Fourth Industrial Revolution and year’s top scorer – interstate conflict climate change. The three scenarios with regional consequences – giving for possible futures developed in this way to the environmental risks of context inform new ways of building extreme weather events and the resilience to security threats through failure of climate change mitigation public-private collaboration. and adaptation and followed by major natural catastrophes.

6 Global Risks 2015 Global risks that remain serious looking for ways to engage with Risks to Doing Business because of their combined impact and concerned citizens. likelihood involve some economic risks, Private sector respondents to the World including fiscal crises in key Food security risk in the context of Economic Forum’s Executive Opinion economies and high structural climate change is the second Risk in Survey were asked to identify their risks unemployment and Focus. Building upon the climate-water of highest concern for doing business in underemployment. These are nexus discussed in Part 1, the chapter the next 10 years. The responses, from complemented by cyberattacks and looks at how changing climate and 140 economies, reveal patterns of profound social instability. Their weather patterns could jeopardize food concern at country and regional levels assessment reflects the potentially security and agricultural production that can usefully inform initiatives to profound impact of the Fourth Industrial across geographies. The most climate- engage the private sector in building Revolution on the economy and society vulnerable countries often heavily resilience to global risks. and emphasizes the need for depend on agricultural productivity to safeguarding future benefits. sustain economic growth and On a global scale, two economic risks development. But the recent years – unemployment and Respondents were also asked which have also shown the climate underemployment and energy price risks were related and could give rise to vulnerability of G-20 countries such as shocks – are mentioned as the top risks cascading risks. Three emerged India, Russia and the United States of highest concern for doing business in strongly: the potential for climate – the breadbasket of the world – and half of the 140 economies. These are change to exacerbate water crises, other large industrial producers of followed by the failure of national with impacts including conflicts and agricultural commodities. The chapter governance, fiscal crises, asset bubbles more forced migration, calling for discusses how climate change–resilient and cyberattacks. improved water governance to adapt to crops and supply chain networks, as climate change and accommodate a well as financing and insurance Economic risks predominate in growing population and economic schemes, can help mitigate the social, responses from Europe, including fiscal development; the need to address the economic and environmental aspects crises, unemployment, asset bubbles global refugee crisis, adding of food security risks related to climate and energy prices – the latter also being emphasis to policies that can build change. the top concern in Canada – while resilience in addition to responding to executives in the United States are most the immediate crisis; and the risks of Drawing lessons from the Ebola crisis, concerned about cyber-related risks and failing to fully understand the risks the third Risk in Focus discusses attacks. Respondents from Central Asia around the Fourth Industrial Revolution global disease outbreaks. It warns and Russia worry about fiscal crises and and how this transition will impact that population growth, rapid unemployment, along with the risks of countries, economies and people at a urbanization and increasing unmanageable inflation and interstate time of persistently sluggish growth. transnational flows of commodities, conflict. Environmental risks worry people and animals intensify the risk of business leaders in East Asia and the Risks in Focus infectious transmission across Pacific,alongside energy prices, asset geographies while equally diminishing bubbles, and cyber attacks. Key to building resilience is the stability the ability to respond – all at a time of of societies. The first Risk in Focus growing resistance of microorganisms In South Asia concerns also include therefore looks at the complex to today’s most effective medicines. energy prices, together with fiscal crises, dynamics of societies in the age of Preparedness and response measures unemployment and failure of national digitization and discusses the range from the behavioural, such as governance – which is the top concern in phenomenon of the (dis)empowered fact-based communication and Latin America and the Caribbean citizen, which is a result of the interplay education campaigns, to the need to – followed by energy prices shock and of varying dynamics: as technology invest in diagnostic, drug and vaccine unemployment. Executives in the Middle empowers citizens to find information, R&D and in its enabling environment, East and North Africa likewise worry connect with others and organize, especially advancing a regulatory about energy prices, together with those citizens feel disenfranchised by framework. It raises the imperative for unemployment, terrorist attacks and distant elites. It explores the risk of public-private sector collaboration interstate conflict. In Sub-Saharan social instability if both governments across areas such as data availability Africa, the business community’s top and business embark on either and analysis, a joint research agenda, concerns include unemployment, energy repressive actions or non-action out of regulatory frameworks, long-term prices, the failure of national governance uncertainty about how to deal with a financing and ways to promote and the failure of critical infrastructure. more informed, connected and responsible media engagement as part demanding citizenry, which could lead of effective crisis management to an escalating downward spiral of communication. broken trust and harsher response on either side. The chapter also, however, For each Risk in Focus, examples are explores the benefits governments and given of three practical mechanisms business stand to gain by proactively that can build resilience against the identified threats.

The Global Risks Report 2016 7 Over the past decade, The Global Risks Report has expanded its scope Introduction from analysing the interconnected and rapidly evolving nature of global risks to also putting forward actionable solutions and calling for public- private collaboration in strengthening resilience. Now in its 11th edition, the Report describes a world in which risks are becoming more imminent and have wide-ranging impact: tensions between countries affect businesses; unresolved, protracted crises have resulted in the largest number of refugees globally since World War II; terrorist attacks take an increasing toll on human lives and stifle economies; droughts occur in California and floods in South Asia; and rapid advances in technologies are coupled with ever- growing cyber fragilities and persistent unemployment and underemployment.

Implications of sweeping digitization (also termed the “Fourth Industrial Revolution”), ranging from transformations that are the result of rising cyber connectivity to the potential effects of innovations on socio- economic equality and global security, remain far from fully understood. At the same time, climate change is unequivocally happening, and there is no turning back time.

The increasing volatility, complexity and ambiguity of the world not only heightens uncertainty around the “which”, “when”, “where” and “who” of addressing global risks, but also clouds the solutions space. We need clear thinking about new levers that will enable a wide range of stakeholders to jointly address global risks, which cannot be dealt with in a centralized way.

Taken together, this calls for a resilience imperative – an urgent necessity to find new avenues and more opportunities to mitigate, adapt to and build resilience against global risks and threats through collaboration among different stakeholders.

By putting the resilience imperative at its core, this year’s Global Risks Report combines four parts to present an analysis of different aspects of global risks – across both global risks and stakeholders – focused as much on the search for solutions as on the analysis of the risks themselves.

8 The Global Risks Report 2016 World EconomicWorld Forum Economic Global Forum Risk Report Global Graphics Risk Report Graphics

1. Economic3. GeoPolitical 4. Societal

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IDEA IDEA IDEA IDEA IDEA IDEA IDEA RiskIDEA : UnmanRisagk: eableWater in crisesflation Risk: ExtremRiske weathe: Adverser events consequences Risk: FailureRis ofk: cBreakdownlimate-change of critical Risk: MajorRis biodiversitk: Large-scaly losse cyberattacks World Economic Forum Global Risk Report Graphics (e.g. floods,•o Watefstorms, technologicar droplet etc.) l advances mitigation•in and Androidformation ad-saptationtyle robot inf rato strepresenructurt tece hnology,an d ecosyste• Wi-fim symbol collaps to represene (landt the internet • Bug, to represent a cyber-bug • Bag of money with hole, money falling out • Figures (people), with a downwards arrow • Prisoner icon, to represent illicit behaviour Unman• Lightningag eablboltA , stoeig isncnificantignifyreas enee indergy thclin aned egeneral shock in the available and artificial intelligence Large-scand netwaloreks cyberattacks or malware Part 3 explores three risks clusters and networks or ocean) between them to signify underutilization price level ofqu gooalitdys an andd quantit servicesy inof fresh water Major property,Intended infrastructur or unintendee and d adverse Governments and businesses fail to causing large economic damages, Massive incident of data of people Extreme weather events key economies. environmentaconl damsequageneces as welof technologicall as human Cyber dependency increases vulnerIrreversiblability e cgeopoliticaonsequencel tensionss for the or widespread loss that have the potential to challenge health and/or economic activity. loss caused advby extremances seuc weath ashe artificiar events.l intelligen toce ,mitigat e clitomat outeag chae ofng criticae, protectl infor mation environment,of resultintrust in gth ine Internet.severely fraud/theft (e.g. floods,geo-engineering and synthetistorms,c biologypopulati onsinfrastructure andetc.) help businesses (e.g. internet , satellites,deplete d res ources for humankind as 1. Economic 2. Environmental causing human, environmental andimpacte d byetc. climat) ande chanetworksnge to causin adapt.g widespreadwell as industries. social stability. For each of these “Risks economic damage. disruption. 1.9. IDEA2.1. IDEA2.2. IDEA2.3. IDEA 5.4. IDEA IDEA IDEA IDEA Risk: Unmanageable inflation •Ris Pricek: taExtremg featuringe weathemultiple dolr laeventsr symbol s to •Ris Tork:nad Failureo of climate-change •Ris Globk:e Majo with thrermom biodiversiteter, representingy loss the • Upside-down Risfish k:with Massive crosses for inc eyes,ide nt of data represent high prices world climate representing environmental consequences in Focus”,World Economic Forum Global Riskit Report describes Graphics three existing, (e.g. floods,• Wate storms,r droplet etc.) mitigation• Androidand ad-saptationtyle robot to represent technology,an d ecosyste• Wi-fim symbol collaps to represene (landt the internet • fr Bug,aud/theft to represent a cyber-bug Unmanageable increase in the general and artificial intelligence and networks or ocean) price level of goods and services in Major property, infrastructure and FailureGovernments and of busin esseclimate-changes fail to Wrongful exploitation of private or key economies. environmental damage as well as human Irreversible consequences for the practical initiatives that could help to loss caused by extreme weather events. to mitigate climate change, protect environment, resulting in severely unprecedented scale. mitigationpopulations and help businesses an d adaptationdepleted resources for humankind as build1. Economic resilience. 2.The Environme conceptntal of the impacted by climate change to adapt. well as industries. IDEA IDEA IDEA IDEA IDEA • Cloud with a padlock in the middle, to represent 1.9. 2.1. 2.2. 2.3. data and privacy/security Risk: Unmanageable inflation Ris• Pricek: taExtremg featuringe weathemultiple dolr laeventsr symbol s to Ris• Tork:nad Failureo of climate-change Ris• Globk: eMajo with thrermom biodiversiteter, representingy loss the • Upside-down fish with crosses for eyes, (dis)empowered citizen is introducedrepresent high prices world climate representing environmental consequences (e.g. floods, storms, etc.) Worldmitigatio Economicn and Forum ad aptation Global Risk Report Graphics and ecosystem collapse (land Unmanageable increase in the general Majoror ocean) biodiversity loss and price level of goods and services in Major property, infrastructure and Governments and businesses fail to to describe the ketensionsy economies. createdenvironmental damage as well as human ecosystemIrreversible consequences for thecollapse (land loss caused by extreme weather events. to mitigate climate change, protect environment, resulting in severely populations and help businesses depleted resources for humankind as 3. GeoPolitical by growing cyber connectivity that 2.impacte Envird onby climematntale change to adapt. orwel ocean)l as industries.

1.9. IDEA2.1. IDEA2.2. IDEA2.3. IDEA empowersRisk: Unmanageable inflation citizens•Ris Pricek: taExtremg featuring ate weathemultiple the dolr laeventsr symbol s tosame •Ris Tork:nad Failureo time of climate-change as •Ris Globk: eMajo with thrermom biodiversiteter, representingy loss the • Upside-down fish with crosses for eyes, represent high prices world climate representing environmental consequences (e.g. floods, storms, etc.) mitigatioWorld Economicn and Forum ad aptation Global Risk Report Graphics and ecosystem collapse (land Major natural catastrophes Unmanageable increase in the general or ocean) theyprice leve feell of goods an dincreasingly services in Major property, infrastructur disenfranchisede and Governments and businesses fail to (e.g. earthquake, tsunami, key economies. environmental damage as well as human Irreversible consequences for the loss caused by extreme weather events. to mitigate climate change, protect environment, resulting in severely populations and help businesses depleted resources for humankind as volcanic eruption, geomagnetic from traditional decision-makingimpacte2. Envdir bony clime matntale change to adapt. 3. GeoPolitical well as industries. storms) processes.IDEA TheIDEA second contributionIDEA 2.4.IDEA 2.5. 3.1. 3.2. • Price tag featuring multiple dollar symbols to • Tornado • Globe with thermometer, representing the Ris• Upk:side-dow Majorn fishnatura with crossesl cata forst ropeyes,he s Risk: Man-made environmental Risk: Failure of national Risk: Interstate conflict with represent high prices world climate representing environmental consequences World Economic Forum Global Risk Report Graphics (e.g. earthquake, tsunami, Man-madecatastrophes (e.g. oil spill, environmentalgovernance (e.g. failure of rule regional consequences volcanic eruption, geomagnetic radioactive contamination, etc.) of law, corruption, political further explores one impact of climate A bilateral or multilateral dispute between storms) deadlock, etc.) catastrophesFailure to prevent major man-made (e.g. oil spill, states escalates into economic (e.g. trade/ Major property, infrastructure and catastrophes, causing harm to lives, Inability to govern a nation of geopolitical currency wars, resource nationalization), military, cyber, societal or other conflict. change: coupled with rising population enviro3. GeoPoliticalnmental damage as well as human health, infrastructure, property, importance due to weak rule of law, 2. Environmental human loss caused by geophysical radioactiveeconomic activity and the enviro contamination,nment. corruption or political deadlock. etc.) disasters such as earthquakes, growth, it is threatening food2.4. security. volca2.5. nic activity, landslides, tsunamis 3.1. 3.2. or geomagnetic storms. Risk: Major natural catastrophes Risk: Man-made environmental Risk: Failure of national Risk: Interstate conflict with World Economic Forum Global Risk Report Graphics (e.g. earthquake, tsunami, IDEAcatastrophes (e.g. oil spill, FailureIDEAgovernance (e.g. of failure national of rule IDEAregional consequences IDEA Finally, in the wake of the Ebolavolcanic erupticrisis,on, geomagnetic radioactive contamination, etc.) of law, corruption, political • Erupting volcano • Radioactivity symbol •A Broke bilateran scale,l o rto multilatera signify the failurel disput of thee between • Crossed swords to represent conflict storms) governancedeadlock, etc.) (e.g. rulefailure of law of rule Failure to prevent major man-made states escalates into economic (e.g. trade/ Major property, infrastructure and catastrophes, causing harm to lives, Inability to govern a nation of geopolitical currency wars, resource nationalization), the potential of pandemics to threaten of law, corruption,military political, cyber, societal or other conflict. 3.enviro GeoPoliticalnmental damage as well as human health, infrastructure, property, importance due to weak rule of law, 2. Environmental human loss caused by geophysical economic activity and the environment. corruption or political deadlock. disasters such as earthquakes, deadlock, etc.) social cohesion is discussed. 2.4. 2.5.volcanic activity, landslides, tsunamis 3.1. 3.2. or geomagnetic storms. Risk: Major natural catastrophes Risk: Man-made environmental Risk: Failure of national Risk: Interstate conflict with (e.g. earthquake, tsunami, cataIDEA strophes (e.g. oil spill, WorldgovernanceIDEA Economic Forum (e.g. failure Global Risk of Report rule Graphics regionalIDEA consequences IDEA volcanic eruption, geomagnetic radioactive contamination, etc.) of law, corruption, political • Erupting volcano • Radioactivity symbol InterstateA• Brokebilateran scale,l or to multilatera signify the failurel disputconflict of thee between • Crossed swordwiths to represent conflict storms) deadlock, etc.) rule of law Failure to prevent major man-made states escalates into economic (e.g. trade/ Part 4 applies theMajor property, resilience infrastructure and catastrophesimperative, causing harm to lives, Inability to govern a nation of geopoliticalregional currency wars, resourc consequencese nationalization), environmental damage as well as human health, infrastructure, property, importance due to weak rule of law, military, cyber, societal or other conflict. human loss caused by geophysical economic activity and the environment. 3.corruption GeoPolitical or political deadlock. 4. Societal to one specific disasterstakeholders such as earthquakes, – the 2.4. volca2.5. nic activity, landslides, tsunamis 3.1. 3.2. or geomagnetic storms. Risk: Major natural catastrophes Risk: Man-made environmental Risk: Failure of national Risk: Interstate conflict with business(e.g. earthquake, tsunami, community IDEAcatastrophes (e.g. oi–l spill, with anIDEAgovernanceWorld Economic Forum (e.g. failure Global Risk of Reportrule Graphics IDEAregional consequences IDEA volcanic eruption, geomagnetic radioactive contamination, etc.) of law, corruption, political • Erupting volcano • Radioactivity symbol •A Brokebilateran scale,l or to multilatera signify the failurel disput of thee between • Crossed swords to represent conflict storms) deadlock, etc.) rule of law analysis at countryFailure to prevent and major man-m regionalade levels. states escalates into economic (e.g. trade/Large-scale terrorist attacks Major property, infrastructure and catastrophes, causing harm to lives, Inability to govern a nation of geopolitical currency wars, resource nationalization), environmental damage as well as human health, infrastructure, property, importance due to weak rule of law, military, cyber, societal or other conflict. human loss caused by geophysical economic activity and the environment. corruption3. GeoPolitical or political deadlock. 4. Societal Drawing on a unique data set of more disasters such as earthquakes,

volcanic activity, landslides, tsunamis 3.3. 3.4. 3.5. 4.1. or geomagnetic storms. than 13,000 business leaders in 140 Risk: Large-scale terrorist attacks Risk: State collapse or crisis (e.g. Risk: Weapons of mass Risk: Failure of urban planning IDEA WorldIDEA Economic Forum Global Risk Report Graphics IDEA IDEA civil conflict, military coup, failed destruction Individuals or non-state groups with State collapse or crisis (e.g. Poorly planned cities, urban sprawl and states, etc.) • Erupting volcano • Radioactivity symbol • Broken scale, to signify the failure of the politica• Crossedl oswordr relsigiou to represens goalst co sunflccictessfully Nuclear, chemical, biological and associated infrastructure create social, economies, it explores the differingrule of law inflict large-scale human or material civilState collaps conflict,e of geopolitical importan ce militaryradiological tech nologiecoup,s and materials environmental and health challenges. damage. due to internal violence, regional or global are deployed creating international crises instability, military coup, civil conflict, failed and potential for significant destruction. landscape of global3. GeoPolitical risks across failedstates,4. Societal etc. states, etc.) regions and offers a deep-dive3.3. into IDEA3.4. IDEA3.5. IDEA4.1. IDEA Risk: Large-scale terrorist attacks •Ris Buik:lding State in target collapse sight or crisis (e.g. •Ris Burnink: Weaponsg flag of mass •Ris Muk:sh roomFailur cloeud of, to urban represent pl nuclear/canninghemical • Collection of urban buildings to represent an weapons urban area civil conflict, military coup, failed destruction Individuals or non-state groups with Poorly planned cities, urban sprawl and states, etc.) five of the six most cited globalpolitical or relrisksigious goals succ essfully WeaponsNuclear, chemical, biologica ofl and massassociated infrastructure create social, inflict large-scale human or material State collapse of geopolitical importance radiological technologies and materials environmental and health challenges. damage. due to internal violence, regional or global are deployed creating international crises destruction worldwide. Its aim is to inform the instability, military coup, civil conflict, failed and potential for significant destruction. states, etc.

IDEA IDEA IDEA IDEA discussion of which3.3. risks to prioritize3.4. 3.5. 4.1. • Building in target sight • Burning flag • Mushroom cloud, to represent nuclear/chemical • Collection of urban buildings to represent an Risk: Large-scale terrorist attacks Risk: State collapse or crisis (e.g. Risk: Weapons of mass Risweaponsk: Failure of urban planning urban area civil conflict, military coup, failed destruction Individuals or non-state groups with Poorly planned cities, urban sprawl and in order to build resilience withinstates, etc.) political or religious goals successfully Nuclear, chemical, biological and associated infrastructure create social, inflict large-scale human or material State collapse of geopolitical importance radiological technologies and materials environmental and health challenges. businesses. damage. due to internal violence, regional or global are deployed creating international crises instability, military coup, civil conflict, failed and potential for significant destruction. states, etc.

IDEA IDEA IDEA IDEA

• Building in target sight • Burning ﬂag • Mushroom cloud, to represent nuclear/chemical • Collection of urban buildings to represent an weapons urban area The Global Risks Report 2016 9 Part 1 Part

From the refugee crisis to economic slowdowns in emerging markets, Part 1: from ever-rising numbers of terrorist and cyberattacks to water shortages, global risks have been in the headlines

Part 2 Part in the last year. Yet so have initiatives Global Risks 2016 to address them, such as the COP21 meeting on reducing greenhouse gas emissions or European Union (EU) summits to address the refugee crisis.1 The Global Risks Report exists to raise awareness about global risks and their potential interconnections, and to provide a platform for discussion and action to mitigate, adapt and Part 3 Part strengthen resilience.

There is remarkable stability in this year’s Global Risks Landscape (Box 1.1): many risks that are assessed as above average in terms of likelihood and impact were similarly assessed last year. This suggests the emergence of a new status quo, with geopolitical risks – such as interstate conflict or terrorist Part 4 Part attacks2 – being at the forefront. Other risks rated as highly impactful or likely, such as involuntary migration and social instability, are partly a result of spillover effects of insecurity and conflict. Some geopolitical risks – such as the failure of national governance, which is pervasive across Latin America and Sub-Saharan Africa (see Figure 3) and considered to be among the top three most likely risks in the Middle East and North Africa, East Asia and the Pacific, and Central Asia – are considered to be important in some regions but not globally impactful. Consistent with the past, weapons of mass destruction is ranked as the second least likely risk to occur, but the second most impactful if it were to. Part 2 of this Report explores the international security landscape and how it could evolve in future.

Also prominent in the Global Risks Landscape 2016 are environmental risks such as failure of climate- change mitigation and adaptation, which is considered the most potentially impactful risk and the third most likely, with water crises,3 biodiversity loss and ecosystem collapse rising up the list of concerns. Environmental worries have been at the forefront in recent years (Figure 1.1.1), reflecting a sense that climate change–related risks have moved from hypothetical to certain because

10 The Global Risks Report 2016 Part 1 Part

Box 1.1: Methodology of The Global Risks Report

This Report defines a “global risk” as an uncertain event or condition that, if it occurs, can cause significant negative impact for

several countries or industries within the next 10 years. Based on this refined definition, this year 29 global risks were identified 2 Part and grouped into the five customary categories: economic, environmental, geopolitical, societal and technological. A description of the risks and the methodology employed can be found in Appendices A and B.

The Report also identifies 13 global trends that can potentially drive global risks. A “trend” is defined as a long-term pattern that is currently taking place and that could contribute to amplifying global risks and/or altering the relationship between them. Unlike risks, trends are occurring with certainty and can have both positive and negative consequences. Trends can alter how risks evolve and interrelate, and they inform efforts at risk mitigation.

Figure 1.1.1: The Evolving Risks Landscape, 2007–2016 Part 3 Part

Top 5 Global Risks in Terms of Likelihood 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Breakdown of Asset price collapse Asset price collapse Asset price collapse Storms and Severe income Severe income Income disparity Interstate con ict Large-scale 1st critical information cyclones disparity disparity with regional involuntary infrastructure consequences migration

Breakdown of critical information infrastructure Chronic disease Middle East Slowing Chinese Slowing Chinese Flooding Extreme weather Extreme weather Extreme weather 2nd in developed instability economy (<6%) economy (<6%) imbalances imbalances events events events countries

Oil price shock Failed and failing Chronic disease Chronic disease Corruption Rising greenhouse Rising greenhouse Unemployment Failure of national Failure of climate- 3rd states gas emissions gas emissions and governance change mitigation underemployment and adaptation

Breakdown of Part 4 Part critical information China economic Oil and gas price Global governance Fiscal criseinfrastructures Biodiversity loss Cyber attacks Water supply crises Climate change State collapse or Interstate con ict 4th hard landing spike gaps crisis with regional consequences

Asset price collapse Chronic disease, Retrenchment Global governance Climate change Water supply crises Mismanagement Cyber attacks High structural Major natural 5th developed world from globalization gaps of population unemployment or catastrophes (emerging) ageing underemployment

Top 5 Global Risks in Terms of Impact 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Asset price collapse Asset price collapse Asset price collapse Asset price collapse Fiscal crises Major systemic Major systemic Fiscal crises Water crises Failure of climate- 1st change mitigation and adaptation

Breakdown of critical information infrastructure Retrenchment Retrenchment Retrenchment Retrenchment Climate change Water supply Water supply Climate change Rapid and massive Weapons of mass 2nd from globalization from globalization from globalization from globalization crises crises spread of infectious destruction (developed) (developed) (developed) diseases

Interstate and Slowing Chinese Oil and gas Oil price spikes Geopolitical Food shortage Water crises Weapons of mass Water crises 3rd civil wars economy (<6%) price spike crises imbalances destruction

Breakdown of critical information Pandemics Oil and gas Chronic disease Chronic diinfrastructuresease Asset price collapse Unemployment Interstate con ict Large-scale 4th price spike imbalances weapons of mass and with regional involuntary destruction underemployment consequences migration

Oil price shock Pandemics Fiscal crises Fiscal crises Extreme energy Extreme volatility in Failure of climate- Critical information Failure of climate- Severe energy 5th price volatility energy and change mitigation infrastructure change mitigation price shock agriculture prices and adaptation breakdown and adaptation

Economic Environmental Geopolitical Societal Technological

Source: World Economic Forum 2007–2016, Global Risks Reports.

Note: Global risks may not be strictly comparable across years, as definitions and the set of global risks have evolved with new issues emerging on the 10-year horizon. For example, cyberattacks, income disparity and unemployment entered the set of global risks in 2012. Some global risks were reclassified: water crises and rising income disparity were re-categorized first as societal risks and then as a trend in the 2015 and 2016 Global Risks Reports, respectively. The 2006 edition of the Global Risks Report did not have a risks landscape.

As in previous years, assessments of risks in this year’s Report are based on the Global Risks Perception Survey. The survey captures the perceptions of almost 750 experts and decision-makers in the World Economic Forum’s multistakeholder communities and was conducted in Fall 2015. Respondents are drawn from business, academia, civil society and the public sector and span different areas of expertise, geographies and age groups.

The analysis takes into account three complementary angles on global risks: an assessment of their likelihood and impact (Figure 1), and how these have evolved over the years (Figure 1.1.1); a regional breakdown of the perceived likelihood of risks (Figure 3); a mapping of interconnections among risks (Figure 2) and among risks and trends (Figure 4); and the difference of the level of concern in the short and long term (Figure 1.2).

The Global Risks Report 2016 11 Part 1 Part

insufficient action has been undertaken To tease apart short- and longer- awareness about the importance of to address them. term thinking and shed light on the long-term thinking about global risks – psychology behind the responses, especially significant when it comes to Figure 1.1 shows risks that have the survey asked experts to nominate attempting to limit the extent of climate registered the highest increases and risks of highest concern over two change and to adapt to the change

Part 2 Part declines in perceptions of likelihood time horizons: 18 months and 10 that is already inevitable. and impact, notably large-scale years. Global risks that have recently involuntary migration, now rated been in the headlines – such as Three risk clusters are discussed in as the most likely and fourth most large-scale involuntary migration, more detail below: the cluster linking impactful. Other risks gaining in interstate conflict and cyberattacks – the failure of climate change mitigation prominence on both dimensions tend to feature higher as short-term and adaptation with water crises and include profound social instability concerns, indicating that recent events large-scale involuntary migration; the – also one of the most highly significantly influence our thinking cluster linking large-scale involuntary interconnected risks, as shown in about risks and, hence, stakeholder migration with a range of risks related Figure 2. action. to social and economic stability; Part 3 Part and the cluster linking economic The economic risks of unemployment The longer-term concerns are more global risks with uncertainty around and underemployment, asset related to underlying physical and the impacts of the Fourth Industrial bubbles, and fiscal crises in key societal trends, such as the failure Revolution. economies have increased in both of climate change mitigation and likelihood and impact over the past adaptation, water crises and food two years, although these have been crises. Interestingly, extreme weather Coping with the Changing overtaken by other concerns. At the events and social instability are same time, cyber threats remain at considered a concern in both the short Climate the top of respondents’ minds, as in and long term, reflecting an expectation Part 4 Part Climate change and water crises, previous years. that the frequency and intensity of which have featured prominently in the crises will continue to rise. One of Global Risks Landscape over the last the roles of this Report is to raise five years, are joined this year by large- scale involuntary migration. The links Figure 1.1: The Changing Global Risks Landscape 2015–2016: The 10 Most among these risks appear clearly in Changing Global Risks the Global Risks Interconnections Map 2016 (Figure 2), and the intertwined challenges are unfolding against a background of many socio-economic pressures.

As illustrated by the Global Risks Interconnections Map, climate change and water risks are intricately linked to food security concerns – a subject explored further in Part 3 of this Report. About 70% of the world’s current freshwater withdrawals are used for agriculture, rising to over 90% in most of the world’s least-developed countries.4 Carbon dioxide also causes ocean acidification, which makes it harder for small shellfish to form the calcium carbonite shells they need to grow – with implications rising up the food chain, threatening the availability of food from the seas as well.5

Challenges around water management are already immense. On the one hand, over a billion people lack access to improved water. Some 2.7 billion – or 40% of the world’s population – suffer water shortages for at least a Source: Global Risks Perception Survey 2014 and 2015, World Economic Forum. month each year.6 The Organisation Note: We are presenting the 10 global risks assessments that have changed the most since the Global Risks for Economic Co-operation and Report 2015. To identify them, we take the distance between the two years for each risk, in absolute terms.

12 The Global Risks Report 2016 Part 1 Part

Figure 1.2: The Top Five Global Risks of Highest Concern for the Next 18 Months 2030 across Asia.10 Globally, based and 10 Years on current trends, water demand is projected to exceed sustainable supply by 40% in 2030.11 Adding to the pressures, agricultural production

will have to increase in the coming 2 Part decades to feed a growing population and a rising demand for meat.12

Unless current water management practices change significantly, many parts of the world will therefore face growing competition for water between agriculture, energy, industry, and cities. Tensions are likely to grow within countries, especially between rural 3 Part and urban areas and between poorer and richer areas, and also potentially between jurisdictions. More than 60% of the world’s transboundary water basins lack any type of cooperative management framework. Even where such frameworks do exist, they often do not cover all states that use the 13

basin. Interstate tensions over water 4 Part access are already apparent in some Source: Global Risks Perception Survey 2015, World Economic Forum. parts of South Asia, and could impact Note: Survey respondents were asked to select up to five risks of highest concern for each time frame. The the evolution of the international percentage indicates the share of respondents who selected the specific global risk among the five risks of highest security landscape, as discussed in concern for each time frame. See Appendix B for more details. To ensure legibility, the names of the global risks are abbreviated; see Appendix A for the full names and descriptions of the risks. Part 2.

Climate change will only exacerbate Development (OECD) estimates that 4 Brazil exemplifies the challenge of these challenges. The latest billion people could be living in water- managing water even within a single Intergovernmental Panel on Climate scarce areas by 2050. According to country: it has 12% of the planet’s Change (IPCC) report, in November the World Water Council, 80% to 90% freshwater reserves, mostly in the 2014, reaffirmed that this warming in of the scarce water in many of the Amazon region, but much of this water the climate system is “unequivocal” world’s arid and semi-arid river basins does not reach its urban population. and that human influence is “extremely is already being used, and over 70% Sao Paulo, which contributes a third likely” to be the dominant cause. of the world’s major rivers no longer of Brazil’s GDP, has a lower water- Atmospheric concentrations of three reach the sea.7 On the other hand, per-capita availability than even the major greenhouse gases (carbon inadequate sanitation exposes 2.4 historically drought-prone north- dioxide, methane and nitrous oxide) are billion people to many diseases, such eastern region of the country. With at their highest level in 800,000 years, with CO concentration up 13% since as diarrhoeal disease, which is the third hydropower constituting approximately 2 leading cause of death among children 64% of the electricity power load, there 1990. The world today is estimated to under five.8 are conflicts caused by unclear rules be about 1°C warmer, on average, than about water governance at federal, it was in the 1950s, and the effects Governance – at global, regional state and basin levels.9 are being felt. Regional analysis of the and national levels – lies at the Global Risks Perception Survey shows heart of water management. Even Water management is further that declining water availability features many developed countries are complicated around the world by as the most likely risk in the Middle failing to proactively address water economic pressures – developing an East and North Africa and South Asia, vulnerabilities, instead reacting only economy can be a thirsty business, and the likelihood of extreme weather after extreme weather events. In based on unsustainable use of water. events is considered especially high in developing countries, the political As countries industrialize, more fresh North America, South Asia and East challenges inherent in water water is needed for energy production Asia and the Pacific (see Figure 3). infrastructure and conservation – the United States allocates about projects are exacerbated by greater 40% of its fresh water to energy, Scientists caution that a total warming of 2°C implies a high risk of financing challenges. Europe over 30% – and the demand catastrophic climate change that could for water for energy and industry damage human well-being on a global is forecast to increase by 70% by scale. Yet even if each country meets

The Global Risks Report 2016 13 Part 1 Part

its Intended Nationally Determined or rapidly? The average sea level is fossil fuel emissions – the impact will be Contributions plans, submitted to the already rising by 3 millimetres per global. United Nations Framework Convention year, faster than any other time in on Climate Change (UNFCCC) and the last two millennia; many of the Failure to address climate change and agreed at the Paris Climate Conference world’s cities lie on the coast or on water crises will forcibly displace more in December 2015 (Box 1.2), warming is people – the IPCC warns that droughts Part 2 Part river banks, with poor neighbourhoods projected to reach 2.7°C by 2100. most likely to be in low-lying areas and coastal floods could cause vulnerable to flooding.14 Another “large-scale demographic responses Given these developments, it will, source of uncertainty is the “Amazon – for example, through migration”. therefore, be impossible to live Dieback” scenario: recent oscillation Forced displacement is already at an without adaptation – but adaptation between unusually dry years and heavy unprecedented level, causing severe planning is complicated by the flooding could be an early indicator of humanitarian challenges, as explored in difficulty of predicting not only the irreversible system phase change.15 If the following section. expected degree of warming but the Amazon stops absorbing carbon also the expected pace. One source and starts releasing the estimated

Part 3 Part of uncertainty is the Arctic feedback 120 billion tonnes of carbon it holds – loop – will ice sheets collapse slowly equivalent to 15 years’ worth of 100%

Box 1.2: The Paris Agreement: A Historic Turning Point on Climate Change

The adoption of the Paris Agreement on 12 December 2015 by 195 governments is a major turning point in the global fight against climate change. The world’s nations agreed to limit global average temperature rise to “well below 2°C above pre-

Part 4 Part industrial levels and to pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels”. They also agreed to a review mechanism that will help ratchet up efforts every five years from 2018, as well as a floor for financial flows to developing countries.

The Paris outcomes are far more ambitious than had been expected – a collective recognition of the dangerous risks posed by climate change as well as the cost of inaction. These outcomes are also sending unmistakable signals to the global markets that governments are willing to put aside their differences and do their part in tackling this biggest of global challenges.

In the coming months and years, the impact of the Paris Agreement will be felt in board rooms, banks and stock exchanges across the world. The expectation is that, as a result, trillions of dollars needed for investments will be unlocked to put the world onto a climate-safe pathway. The time has come to pivot from business-as-usual.

One of the innovations that emerged from Paris was the official recognition of the role played by business, investors, cities and provinces in driving and delivering climate action. Effective mobilization of these constituencies – alongside civil society and faith-based groups – has indeed contributed to this successful outcome. But such mobilization was possible only because an ever-growing number of global businesses and cities today understand that deepened globalization has heightened vulnerabilities through global supply chain shocks. And that these disruptions could be further triggered by climate volatility and policy uncertainty.

To date, nearly 190 governments have submitted their climate action plans, covering over 95% of total global emissions. These efforts alone will not suffice, as even the most optimistic estimates suggest that these pledges taken together would contain warming only to 2.7°C above pre-industrial levels. But these bottom-up efforts will provide a solid foundation from which ambition can be ratcheted up in the coming years.

Developments in the real world will also help, with cost-competitive alternatives already available today. In 2014, renewables made up over half of total energy investment, while the cost of solar panels has fallen by 75% and that of batteries for electric vehicles by half since 2009. Wind-generated electricity in over 50 countries is now at grid parity – when the customer of electricity pays the same to buy wind energy as to buy traditional technologies.

Looking forward, global attention will turn firmly towards implementation and developing specific action plans to deliver a low-carbon, climate-resilient world. With a clear direction of travel, the immediate next step will focus on policy frameworks and incentives that will deliver the results, as well as on the consolidation and scaling of much-needed public-private cooperation.

For businesses, the Paris Agreement is a licence not only to implement climate-friendly practices but also to innovate and develop the next generation of solutions. The race is on for forward-looking businesses and governments alike to capitalize on these new business opportunities for growth and resilience.

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Humanity on the Move Three factors increase the risks posed Second, the global humanitarian by involuntary migration. First, people architecture is not able to effectively The Global Risks Landscape sees a stay in host countries longer than respond to today’s challenges. Many noticeable increase in both perceived they used to. The average duration of countries, including some of Syria’s likelihood and impact of the risk of displacement lengthened from nine neighbours, have either not signed 16 large-scale involuntary migration. years in the 1980s to 20 years by the the Geneva Convention governing the 2 Part The definition of this risk includes mid-2000s.19 Fewer than one in 40 status of refugees, or do not uphold forced migration caused not only by conflicts is now resolved within three it because there is no enforcement violence and conflicts, such as those years, and more than 80% last for more mechanism. Without formal refugee driving the exodus from Syria and Iraq, than 10 years. status, refugees can find it harder to but also for environmental or economic access formal employment, social reasons. The risk is seen as more The longer people stay away from assistance or travel documents. relevant in the next 18 months than the their home countries, the harder it is next 10 years (see Figure 1.2). However, to return: often they have lost their The institutional architecture for it is strongly interconnected with livelihoods, family ties and physical refugees focuses on providing a short- other risks that are considered highly property; furthermore, property rights term response to people displaced 3 Part worrisome in the longer term: not only issues for returning refugees can be by conflict and violence. It assumes interstate conflict and state collapse but complex. Protracted refugee situations refugees will settle in camps and also climate change and water crises, become even more difficult when primarily need humanitarian assistance, as discussed above. refugees are granted only limited socio- whereas most now settle in urban economic rights and opportunities, areas20 – where humanitarian actors Global refugee flows have reached a limiting their scope to reclaim have not yet developed well-functioning level that is unprecedented in recent livelihoods and dignity. operating models – and primarily history. In 2014, 59.5 million people need resilience building. Moreover, were forcibly displaced in the world, The lack of effective integration policies the Geneva Convention does not 4 Part compared to 40 million at the time in most countries (see Box 1.3 for an cover environmental migrants, whose of World War II.17 More than half of example) can lead to the formation of numbers are expected to rise for these recent refugees come from ghettos or isolated communities on the reasons explored above. three conflict-ridden countries: Syria, margins of society, ripe for frustration Afghanistan and Somalia.18 The trend and vulnerable to disenchantment and Third, most forced migrants move to is upwards: during 2014, the number even radicalization. In Europe, the rapid other developing countries, where of people displaced – 42,500 per day inflow of migrants in 2015 challenged social and governance systems may – was four times greater than in 2010. local financial and absorption already be weak or likely to fail (see Although the recent crisis in Europe has capacities and exacerbated the trend Figure 3). In 2014, 86% of refugees dominated headlines, and is reflected in towards polarization of societies and lived in developing countries and about the risk being considered most likely in the political spectrum, which in turn 12% in least-developed countries. that region (see Figure 3), the challenge undermined the efficiency of European In emerging economies, resource is global with most regions affected governance structures. constraints can be significant: the UN (see Figure 1.3). estimates the cost of housing Syrian refugees in Jordan to be over 7% of Jordanian GDP.21

Figure 1.3: Global Displacement Hotspots, 2014 All these factors, if unaddressed, can fuel risks in host and destination countries. Although research on the economic effects of refugee inflows is limited, it suggests that refugees can make a positive contribution to the host country’s economy through increased demand, inflows of remittances, promoting the use of technology and engaging in international trade.22 In advanced, ageing economies, incoming refugees can contribute to keeping aggregate demand high and the workforce stable.

Multistakeholder approaches that include local business communities Source: UNHCR 2015b, p. 3. can contribute both to mitigating risks Note: A “hotspot” is defined as a country or area that has been suffering from conflict-related displacement flows that could emerge from large-scale during the reporting period. involuntary migration and to building

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resilience in transit countries and Economic Growth 4.0 Economic concerns are currently countries of destination. Measures centred on the corporate and public to consider include work permits Fiscal crises in key economies, asset debts built up by emerging markets and access to jobs, skills recognition bubbles, and structural unemployment in the recent low-interest rate and training, and access to schools and underemployment are among environment: the International Monetary Fund (IMF) estimates the extent of Part 2 Part and public health services. At the economic risks rated as both highly same time, at the global level, the impactful and likely; another global corporate over-borrowing at up to 23 development community could help systemic financial crisis is rated as US$3 trillion, and the corporate debt by focusing more strongly on building somewhat less likely than last year, to GDP ratio rose by 26 percentage resilience and helping refugees to but similarly impactful. Taken together, points between 2004 and 2014 for this 24 transition into self-reliance. This will these risks could result in another group of countries. Particular risks be even more important in light of the economic slowdown with knock-on could emanate from China, where slow and unstable growth the world effects on employment and, ultimately, continued credit-based measures to is currently experiencing, which may social stability. address concerns about a slowing further limit countries’ absorptive economy could further heighten Part 3 Part capacities. vulnerability to a financial crisis.

Box 1.3: Refugees in Malaysia

Since the 1980s, hundreds of thousands of Rohingya, a stateless ethnic and religious minority from Myanmar, have sought asylum in nearby countries, including Bangladesh, Thailand and Malaysia. In recent years, an increasing number of Rohingya people have fled by boat: 25,000 people departed from the Bay of Bengal just in the first quarter of 2015. Over 50,000 Rohingya refugees are registered with the United Nations High Commissioner for Refugees (UNHCR) in Malaysia,1 with thousands more Part 4 Part unregistered. The situation in Malaysia is at once a protracted refugee situation – with multiple generations of refugees, some of whom have achieved moderate de facto integration – and a humanitarian crisis marked by a steady influx of emaciated and traumatized asylum-seekers.

The legal status of refugees in Malaysia is tenuous: the country has not ratified key international agreements (most notably the 1951 Refugee Convention and its 1967 Protocol), and it lacks a legal and administrative framework for responding to refugees. While the UNHCR has primary responsibility for refugees – including registration and documentation – there are significant gaps in protection and assistance. Refugees cannot attend Malaysian schools, face barriers accessing healthcare, and confront a range of security and protection risks, including detention.

Despite these challenges, refugees invariably show a vibrant entrepreneurial spirit, undertaking formal and informal work to support themselves and their families, at restaurants and retail shops, schools, factories and farms, operating their own small businesses, cleaning, collecting goods to recycle and working in skilled professions, for instance as electricians. Specific examples include refugees opening tea shops with the help of Malaysian acquaintances, opening grocery shops that serve as meeting places for other refugees, and opening home day care for Malaysian children in the neighbourhood. However, restrictions prohibiting them from undertaking employment legally mean that most resort to difficult jobs for low pay, and their illegal status leaves them vulnerable to abuse and exploitation.

Rohingya refugees seek to improve their lives and livelihoods over the course of protracted displacement in various ways. They adopt skills and techniques – such as learning the local language and negotiating with authorities – to help them secure employment and make their way. Contrary to the widespread perception that refugees are a burden for the country of asylum, only a small proportion of refugees in Malaysia receive formal assistance from non-governmental organizations or the UNHCR; instead, most find innovative, albeit challenging, ways to support themselves and their families. They rely primarily on support from other refugees, community associations, and members of the host population to manage shocks, find work, overcome bureaucratic barriers and gain access to institutions. In the absence of formal social protection and services, Rohingya refugees have begun to develop their own: refugee-run community organizations, for example, register members, issue marriage certificates, operate convalescent shelters and help refugees find work.

Although it is important to recognize what refugees can do for themselves, the livelihoods of even the most successful are precarious. Many have relevant and transferable skills and a genuine desire to bring something to the communities in which they live, yet there is a marked dissonance between what refugees stand to contribute and the restrictive policies that limit their ability to do so. Addressing this gap requires a shift away from seeing refugees as passive victims or recipients of assistance or goods to understanding them as active agents pursuing lives and livelihoods in an extremely challenging environment, and in doing so contributing to the countries where they seek asylum.

Note 1 UNHCR 2015a; UNHCR 2015c.

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Concern is growing over debt levels could undermine the sustainability would accentuate risks associated with at a time when long-term global of high debt and lead to reversals in unemployment and the weak fiscal economic prospects are expected to capital flows. position of many key economies. remain weak as a result of a worldwide slowdown in productivity growth over The result could be numerous In developed countries, concerns the past decade. In the short term, corporate and potentially sovereign remain about debt levels – mainly 2 Part lower commodity prices and further defaults in emerging markets, public – creating another vulnerability appreciation of the dollar could pose triggering a financial crisis and further in the interconnected global balance sheet risks to both public slowing growth. In turn, slower economy. National economic crises and private sectors in countries with a growth in emerging economies can spark global slowdowns, but high share of debt denominated in US could further reduce commodity international governance does not have dollars; in emerging markets, dollar- prices, exacerbating exchange rate mechanisms in place to address the denominated corporate debt issued shifts.26 With declining liquidity in underlying risks, which are under the in 2015 stands at US$120.5 billion in financial markets in emerging market purview of national economic policies. 2015.25 Also plausible is an increase economies,27 a crisis in an emerging Because any country could be a weak in risk premiums on investments in market could spark volatility in global link, it is critical to strengthen resilience 3 Part emerging markets, which have been financial markets, leading to a global in all countries. compressed in recent years. Interest economic slowdown (see Box 1.4). This rates are likely to go up in future, which

Box 1.4: China’s Financial Vulnerabilities and the Transition to the New Normal

Because of its sheer size and rapid development, China plays a prominent role in shaping the global economic landscape. The Part 4 Part country is now at a critical juncture as it transitions to a new phase of its economic development – referred to as a “new normal” by President Xi – in which its economy is based less on investments and exports and more on consumption and services. In the new normal, the Chinese economy will be more driven by market forces; it is expected to grow more slowly than its recent annual average of 7%, but more sustainably. However, whether this transition will be orderly is uncertain.

Uncertainty centres on the massive corporate debt built up by traditional industries that drove China’s last two decades of growth but now face lower demand. The IMF estimates, for instance, that, at the end of 2014, the ratio of total liabilities to equity in China’s construction sector exceeded 250;1 in the oil and gas sector, the ratio has more than doubled since 2007, albeit from a lower base.

China’s financial sector is another, related cause for concern. The Chinese banks that fuelled the rapid credit growth in now- declining industries consequently face worsening asset quality and non-performing loans. Their profitability has plummeted over the past year, adding to concerns about the fragility and vulnerability of China’s underdeveloped financial system – which is dominated by large state banks and casts a large shadow banking sector. The central bank’s intervention in August 2015 to weaken the renminbi could increase the risks of capital outflows, making funding and liquidity conditions for banks even tougher. It could also exacerbate the risk of default of Chinese companies that borrowed in foreign currency.

The government faces a dilemma. If it tightens credit conditions, it could reduce investment more quickly than consumption can increase to compensate, and cause massive defaults among struggling and heavily leveraged companies. This could mean a much more severe economic slowdown, potentially causing a surge in unemployment and social unrest. However, if the government lets more credit flow to avoid these destabilizing defaults, it risks further increasing the indebtedness of underperforming industries and creating bigger problems down the line. The government seems to have opted for letting more credit flow: in October 2015, the central bank lowered its benchmark rates and relaxed reserve requirements for banks. The hope is that more of the new liquidity will flow to productive service-based activities and high-end manufacturing that will yield higher returns and accelerate the transition to the new normal. Mitigating the risks of this further increase in debt, China still has policy buffers to absorb financial shocks – it has a relatively favourable fiscal situation, including low debt and large foreign reserves. This allows the central government to be lender of last resort for heavily indebted local governments, state-owned banks and enterprises; to intervene to stabilize the stock market; or to adopt stimulus plans.

However, overreliance on these buffers could exacerbate existing vulnerabilities and impede the transition process. Instead, the government should invest in improving the nascent safety net to boost consumption in a country where, on average, households save about 30% of their disposable income, one of the world’s highest.2

Notes 1 IMF 2015d. 2 Roberts 2015.

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With longer-term trends such as European countries that do not dependence rises, the resulting demographic changes and rising react appropriately to technological interconnectivity and interdependence wealth disparities likely to heighten change could lose 600 billion euros in can diminish the ability of organizations economic and social pressure in value added over the next 10 years, to fully protect their entire enterprise. emerging economies over the next corresponding to about 10% of As more organizations move to digitize 32

Part 2 Part 10 years, there is renewed urgency Europe’s industrial base. Businesses, their unique business value within more to generate growth. As explored in policy-makers and civil society connected environments that rely more the Global Competitiveness Report therefore need to find appropriate and more on machine learning and 2015–2016, productivity – the major frameworks to address four high-level automated decision-making, cyber driver of growth – has been declining in risks associated with the transformation resilience takes on a new importance. recent years.28 towards a more digitized economy. Although organizations may recognize the benefit of cyber technologies for Many hope that emerging technologies First: cyber-related risks. Cyberattacks their bottom lines, they may not be will fuel a new wave of productivity and related incidents have been fully internalizing cyber security risks and growth. The pace of innovation entering the global risks landscape and making the appropriate level of Part 3 Part is increasing and the spread of as among the most likely and most investment to enhance operational technologies is inevitable,29 giving rise potentially impactful risks for the past risk management and strengthen to individual innovations and disrupting two to three years – in North America, organizational resilience. Particular business models, processes and cyberattacks ranks as the most likely attention is needed in two areas that products in ways that will require rapid risk by far (see Figure 3) – with the are so far under-protected: mobile adaptation.30 A recent study suggests potential threat for doing business internet and machine-to-machine that internet-related technologies explored further in Part 4. Cases connections. It is vital to integrate such as mobile internet, automation have been rising in both frequency physical and cyber management, of knowledge work, the Internet of and scale. They have so far been strengthen resilience leadership and Things and cloud technology will be the isolated, concerning mostly a single organizational and business processes, Part 4 Part most disruptive and generate the most entity or country, but as the Internet and leverage supporting technologies. economic benefit (see Figure 1.4).31 of Things leads to more connections between people and machines, Second: the exchange of data between The failure to understand and address cyber dependency – considered by countries and stakeholders. Data have risks related to technology, primarily survey respondents as the third most been called “the oil of the 21 century”, the systemic cascading effects of important global trend (see Figure and a predictable legal framework is cyber risks or the breakdown of critical 4) – will increase, raising the odds of a needed to realize the full economic information infrastructure, could have cyberattack with potential cascading potential of digitization. Recent cases of far-reaching consequences for national effects across the cyber ecosystem. As policy reversal have created uncertainty economies, economic sectors and a result, an entity’s risk is increasingly about the legal situation, which can global enterprises. By one estimate, tied to that of other entities. As cyber hamper investment and adaptation of the latest technologies. Given the inherent international nature of data flows, in areas such as supply chains Figure 1.4: Estimated Potential Economic Impact of Technologies, US$ trillion, or 3D printing, national governance annualEstimated potential economic impact of technologies needs to be complemented by a functioning international legal framework. However, the current 11 3.7-10.8 regulatory regime is underdeveloped 10 High 9 and lacks the necessary legal certainty

8 Low in areas such as privacy, transparency, 7 encryption control, the effect of 2.7-6.2 1.7-6.2 Range of sized potential 6 5.2-6.7 economic impacts intellectual property regimes on data 5 1.7-4.5 that cross borders, and the impact 4 of proprietary data on competition. 3 Given the many actors and industries 2 0.2-1.9 0.7-1.6 involved and the competing interests 1 0.1-0.6 0.2-0.6 0.2-0.5 0.1-0.5 0.2-0.3 at stake, stakeholders will probably 0 struggle to find common agreement. Moreover, the physical infrastructure genomics 3D printing for data exchange, such as undersea Automation of Mobile Internet Energy storage Next-generation knowledge work

Cloud technology cables, could also become a target in Renewable energy Advanced robotics Advanced materials autonomous vehicles Advanced oil and gas The Internet of Things

Autonomous and near- international conflict or terrorism. exploration and recovery

Third: changes to the work Source: Based on Manyika et al. 2013. environment. Although there is a lot of uncertainty about how many new Note: Projections are to 2025 and include sized applications and consumer surplus.

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Box 1.5: Pathways to Resilience: Effective Leadership and Institutional Values

Global risks recognize no geographic boundaries. Whether from natural or man-made or cyber disasters, the cascading effects

can be felt oceans away. Escalating terrorist attacks in Africa, Europe and the Middle East; natural disasters related to climate 2 Part change; and health disasters from infectious diseases increasingly impose both economic and human costs. How can the global community prevent or mitigate the adverse effects of catastrophic events in our increasingly complex and quickly evolving environment?

The Global Agenda Council (GAC) on Risk and Resilience advocates four key activities for companies, organizations and governments to build resilience at national and global levels.1 These recommendations resulted from a detailed study of entities that proved to be resilient in recent disasters, including Nepal’s 2015 earthquake, the 2014 Ebola outbreak and Chile’s 2010 earthquake, along with an assessment of data from four sources including the Organisation for Economic Co-operation and Development, the U.N. Office for the Coordination of Humanitarian Affairs, the World Bank and the Zurich Insurance Group. Part 3 Part

1. Clarify roles and responsibilities. During a crisis, it is critical to have clearly delineated and understood senior official and c-suite executive roles and responsibilities for risk and incident management. Confusion around “who is in charge” or “who has authority” wastes crucial time and resources, and makes response and recovery less efficient and effective. The need for well-defined roles becomes heightened when an organization faces novel or rapid-onset disasters or emergencies, such as those resulting from cyberattacks. Pre-determining, training and exercising roles, capabilities and plans helps to ensure an organization’s risk readiness. The successful management of complex crises also requires a capacity for adaptability and flexibility. Crisis managers must be able to adjust pre-established plans as needed given the unique characteristics of the crisis.

2. Develop Crisis Leadership Characteristics. Organizations that successfully position for, respond to and recover from 4 Part major events also consistently have effective leadership – the qualities and actions of those with authority and influence can empower their entities to be resilient. Such leaders are steady and decisive in the face of uncertainty and pressure. They make decisions in a timely and prioritized way, and communicate them transparently. Recognizing that they cannot address risks alone, they galvanize others and are clear about what assistance they require. They understand when a disaster requires them to cut through policies that may prevent or delay action. Leaders who are effective during and after a crisis are those who have earned trust through their demonstration of openness, transparency, responsiveness and accountability. They are seen as honest and standing up against corruption. For example, an IMF assessment attributes much of Chile’s effective recovery from the 2010 earthquake to the nation’s “technocratic, rules-based, and transparent” leadership – and to its institutional practices, including the rule of law.2 Another example is seen in Norwegian Prime Minister Jens Stoltenberg’s speech in the wake of the July 2011 terrorist attacks in Norway, which demonstrated how leadership during a crisis can significantly result in both increased trust in government and meet citizens’ expectations of responsiveness. These examples also highlight the role of meaning making – that is, the capacity for leaders to make sense of an adverse event and articulate to the public a clear path forward in a state of emergency.

3. Leverage expertise. When confronted with an unprecedented emergency, strategic crisis managers must be able to quickly identify and mobilize the most relevant and trustworthy expertise to help understand and respond to the crisis. Knowledge management systems and expert networks need to be set up in advance and across multiple sectoral, professional and disciplinary boundaries. Understanding the implications of the crisis beyond the immediate consequences and anticipating the potential pathways of cascading effects requires appropriate crisis management structures that enable additional expertise to formally support decision-making. For example, the United Kingdom’s Scientific Advisory Group in Emergency (SAGE) is an independent support group that provides science-based expertise for the management of complex and unprecedented crises to the UK cabinet. Access to such expert “force-multipliers” could help both public and private entities understand and address the unique aspects of a crisis. Having access to specialized expertise is especially crucial for novel or multi-faceted evolving crises – such as the Great East Japan Earthquake, which impacted the Fukushima nuclear reactor and caused many companies to struggle with what decisions to make.

4. Create a culture of integrated risk management and multistakeholder partnerships. Another necessary institutional value is the recognition of the scope of global risks and the need for partnerships to address them. A culture of risk management – the beliefs, norms and values that underpin daily actions – must span the whole organization, including its supply chains. Entities can no longer afford to have different types of risks managed by different policies and operating procedures and by different officials, executives and agencies. All parts of an organization must collaborate transparently on risk management through integrated planning because of the potential for risks to have cascading consequences, including spillovers between the virtual and physical realms – for example, a flood disabling a server farm, or a cyberattack interrupting electricity supply.

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Individuals and organizations must recognize the imperative to contribute to resilience and must also know what and how they can contribute. No single entity – public or private – possesses all of the necessary authority, resources, or expertise to ensure its resilience against catastrophic events. Instead, resilience necessitates collaborative approaches. Public-private partnerships that harness the core competencies of each sector have a critical role to play in strengthening resilience capacity Part 2 Part and maximizing the benefits of investment in risk monitoring, business continuity planning, and disaster preparedness. Instilling a culture of collaboration will enable effective partnerships before, during and after disasters. For example, in Germany, the LÜKEX Strategic Crisis Management Exercises conducted every two years by the federal government are designed to address complex crises and their potential disruptive consequences across sectors through cascading effects. LÜKEX involves a large partnership between the public and the private sectors to build a culture of crisis management and trust across multistakeholder partnerships.3

Notes 1 “Resilience” is defined as “the ability of a system, community or society exposed to hazards to resist, absorb, accommodate to and recover from the effects of a

Part 3 Part hazard in a timely and efficient manner, including through the preservation and restoration of its essential basic structures and functions.” UN Office for Disaster Risk Reduction (UNISDR) 2009; see http://www.unisdr.org/ we/inform/terminology.

Further information about the GAC on Risk and Resilience can be found at http://www.weforum.org/content/global-agenda-council-risk-resilience-2014-2016-0

2 Chile’s extraordinary comeback has been recently analysed in detail to provide leaders from around the world with concrete lessons they can apply when they face their own national crisis. See Useem, Kunreuther, and Michel-Kerjan 2015.

3 OECD 2015 http://dx.doi.org/10.1787/9789264249127-en Part 4 Part types of jobs new technologies will advancing technology could diminish Conclusions create and what they may be, it is likely returns to labour and lead to wealth that more existing categories of jobs accumulating in fewer hands. Every year The Global Risks Report will be computerized. The US Bureau Excessive inequality lowers aggregate seeks to remind readers of the varied of Labor Statistics estimates that, by demand and threatens social stability, interconnections between seemingly 2022, 47% of US workers will have a and can increase risks such as diverse global risks. As well as the high probability of their jobs becoming involuntary migration or terrorism interconnections explored in the automated.33 Examples include robots caused by violent extremism. Rising three risk clusters above, each nexus taking over manual tasks in online inequality is also correlated to upticks of risks can also be linked back to retail stock keeping, healthcare and in security problems, such as violent the new status quo of heightened diagnostics, and checking in hotel deaths or robbery.35 geopolitical and global security guests, while knowledge workers in concerns: environmental stresses non-routine cognitive tasks could be There is a role for public, private and could increasingly see tensions among displaced by advances in intelligent civil society organizations in building countries over access to water and algorithms. The entire employment resilience to the risks explored in this land; mass forced migration can system may have to be re-thought part of the Report. In Box 1.5, the World be both a symptom and a cause of to facilitate transitions between Economic Forum’s Global Agenda cross-border tensions; and emerging different types of jobs. Skills in STEM Council (GAC) on Risk and Resilience technologies are set to transform (science, technology, engineering and shares the results of research on what the international security landscape, mathematics) are expected to increase makes organizations resilient. alongside many others. The next part in importance in the medium term, with of this Report turns the focus to how longer-term needs projected to focus the global security landscape has and on skills such as creativity, problem- may continue to evolve. solving and social intelligence.34

Fourth: widening wealth, income and social inequalities. Access to technology is likely to exacerbate income differences within and across countries, with those who adapt gaining and those who do not losing income. Four billion of the planet’s 7 billion people still do not have access to the internet and may not be able to gain from technology-driven growth. Currently the distribution of income is largely determined by employment:

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Endnotes 26 IMF 2015a 27 IMF 2015a. 1 “COP21” refers to the 21st session of the Conference of the Parties, also known as 28 World Economic Forum 2015. the 2015 Paris Climate Conference. 29 Brynjolfsson and McAfee 2011. 2 The risk of interstate conflict has decreased somewhat this year, but remains in the 30 Schwab 2016. upper right quadrant of the landscape for a second year in a row. In 2014, the two risks were assessed as significantly less important. 31 Manyika et al. 2013. At the same time, the application of some of these technologies 2 Part (nanosats, autonomous drones, cloud and Internet of Things) coupled with machine 3 Water crises is classified as a societal risk, but it is related to both the environment learning and artificial intelligence along with fast-improving technologies will create and society at large. a step-change improvement in the dynamic decision support capabilities urgently 4 UNESCO 2015. needed by governments, businesses and communities in dealing with the complexities 5 See for example, the United Nations Environment Programme report on ocean and risks associated with the climate-water-energy-food-land nexus at appropriate acidification (UNEP 2010). spatial and temporal dimensions, particularly in emerging economies and the broader developing world. 6 http://www.nature.org/newsfeatures/pressreleases/study-over-2-billion-people- 32 affected-global-water-shortages.xml Bundesministerium für Wirtschaft und Energie 2015. 33 7 http://www.worldwatercouncil.org/fileadmin/wwc/Library/WWVision/Chapter2.pdf Frey and Osborne 2013. Carl Benedikt Frey and Michael Osborne of the Oxford (“The Use of Water Today”, World Water Council – Chapter 2) Martin School, University of Oxford, have estimated that 47% of US jobs are potentially

automatable over the next decade or two. 3 Part 8 Key facts from the Joint Monitoring Programme of the WHO/UNICEF 2015 report 34 are available at http://www.wssinfo.org/fileadmin/user_upload/resources/JMP-2015- Frey and Osborne 2013. update-key-facts-English.pdf 35 Aitken and Elgar 2011. 9 OECD 2015b. 10 US number: US National Renewable Energy Lab, part of US DoE http://www.nrel.gov/analysis/ workshops/water_nexus_workshop.html “39% of all freshwater withdrawals made in the United States is dedicated to the production of electricity through fossil fuels and nuclear power.” Also “http://www.ncsl.org/research/environment- and-natural-resources/overview%20ofthewaterenergynexusintheus.aspx” http://www.ncsl.org/research/environment-and-natural-resources/overview Part 4 Part ofthewaterenergynexusintheus.aspx “41% of freshwater drawn in the United States is for thermoelectric generation.” These figures are necessarily estimates and may rely on different assumption based on region and /or methodology. EU number: European Waters: Current Status and Future Challenges – a Synthesis, European Environment Agency 2012 Asia number: Research undertaken by Columbia University Water Centre for the World Economic Forum Water Initiative Report 11 2030 Water Resources Group. 2009. 12 The UN World Water Development Report (UNESCO 2015) suggests that by 2050, agriculture will need to produce 60% more food globally, and 100% more in developing countries. 13 UNEP 2002. 14 Many of the world’s cities are on the coast or on the banks of major rivers. The World Bank and the OECD forecast that average global flood losses in coastal cities will multiply from US$6 billion per year in 2005 to US$52 billion a year by 2050 with just the socio-economic costs of floods, such as impact on population and property value, taken into account. Add in the risks from sea-level rise and sinking land, and global flood damage for large coastal cities could cost US$1 trillion a year if cities do not take steps to adapt. 15 In 2010, Amazonia experienced a record-breaking dry year as it did in 2005 (two 1 in 100 year events). In 2009 and 2012, Amazonia experienced the other extreme with heavy flooding (two 1 in 500 year events). See Nobre and Castilla-Rubio 2012 and Borma, Nobre, and Cardoso 2013. 16 In the context of the discussion on migration and refugees, it is crucial to differentiate between voluntary and involuntary migration and also the drivers of migration flows. In the following section we refer only to involuntary migration as defined by the Global Risks Report (see Appendix A: Description of Global Risks and Trends 2015). 17 UNHCR 2015b. This estimate comprises internally displaced people, refugees and asylum seekers. However, the share of refugees in the total population is higher in 1940, as the population amounted to about 2 billion vs. 7.3 billion today. 18 UNHCR 2015b. 19 Loescher and Milner 2011. 20 UNHCR 2015b. 21 IMF 2015a. 22 Betts et al. 2014. 23 IMF 2015a. 24 IMF 2015c. 25 Dealogic.

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References 1 May 2015. http://www.bloomberg.com/news/articles/2015-05-01/chinese- consumers-cling-to-saving-suppressing-spending

2030 Water Resources Group. 2009. Charting our Water Future: Economic Schwab, K. 2016. The Impact of the Fourth Industrial Revolution: What Everybody Frameworks to Inform Decision-Making. 2030 World Water Group. Available at Should Know. Geneva: World Economic Forum. http://www.mckinsey.com/client_service/sustainability/latest_thinking/charting_our_ UNEP (United Nations Environment Programme). 2002. The World’s International water_future Freshwater Agreements. Nairobi: UNEP. http://www.unep.org/dewa/Portals/67/pdf/

Part 2 Part Betts, A., L. Bloom, J. Kaplan, and N. Omata. 2014. Refugee Economies: Rethinking Ocean_Acidification.pdf Popular Assumptions. Oxford, UK: Humanitarian Innovation Project, University of 2010. UNEP Emerging Issues: Environmental Consequences of Ocean Oxford. Acidification: A Threat to Food Security. Nairobi: UNEP. Borma, L.S., C. A. Nobre, and M.F. Cardoso. 2013. “Response of the Amazon UNESCO (United Nations Educational, Scientific and Cultural Organization). 2015. Tropical Forests to Deforestation, Climate, and Extremes, and the Occurrence of The United Nations World Water Development Report: Water for a Sustainable Drought and Fire”. Climate Vulnerability: Understanding and Addressing Threats World. Paris: UNESCO. to Essential Resources, Volume 2. Reference Module in Earth Systems and UNHCR (United Nations High Commissioner for Refugees). 2015a. Figures at a Environmental Sciences. Elsevier Inc., Academic Press, 153–63. glance. http://www.unhcr.org.my/About_Us-@-Figures_At_A_Glance.aspx Brynjolfsson, E. and A. McAfee. 2011: Race Against the Machine: How the 2015b. Global Trends 2014: A World at War. Geneva: UNHCR. Digital Revolution Is Accelerating Innovation, Driving Productivity, and Irreversibly 2015c. South-east Asia Irregular Maritime Movements. http://www.unhcr. Transforming Employment and the Economy. Lexington MA: Digital Frontier Press. org/554c6a746.html

Part 3 Part Bundesministerium für Wirtschaft und Energie, 2015, Industrie 4.0 und Digitale UNISDR (UN Office for Disaster Risk Reduction). 2009. “Terminology”. http://www. Wirtschaft: Impulse für Wachstum, Beschäftigung und Innovation.[Industry 4.0 and unisdr.org/we/inform/terminology the Digital Economy: Impulses for Growth, Employment and Innovation.] Policy paper, Berlin. April. Useem, M., H. Kunreuther, and E. Michel-Kerjan. 2015. Leadership Dispatches: Chile’s Extraordinary Comeback from Disaster. Stanford, CA: Stanford University Del Carpio, X.V. and M. Wagner. 2015. “The impact of Syrian refugees on the Turkish Press labor market”. Policy Research Working Paper no. 7402. World Bank. Washington West, D.M. 2015. “What happens if robots take the jobs? The impact of emerging DC. August. technologies on employment and public policy”. Brookings Center for Technology EEA (European Environment Agency). 2012. European Waters: Current Status and Innovation. October. Future Challenges: Synthesis. Copenhagen: EEA. World Economic Forum. 2015. Elgar, F.J. and N. Aitken. 2011. “Income inequality, trust and homicide in 33 2007. Global Risks 2007: A Global Risk Network Report. Geneva: World countries”. The European Journal of Public Health 21 (2): 241. Economic Forum.

Part 4 Part Enghof, M., B. Hansen, A. Umar, B. Gildestad, M. Owen, and A. Obara. 2010. In 2008. Global Risks 2008: A Global Risk Network Report. Geneva: World Search of Protection and Livelihoods: Socio-Economic and Environmental Impacts Economic Forum. of Dadaab Refugee Camps on Host Communities. September. Nordic Consulting 2009. Global Risks 2009: A Global Risk Network Report. Geneva: World Group. http://www.ncg.no/novus/upload/file/2010-HostCommunities-Kenya3009. Economic Forum. pdf 2010. Global Risks 2010: A Global Risk Network Report. Geneva: World Frey, C. B. and M. A. Osborne. 2013. “The future of employment: How susceptible Economic Forum. are jobs to computerisation?” Oxford, UK: Oxford Martin School. http://www. 2011. Global Risks 2011: Sixth Edition: An Initiative of the Risk Response oxfordmartin.ox.ac.uk/publications/view/1314 Network. Geneva: World Economic Forum. Gibbons-Neff, T. 2015. “Checkpoint: As Russia scopes undersea cables, a shadow 2012. Global Risks 2012: Seventh Edition. Geneva: World Economic Forum. of the United States’ Cold War past”. The Washington Post, 26 October 2015. 2013. Global Risks 2013: Eighth Edition. Geneva: World Economic Forum. https://www.washingtonpost.com/news/checkpoint/wp/2015/10/26/as-russia- 2014. Global Risks 2014: Ninth Edition. Geneva: World Economic Forum. scopes-undersea-cables-a-shadow-of-the-united-states-cold-war-past/ 2015a. The Global Competitiveness Report 2015–2016. Geneva: World IMF (International Monetary Fund). 2015a: Global Financial Stability Report. Economic Forum. Washington, DC: IMF. 2015b. Global Risks 2015: 10th Edition. Geneva: World Economic Forum. 2015b. IMF Country Report No.15/115: Jordan. Washington, DC: IMF. http:// www.imf.org/external/pubs/ft/scr/2015/cr15115.pdf 2015c. «Rise in emerging market corporate debt driven by global factors“. IMF Survey Magazine: Policy, 29 September. http://www.imf.org/external/pubs/ft/ survey/so/2015/POL092915B.htm 2015d. World Economic Outlook, October 2015. Washington, DC: IMF. Kuner, C. 2011. Regulation of transborder data flows under data protection and privace law: Past, present and future“. OECD Digital Economy Papers No. 187, OECD Publishing. Loescher, G. and J. Milner. 2011. “Responding to protracted refugee situations: Lessons from a decade of discussion”. Forced Migration Policy Briefing 6, Refugee Studies Centre, January. http://www.refworld.org/docid/4da83a682.html Manyika, J., M. Chui, J. Bughin, R., Dobbs, P. BIsson, and A. Marrs. 2013. Disruptive Technologies: Advances that Will Transform Life, Business, and the Global Economy. McKinsey Global Institute, McKinsey & Company. Nobre, C. and J.C. Castilla-Rubio. 2012. “Why we should fear the Amazonia tipping point”. Agenda, Climate Change Initiatives Blogpost, 29 November 2012. https:// agenda.weforum.org/2012/11/why-we-should-fear-the-amazonian-tipping-point/ OECD (Organisation for Economic Co-operation and Development). 2012. Environmental Outlook to 2050. OECD (Organisation for Economic Co-operation and Development). 2013. OECD Guidelines on the Protection of Privacy and Transborder Flows of Personal Data. http://www.oecd.org/sti/ieconomy/ oecdguidelinesontheprotectionofprivacyandtransborderflowsofpersonaldata.htm 2015a. The Changing Face of Strategic Crisis Management. Paris: OECD Publishing. http://dx.doi.org/10.1787/9789264249127-en 2015b. Governança dos Recursos Hídricos no Brasil. Paris: OECD Publishing. http://dx.doi.org/10.1787/9789264238169-pt Roberts, D. 2015. “The Chinese can’t kick their savings habit”. BloombergBusiness,

22 The Global Risks Report 2016 Part 1 Part Part 2 Part Part 3 Part Part 4 Part

The Global Risks Report 2016 23 Part 1 Part

The international security landscape is in flux, challenging the assumption Part 2: of continued social, political and economic progress that characterized the first 25 years after the end of

Part 2 Part the Cold War. Transformative shifts The Security in political and economic power – accelerated by technological innovation, social fragmentation Outlook 2030 and demographic shifts – will have profound ramifications for the international security order (see Box 2.1 for the Forum’s definition). Part 3 Part Box 2.1: International Security Defined

“International security” refers to the measures taken by state or non-state actors, individually or collectively, to ensure their survival and integrity against transboundary threats. Part 4 Part

The Security Outlook 2030 initiative was launched by the World Economic Forum in November 2014 (see Box 2.2). This initiative harnessed foresight methodology to identify the drivers of future security landscapes and their implications. Ten multistakeholder workshops were held in six different regions of the world, and interviews were conducted with security experts and practioners. The process resulted in the definition of seven drivers and three scenarios featured in this Report.

The Security Landscape in Context

The landscape is characterized by two main phenomena: first is the vacuum created by frail or weakening states, which open up space for the rise of armed non-state actors in the global security space and create difficult spillover crises.1 The rise of well- organized, armed non-state actors demonstrates a departure from the traditional Westphalian notion of the role of the state. This occurs in two

Part 2 was contributed by Espen Barth Eide, Anja Kaspersen and Isabel de Sola from the World Economic Forum.

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Box 2.2: A Deep-Dive into International Security

Geopolitical uncertainty shows no sign of letting up, with new crises cropping up and protracted conflicts spilling over

throughout 2015. It should come as no surprise, therefore, that geopolitical and international security risks are top of mind for 2 Part executives, leaders and the wider World Economic Forum ecosystem. For three years in a row, The Global Risks Report has registered the growing concerns of leaders over international security: in 2014 and 2015, geopolitical risks shot to the top of the most likely and impactful risks. More than ever before, understanding geopolitics and international security is central to mitigating and building resilience to global risks.

The Forum therefore initiated a year-long, in-depth study to examine current trends and possible driving forces for the future of international security. Its purpose was to take a fresh look at how we assess international security risks and ensure greater preparedness. In parallel with the Global Risks Report project, the Forum convened over 250 constituents who could provide unique insights on international security–related matters from different angles. The project harnessed foresight methodology to identify the drivers of future security landscapes and their implications. 3 Part

As summarized in Box 2.4, the seven driving forces that emerged from this consultation map closely onto the risks and trends identified as key by the 2015 Global Risks Perception Survey and discussed in Part 1 of this Report. Based on the findings of the special consultations on international security, this part of The Global Risks Report surveys the current international security landscape and points out two phenomena – failing states and strategic competition – that are transforming geopolitical and international security affairs. It also puts forward three scenarios for the international security landscape to 2030.

By drawing out the drivers and risks, the Forum aims to inform discussions among a broad range of stakeholders on the

international security challenges of the future. This dialogue should ultimately be able to bring an agenda to the institutions 4 Part empowered to take measures to defuse existing and emerging conflicts, and help to identify shared interests, build confidence and drive policy on a global scale.

ways: they position themselves as an of the 1990s and the 2000s were by war and related distress, and the alternative to traditional state-based perceived to be “asymmetrical”, with numbers keep growing.4 Deaths from governance structures, as a “non-state technologically inferior but innovative terrorism are also on the rise; in 2014 state”, and they challenge the state adversaries challenging government alone more than 32,000 people were monopoly of violence.2 security forces. killed in terrorist attacks in 93 countries.5 The indirect costs of both Second is the return of strategic Although this phenomenon persists, trends, not only the human cost, are competition between strong states we are now witnessing the rise of significant. with conflicting interests. The two hybrid conflicts – situations where phenomena may seem contradictory both classical and asymmetric threats In some parts of the world, states but are in fact related: when instability coexist and reinforce each other. States themselves direct violence against leads to the breakdown of existing and armed non-state actors learn from citizens, or support terrorist activities orders, openings are created that each other. Innovative combinations abroad, in order to attain and promote regional or global powers may seek of conventional low-tech and novel their own security objectives. In these to exploit to improve their positions. high-tech tactics create unpredictable cases the state becomes the driver of Likewise, competition between states dynamics. The modern “battlefield” insecurity, rather than the guarantor of may impede effective responses by blurs the distinction between zones of peace and stability, leading to a further global institutions to crises or problems, war and zones of peace, as well as that erosion of trust and confidence of which then fester and worsen. Indeed, between legitimate combatants, non- citizens, violations of human rights, and the confluence of weak states and traditional adversaries and civilians. It increased pressure on neighbouring competitive strong states has created is hard to measure the impact of war, states who may be forced to absorb security threats outside the mandates but conservative estimates suggest refugees or – either explicitly or and capabilities of most international that, in 2014, around 180,000 people inadvertently – find themselves security arrangements and institutions. were killed in 42 armed conflicts around harbouring insurgent groups. The fragmentation of states was the world3. Indirect deaths and costs the principal security concern in the caused by war-related malnutrition, The competition for influence between period after the end of the Cold War. displacements, trauma, disease and great powers of today resembles the In contrast to the tense but stable preventable illnesses raise the toll Cold War period, but with important superpower standoff that ended with even higher. Today more than 6 million differences.6 Today’s world is more the fall of the Berlin Wall, the conflicts people have been forcibly displaced multilayered than multipolar: states are

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A Tour of the Current International gains made by US-led coalition forces Frail States Security Landscape over the past decade have been lost to resurgent Taliban and al-Qaeda The phenomena shaping the fighters. international security landscape are

Part 2 Part well illustrated by the challenge of The spillovers from weakening states Daesh, or the self-proclaimed Islamic are affecting other regions. Violent and State in Syria (ISIS). Although the extremist groups are also at work in territory it controls lies in Syria and parts of the Sahel, northern Nigeria, the Iraq, Daesh has recruited fighters Horn of Africa, the African Great Lakes from over 100 countries – partly area and the Central African Republic. through advanced marketing using At the time of writing, other countries popular social media platforms.7 In its too are facing political tensions leading recruitment strategy, Daesh exploits to violence. Burundi faces worrisome the resentment and disillusionment political tensions, which raises the risk Part 3 Part of young people, offering jihadism as of further severe civil unrest and inter- an exciting anti-establishment cause. ethnic violence. Elsewhere in Africa, It also has local roots – including, it is economic growth continues despite assumed, some forces of Saddam serious security and social problems. Hussein’s regime demobilized after Properly managing the demographic the 2003 invasion of Iraq as well as youth bulge in Africa will be critical for under pressure not just from outside, individual wealthy regional sponsors. security outcomes, implying major challenged by their own citizens, as investments in skills building and job discussed in Part 3 of this Report. Many countries are engaged in the creation. Leaders may consequently delay

Part 4 Part fight against Daesh: recent terrorist dealing with risks emerging from attacks from Ankara to Beirut, Tunis Latin America likewise faces the reconfiguration of international and Paris, with copycat attacks in other governance challenges, with organized relations, and ideology is no longer a far corners, illustrate how the battlefield criminal gangs gaining influence over primary driving force. Strong, weak- has become globalized. There are no many aspects of society in various willed states are challenged by smaller, simple ways to defeat Daesh. It will not countries, as a steady stream of drugs strong-willed players, shifting the be defeated as long as civil war rages continue to flow from the region into traditional notions of balance of power. in Syria – and civil war will continue to the United States, Europe and Africa. rage in Syria for as long as the powers Latin America is at a crossroads.10 The current geopolitical and that could end it disagree about The combination of slower growth international security context, as what the endgame should be. Daesh prospects, increasing social unrest demonstrated in this Report, makes is banking on the inability of major and political instability combined with clear that chronic and resurgent regional and global powers to set aside high levels of violent crime pose serious violence, conflicts, and economic and their differences and pragmatically security challenges for the region. social volatility will remain prominent find a political settlement that all Several processes are underway in features of the current and future would prefer to the status quo. So far, order to foster a region-wide security reality. The rising flows of people on the despite laudable recent attempts to dialogue and establish cooperation move as a result of greater insecurities build a common front, this calculation mechanisms to address growing represent only one of the symptoms of 11 of diplomatic inefficacy seems well- criminality, violence and insecurity. a deep-rooted and protracted systemic founded. governance crisis, underlining the Strategic competition between states need for a transformative shift in how Military solutions, however, can go is raising the stakes. In the South and international affairs are managed. only so far.8 Aerial bombardment East China Seas, territorial disputes are without a coherent strategy for long- far from resolved. Growing economic With each passing year, it also term stability may merely extend the interdependence in a region lacking becomes clearer that many actors commensurate security architectures are no longer aligned to a status vacuum in which terrorist groups can thrive. Daesh also needs to be increases anxieties about the region’s quo defined by a selective United ability to peacefully manage a potential Nations (UN) Security Council. The suffocated socially and economically. misstep or overreach by one of the assumption that shared values are And to prevent it – or something like players. The key question here is how a necessary basis for regional or it – appearing again in another guise, the region – and the wider world – multilateral arrangements may give way its appeal to significant numbers of relates to China’s rise, and indeed how to alliances and arrangements defined young men and women all over the China itself adapts its own policies by shared interests. With dwindling world needs to be understood and 9 as it emerges into one of the primary institutions of global governance, there undermined. centres of political and economic is a growing role for public-private might. A major transformation is collaboration to tackle global security In the meantime, the situation in underway in China’s armed forces, challenges (see Box 2.3). Afghanistan and its neighbourhood is regressing as security and territorial emphasizing expeditionary, air,

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risks causing discord between the United States and the rest of the world, Box 2.3: Public-Private Collaboration in Complex Crises its allies included.

We have entered a new era, and it is not a peaceful one. Emerging conflicts and As an energy power, and possessing

long-term violence are seriously impacting people, social fabrics and political the world’s second largest arsenal 2 Part systems. There has been a rise in de-structured conflicts and violence – often of nuclear weapons, Russia will fought in densely populated urban areas – and international humanitarian law is continue to play an assertive role repeatedly and systematically violated. in the geopolitical order. Following the annexation of Crimea, there is The lines between conflict and non-conflict zones are increasingly blurred, with no clear political solution in sight to pockets of vulnerability coexisting with pockets of progress. The lines are also the continuing tensions in eastern blurred between criminal, inter-communal and politically motivated violence. More Ukraine. EU-US sanctions combined refugees and internally displaced persons are forced to flee for longer periods of with the low price of oil have hurt time. Conflicts, mismanaged migration, poor governance and corruption are Russia’s economy, but have so far eroding gains from economic growth and development, affecting both low- and not achieved the desired policy shift. 3 Part middle-income countries. Other great powers’ desire to contain Russia collides with the desire for New models of public-private collaboration need to be promoted to support, cooperation against the threat of finance and deliver immediate assistance and alleviate long-term needs, with Daesh. Russia’s future hangs in the business collaborating closely with frontline responders on responsible investment balance between modernization and to strengthen state and societal resilience. reliance on raw materials exports, with the current leadership increasingly looking East for politico-economic ties. Western countries, having reduced maritime and space technologies over frailty of intergovernmental structures. their investments in defence and being 4 Part its traditional emphasis on the Army Insularity, xenophobia and right-wing preoccupied with internal concerns, and the defence of the home turf. populism are gaining ground across may find that they lack the resources The further development of a security the continent, calling into question the and will to implement their long-term mitigation apparatus that has its core integration process and a common strategic objectives.12 in the Association of South-East Asian European front on international security Nations (ASEAN), but which has an policies. If Europe proves unable to Trust is waning in the capacity of even broader reach through its regional find common solutions to today’s existing multilateral mechanisms cooperative framework, is of particular pressing challenges, we might see to resolve potential flashpoints. In importance. For instance, the evolving a de-integration process unravelling their current form, global institutions ASEAN Code of Conduct for maritime achievements such as the Schengen such as the UN retain their relevance disputes, while not attempting to solve passport-free zone, the common as meeting places, but they do the underlying competing claims, is an currency, or even the Single Market. not necessarily have the capacity attempt to avoid escalation into conflict. While still unlikely to happen, such a and credibility to effectively uphold process could hardly be expected to peace and security. The UN was As illustrated by its new security be harmonious and peaceful. designed for a very different world. legislation and the long-standing The UN-centric intergovernmental debate about revising Article 9 of its Meanwhile, the role of the United “contract” needs a significant overhaul constitution, thus allowing for a larger States in international security remains if it is to successfully mitigate the military role abroad, Japan’s security a source of uncertainty and contention. challenges and threats currently facing posture is evolving, potentially allowing Many question whether or not the international security. for a more assertive Japan in regional United States has the will and the and international security frameworks. means to remain the world´s dominant The Geo-Economics of International India, while currently occupied with superpower, and whether or not it can Security pressing domestic issues of internal uphold a Western, liberal agenda for conflict and social inequality, is also a the entire international system. Recent International economic relations, key actor to watch as the Asian security attempts to design an American foreign international security and geopolitics landscape adapts to a post-Western policy based on alliances, norms and are closely related. When relations world. international cooperation rather than between states are harmonious, trade unilateralism cannot be secured by and investment patterns are typically Europe has remained united over the United States alone but require driven by economic considerations. the Ukraine crisis, despite initially that other key actors also engage in However, in times of tense relations struggling to deploy sanctions upholding international order. The role between states, politics may trump against Russia because of its strong played by the US Congress in how economics – for instance, through links in energy and finance. An ever the United States is perceived on the the introduction of sanctions against bigger challenge is presented by world stage and the growing domestic adversaries or preferable treatment for the refugee crisis, a clear testament polarization weakens the predictability political allies. to the loss of state control and the of the country as a global actor – which

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After decades of rapid globalization, the Driving Forces and of people or sophisticated equipment, current geopolitical landscape shows such as nuclear weapons, effectively some signs of returning to politics Amplifiers available only to states. With the Fourth dominating economics. The economic Industrial Revolution,18 large-scale growth spurred by globalization has The Forum’s year-long consultations damage is possible for small groups on international security identified

Part 2 Part shifted the balance of economic power, and even individuals working from leading to renewed great power rivalry seven key driving forces of change in home computers or labs. Existing tools and global insecurities. New alliances the international security landscape to prevent the escalation of disputes – are playing out in trade agreements, (see Box 2.4). They are highly treaties, conventions, or doctrines such strategic infrastructure projects, new interconnected, each interacting with as “mutually assured destruction” – are investment banks, and arrangements and affecting the others. From the of questionable use when destructive governing the internet and cross- seven, two stand out as warranting capacity is no longer limited to a border data flows and storage – more detailed discussion: technological handful of entities with broadly similar increasingly a source of tension, as innovation and natural resources and resources, tactics and interests in seen with the annulment of the Safe climate management. They are not preventing escalation. Part 3 Part Harbour Act agreement.13 only drivers in their own right, but also significant amplifiers of the others. The internet has opened a new frontier Economic policies are increasingly in warfare: everything is networked and “weaponized”, and not only through Technological Innovation and anything networked can be sanctions. Tools that were taken for International Security hacked.19 The “dark net” has become a granted in the era of globalization trading place fuelling insecurity. Every – such as access to raw materials From longbows to gunpowder, nuclear future conflict will have a cyber element, and technology underlying financial weapons, airplanes and drones, the and some may be fought entirely history of international security is also transactions – may become politically 16 in cyberspace. Given that attack is restricted, posing new risks for the history of technological innovation, easier than defence in cyberspace, Part 4 Part industries that rely on free and open and the history of humanity is defined this will dramatically change how the by war, and war by the people markets for access to technology, 17 entire security apparatus prepares for materials and customers. Businesses who fight it and how they fight it. potential breaches. Physical distance may find more and more obstructions The Fourth Industrial Revolution no longer offers protection; many as a result of anxieties around trade, will profoundly affect our security, technologies are dual-use; much technology transfer and intellectual physically and virtually. Previous critical infrastructure is privately owned; property, calling into question the industrial revolutions have advanced and attacks are easy to disguise given reliability of global supply chains, human development but they also the challenges of attribution. Social industrial partnerships and cross- precipitated violent transfers of power. media is already a significant tool in holdings.14 Technological innovation will continue hybrid warfare,20 offering a new means to influence how conflicts arise, who for all sides to a conflict to conduct Civil wars and terrorism can disturb fights them, where they are fought and cy-ops and psy-ops,21 including scare the flow of goods and services, with how they are settled. tactics, recruitment and fundraising.22 the interconnectedness of the global economy magnifying the impact. Some ways in which new technologies The seabed and space are both also Ninety percent of traded goods travel will impact international security in likely to become increasingly militarized, by sea, often through stretches of water the coming 15 years can already be as more and more actors – state in Asia and Africa that are increasingly anticipated: for example, improved and commercial – have gained the part of territorial disputes or targets capacity to 3D-print weapons from ability to send up satellites or mobilize of piracy: the Suez Canal, the Strait of digital templates and new possibilities unmanned underwater vehicles Malacca, the Gulf of Guinea and the for biological and chemical weapons. capable of disrupting fibre-optic Strait of Hormuz – thoroughfares for However, technologies are fusing cables and satellite traffic. Off-the-shelf trade, energy transport and supplies – in increasingly unpredictable ways, quadcopter drones are already being are all surrounded by violent and potential nefarious uses are used by gangs to spy on and attack conflicts.15 Air transport costs are not always immediately apparent. rivals. Autonomous weapons, capable increasing because of heightened Even if they were, innovation quickly of identifying targets and deciding to travel security procedures and the outpaces the capacity for regulatory open fire without human intervention, need to avoid overflying conflict oversight. Breakthroughs in a range will become increasingly feasible, areas. As discussed in Part 3 of this of technologies – from robotics to challenging the laws of war. Report, epidemics can also threaten nanotechnology, artificial intelligence, international security, with the recent genome sequencing, human Ebola crisis a reminder of potential advancements or meta materials – vulnerabilities. could destabilize security and shift balances of power.

Until recently, the ability to inflict large- scale damage required either armies

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Box 2.4: The Seven Driving Forces of International Security

Technological innovation: Emerging technologies create challenges, but also opportunities to solve them. Part 2 Part Resources, climate management and security: Tensions are raised by growing competition over access to resources including energy, water and food.

Efficient governance: Corruption and lack of transparency or rule of law limits the progress of development and destabilizes societies.

Geo-strategic competition: Shifts in economic and political power and weakened mutual trust lead great powers to compete for influence, often creating competing spheres of influence.

Demographic shifts: Countries may struggle with bulges of youth or elderly populations, or with rapid influxes of migrants. 3 Part

Social cohesion and trust: Fuelled by inequality, feelings of social exclusion, mistrust and marginalization threaten social stability.

Hybrid and asymmetric threats: More complex threats, indistinct adversaries and “black swans” are arising from a more interconnected world. Part 4 Part

Technological innovation

Resources, Hybrid and climate asymmetric management threats and security

Social cohesion Efficient and trust governance

Demographic Geo-strategic shifts competition

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Natural Resources, Climate Change with poverty, fragility and ineffective additional grievance on which to build and International Security governance. their narratives, finding new recruits among those made destitute. Climate change is expected to amplify The likely impact of climate change existing security problems and create on food security, explored in depth in Stresses on water and food could

Part 2 Part new ones. As explored in Part 1, the Part 3, is another channel of impact on contribute to rising tensions among world will increasingly feel its effects: the international security landscape. states. Trade may be interrupted by extreme weather events including As wells dry up, crops and fisheries the hoarding of commodities, local prolonged high temperatures and fail, and people lose their livelihoods, populations can object to foreign droughts, freak storms and floods, and simmering tensions between social control of arable land, and arguments rising sea levels threatening coastal groups are more likely to boil over into may erupt over rights to draw water cities and island countries are expected community violence. Armed non-state from rivers and aquifers that cross to occur more frequently and at greater actors, including insurgencies and borders. scale, touching many countries, terrorist groups, will be able to leverage especially those already grappling this new source of insecurity as an Part 3 Part

Box 2.5: Scenarios Methodology

What are the most pressing issues leaders should address? What trends are driving transformations? To be as prepared as possible for the future, leaders need to think broadly and consider the worst that could happen.

Strategic foresight enables assessments of what the future context might look like through carefully researched and validated

Part 4 Part scenarios. Scenarios extrapolate existing trends to provide insights that can inform more robust decision-making. The three scenarios presented here (Figure 2.5.1) describe how the seven driving forces of international security could interact and how prominent actors might respond. The collaborative process of developing and using scenarios can generate the relationships necessary to drive change.

During a year-long initiative, launched at the Annual Meeting in 2015,1 over 250 members of the World Economic Forum’s network participated in consultations to build the scenarios. To ensure a broad perspective, our team conducted 10 workshops in six regions, with participants from government, the security sector, academia, civil society, youth, and the business sector, which together comprised 41% of the total number of participants (see Figure in the Acknowledgements section). A full list of contributors is included in the Acknowledgements.

Note 1 Eide and Kaspersen 2015c.

Figure 2.5.1: Illustrations of the Scenarios

Walled cities Strong regions War and peace

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Interstate tensions are also likely to be even clean air become increasingly against strained security forces. stoked by an increase in migration into commoditized and traded between Overwhelmed by internal threats, countries less affected by the changing those who can afford them. With states double down on internal climate. Environmental stresses will economic and political elites feeling security issues and disengage from accelerate migration across borders ever more identical and distant from multilateral collaboration, reducing the

and also to cities, putting additional citizens, states lose their ability to effectiveness of global institutions and 2 Part stress on urban infrastructure in many bring people together around a shared mechanisms. countries. Cities will need to find new narrative or identity. Trust is eroded, as tools and policies to manage security is the social contract between citizens In some areas, lines between states risks. and government. and violent non-state actors blur. Terrorist or criminal groups, often in The vitality of many states is challenged opaque alliances, seize control of more Security Outlook 2030: by demographic trends. In some territories and run them like states, regions, large youth populations come threatening nations and even regions Three Alternative of age with few opportunities for stable, with collapse. The corridor between Scenarios well-paid employment. In other regions, South America and Mexico, Iraq and 3 Part the demographic bulge is of the elderly, the Levant, and swathes of West and The potential for rapid and radical creating ever greater needs for finance Central Africa are among the areas now change, even though the form it for pensions and healthcare; this puts under pressure from combinations of takes is unknown, raises fundamental pressure on declining working-age civil wars, humanitarian crises, violent questions about planning and populations and limits the resources extremist activity, crime and gangs. preparedness. In this section, three available for states to address security scenarios describe potential evolutions issues. More and more frequently, legitimate of the international security landscape non-state actors and organizations fill

to 2030 (see Box 2.5 for a description Social cohesion is further weakened some of the spaces left by weakened 4 Part of the methodology used). These are by mass migration, as youth seek national governments, often with not intended to be predictions, but economic opportunities and social support. Companies and private plausible trajectories that can usefully humanitarian or environmental charities fill the void and manage what challenge current thinking and serve as catastrophes displace people. In the were once public services. With their a call to action for the development of absence of narratives that foster a operations located near desperate more adaptable and resilient response shared identity and common cause, communities, many companies are systems. mismanaged migration flows and poor drawn into addressing the social integration of migrant communities consequences of insecurity and Future 1: Walled Cities create tensions. Anxiety over migration violence. Eroding state power also fuels the rise of extremist, xenophobic increases city power, with cities coming As greater penetration of information and ethno-nationalist political to be regarded as the most practical, and communications technology parties that advocate for a return of functional unit of governance.24 broadens the horizons of citizens in authoritarian government and national many countries, raising expectations identities based on culture, ethnicity or The world divides into islands of in areas such as health, education, religion, effectively exploiting narratives order in a sea of disorder. As large infrastructure and quality of of “us” vs. “them”. numbers of people are displaced governance. At the same time, fiscal by environmental change and challenges are reducing governments’ As younger populations spend more social violence, still-functioning ability to meet citizens’ expectations of their lives online, they fill the need states seek to protect themselves, – and citizens become disillusioned for shared narratives and a sense of often deploying private military and by their exposure to public sector community with like-minded people, intelligence apparatus to minimize risks corruption, poor service delivery and sometimes in faraway geographies. of involvement in protracted conflict. ineffective institutions. Meanwhile, millions of children are In this scenario, by 2030 the world coming of age in refugee camps, resembles medieval times, when the This scenario foresees widening often under duress, and with no citizens of thriving cities built walls inequalities of wealth, income, natural sense of belonging. Rootless around them to protect themselves health, environment and opportunity and disillusioned, often traumatized from the lawless chaos outside. continuing to pull communities apart. by growing up amid civil wars or In wealthier nations, the middle classes community violence, more young Future 2: Strong Regions are hollowed out by declining wages people become anti-system and and dwindling public goods. Those vulnerable to recruitment by violent An alternative scenario envisages the who can afford it are increasingly groups or gangs. volatile and competitive interregnum retreating to gated communities and paving the way for the emergence of a turning to the private sector for what Insurgencies, terrorist groups, and stable world by 2030 with several seats were once public services, divorcing criminal organizations all exploit of power. their interests from the common the security deficit, leveraging new good.23 Fertile soil, fresh water and technologies to strengthen their hands

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In this future, as wealth accumulates public services through big data to allies or relevant players, rather than at in the South and East, more players win popular support.25 Climate change the global level. are able to make strategic economic is another example: as its effects investments in diplomacy, critical become clearer, states increasingly Inevitably, there are losses for the technologies and infrastructures. The shift attention from cumbersome global global economy: geopolitical interests

Part 2 Part balance of power adjusts, creating a efforts to more functional regional take predominance over economic new order of mostly regionally based ones. The goal of saving all humanity ones, with corresponding inefficiencies spheres of influence and interests from catastrophic climate change gives as globalization goes into reverse. that are generally accepted, as are way to states and regions working However, with the revolution in newly evolved norms of engagement together to adapt and protect “their manufacturing and automation making over political disputes and shared own” citizens. it possible to produce goods closer to resources. the consumer, there is less need for With bad memories of recent foreign global trade in goods and less need Far from their power being eroded, interventions and increasing domestic to outsource production to low-wage states in this world are strong – at polarization over foreign affairs, the countries. Companies must make Part 3 Part times authoritarian. Strong leaders rise United States refocuses its priorities costly and complex arrangements to to power on promises to refocus on and abandons its ambition to be the be able to operate across regions; in narrowly defined national interests, with centre of the global stage, allowing many cases, abandoning international minimum diversity and high solidarity others to fill the void on major political strategies, localizing or breaking up into for citizens. Narratives recalling issues. China’s “peaceful rising” no smaller regional entities, prove to be (imagined) past glories and comforting longer raises apprehensions among more effective strategies. homogeneity of ethnicity and creed other powers; its prominence in East become a strategy to compensate Asia becomes an accepted fact. for the uncertainty of the future. As ASEAN goes into a comfortable orbit Future 3: War and Peace in the 1930s, leaders persuade their around its giant neighbour, while Part 4 Part citizens to “escape from freedom”: Japan focuses on maintaining good The final scenario envisages the world these leaders strictly control borders, trade relations. The United States and drifting into a major conflict during the forcefully curb migration, invest more China mutually accept their economic next 15 years, which ultimately leads to in military and police, and persuade relevance and shared roles and a reworking of the global system. people to accept mass surveillance responsibilities in a new world order. as the only way to be protected from In this future, established powers deadly threats. Sweeping aside any last resistance, remain in denial about the major Russia consolidates its sphere of shifts of economic, demographic and Overwhelmed by mistrust among influence in Central Europe and political power that have taken place. states, governments invest their Eurasia. Europe – having rebuilt its Growing strategic competition between political, financial and diplomatic capital economic partnership with Russia states erodes their trust in each in bilateral and regional processes. and consolidated links with the United other, and therefore their capacity to Effective regional powers emerge, States – develops several levels of collaboratively resolve disagreements as do new alliances of convenience integration and remains functional as about the role of certain countries in where shared interests transcend a coherent regional trade bloc. Latin certain regions: for example, the United the regional perimeter. Global America and the Caribbean leverage States in the Asia-Pacific; Russia in governance mechanisms continue their abundant resources and strategic Central Asia; and China in South-East to lose credibility. New forms of location to consolidate into a regional Asia. cooperation initially run in parallel with bloc. The push for African integration the established global architecture, continues apace, with two sub- Meaningful progress slows on issues gradually taking over roles including regional integration blocs emerging such as climate change, with global development, trade, finance, security as twin poles of influence. Following solutions blocked by states that and the internet. Counterintuitively, this years of fruitless proxy conflicts in the calculate that taking action would proves to reduce competition between Middle East and North Africa, two be too problematic domestically, or states: with contentious issues taken carefully balanced security alliances of that they could gain from new lands off the global table, states are able functioning states restore some degree becoming suitable for crop production to rebuild enough trust to maintain of order to the region. or resource exploitation. There is no stability at the international level. longer consensus over the normative Fifteen years into the future, this foundations or rules of the international For example, in this world cyberspace balance of regions and alliances is system, which is not able to manage is neither open nor global. States only beginning to consolidate as a new the rising tensions. establish further controls over the global order. Former rivals and enemies internet, sometimes in collaboration are tempted to test the boundaries, With stagnant growth and the rise of with allies, building their own leading to strong pushbacks and isolationist movements in established capabilities in data storage, search, reconfirmations from regional powers powers, space opens up for emerging and infrastructure – and using security that the new order is here to stay. powers to test the status quo. threats and the promise of better Security issues are handled by regional Meanwhile, internal pressures grow

32 The Global Risks Report 2016 Part 1 Part

in many countries: to varying extents, of these norms are looked after by us back to the purpose of this Report: social turmoil erupts as emerging multistakeholder organizations, rather to cast new light on decisions that need technologies put many people out than intergovernmental organizations. to be taken today. The following set of of work and extreme weather events Civil society and business leaders recommendations is intended to aid in overwhelm the responsive capacity take on management roles in global envisaging possible futures and to help

of governments. In some countries, arrangements. Other areas previously change control the trajectory we are on 2 Part upheavals feed into virulent nationalism, of interest to global governance and improve the outcome. drawing on historical grievances institutions, from human rights and free against powerful neighbours. trade to international development and Overhauling the Social Contract control of the internet, are set aside Eventually, in this scenario, a major as non-essential to the basic aim of Above all, these three scenarios point conflict erupts between two leading preventing conflicts. The UN nominally to the need to overhaul the social powers. One state experiences retains a peacekeeping function in contract between citizen and state. a massive cyberattack on critical protracted conflicts, but is not able Re-establishing trust in governance, infrastructure, causing loss of life. It to regulate relations between leading improving the accountability of accuses another state of complicity, states. institutions and leaders, reducing 3 Part and launches a conventional attack in social and economic divergences and retaliation. Denying any involvement, The result is a stripped-down global delivering better services should be the second state considers it has been system in which the liberal ideals of top objectives for policy-makers. In attacked without cause. Outraged freedom, democracy, justice and these areas,26 technology is not only populations on both sides demand equality are no longer put forward as a potential disruptor but also a key further action; nervous leaders a paradigm to which all should aspire. enabler. seek to shore up their positions A new entente emerges on respect for and miscalculate the gravity of the differences of political and economic More effective governance alone may

consequences. approach, though this means not suffice, however, without also 4 Part accepting a degree of entrenched building greater social cohesion. The Other states are dragged into the global inequality and disintegration, fabric that binds citizens to the state escalating conflict and forced to and a parcelling up of the global and to each other is fraying. A critical choose sides. Armed non-state actors commons. Where they can, people and task for the state is to reinforce notions on both sides seek to leverage the companies move to places that suit of citizenship and narratives of inclusion conflict for their own ends, forcing the their objectives best. within national discourse, which can parties to the war not only to fight each pave the way for reconciling political other, but also to engage in hybrid Implications and and theological differences both conflicts against third parties. domestically and internationally. Outcomes Ultimately, the conflict stops short Rewiring Global Governance of all-out mutual destruction, but Though none of the three scenarios not before imposing high costs on presented here will occur exactly as All three scenarios reflect uncertainty both sides – human, economic, and described, the security landscape around the future role and ability of infrastructure. The “nuclear taboo” of the future may manifest multiple global governance institutions to – that states abstain from using the elements from one or more of the deliver on security. In an ideal world, ultimate weapons, even if they possess scenarios, probably simultaneously. a strong global body would have the them, still proves to hold true – but Indeed, it can be argued that we have tools and standing to mitigate conflicts belligerents did begin to prepare for already entered the period of “walled involving either terrorism or competition their application. There is no clear cities”, as the refugee crisis seems to between great powers, and to contain victor. In this scenario, the aftermath lead some nations to the reflex reaction and resolve peripheral conflicts. At of the conflict leads to a sense of of closing borders – both physical and present, however, the multilateral determination to prevent a repeat political – as described in Part 1. system appears overwhelmed by the interruption to business as usual. The number and complexity of issues, and commonly accepted argument is The three scenarios may come across international mechanisms are often that the lesson to be learned from the as somewhat dystopian, because they fragmented, co-opted or undermined failure of previous global mechanisms are extrapolations of existing, negative by the special interests of chosen to mediate conflicts is that those trends. The world does not need to member states. mechanisms were not only excessively arrive at these dystopias, however. Our ambitious but also largely ineffective. collective knowledge, connectedness, If states want to strengthen their ability technological advances and to take collective decisions on key States set about identifying the social innovations present endless international security matters, they few basic practicalities that truly opportunities to change the outcome need to improve the efficiency of the demand global cooperation: norms, and shape a more secure world, multilateral apparatus. Progress on for example, relating to the seas, given strong leadership and the meaningful reform of the United Nations air corridors, and finance. Because right decisions being taken at the and the Bretton Woods Institutions to of their economic relevance, many international level. This last point brings reflect current political and economic

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realities has been slow and unfocused. Promoting Private Sector public tenders may all be contributing Piecemeal reform of the system itself Engagement towards addressing the drivers of will not suffice: the choice is between geopolitical instability. Another way implementing comprehensive reform A strong argument could be made the private sector can contribute is to create the right mechanisms and for increasing the participation of the through company norms that forbid

Part 2 Part responses for future global cooperation private sector as a stakeholder in involvement with corrupt practices; this on security, and allowing the “death international security.27 The implications may, over time, spur better governance by a thousand cuts” of the global of security risks affect companies and reduce social resentment. governance system – an outcome that assessing where to invest and do would not favour international security. business as much as they affect Encouraging New Behaviour governments engaged in trade, Fostering Global Leadership diplomacy and maintaining the security Multistakeholder cooperation might of their citizens. Yet the potential of also be conducive to mitigating the Today’s world is in clear need of the private sector to contribute to security implications of technological strong leadership, new compromises, peace and security is not reflected in innovation. Ethical frameworks and Part 3 Part innovative ideas and a capacity for global security mechanisms or at the norms guiding technological innovation long-term thinking. This is not limited multilateral level. could be elaborated between those to government and international actually involved rather than relying only organizations but also applies to Businesses often see global security on regulators, which will struggle to civil society and the business sector. as a risk management and compliance keep up with the pace of change in the Because power is distributed among issue. Limited understanding of Fourth Industrial Revolution. Likewise, many sectors, multistakeholder one’s own global, regional and local common understandings about the cooperation is more important for impact might sometimes even lead to security dimension of an increasingly tomorrow’s security than ever before. inadvertently reproducing or confirming connected world could involve key negative patterns in society and private and public stakeholders from Part 4 Part The digital revolution, at times a governance. The traditional business both the emerging technology and source of disruption, can also be a response to geopolitical skirmishes international security spheres. tool for enhanced transparency – and has been to view them essentially as transparency, if genuine, offers the intractable externalities: companies Viewing climate change through potential to rebuild trust. seek to minimize downside risks an international security lens also while waiting for a crisis to blow suggests several policy options As suggested by the “strong regions” over. However, in a hyperconnected where multistakeholder action is scenario, beginning that process at a world, volatility in one place can have critical. These include the search regional level, with new architectures immediate repercussions on the other for new mechanisms to reflect that are parallel to the existing side of the globe. Avoiding investment externalities related to resource international system, could ultimately in known or potentially volatile places scarcity or environmental effects, while strengthen rather than undermine does not insulate companies from the simultaneously safeguarding social global stability. impacts of volatility. In today’s world, stability by guaranteeing affordable companies might be well advised access to the necessities for survival. Enhancing the Role of Cities to understand their own potential to Public-private partnerships established influence international developments. to identify technological solutions to Refocusing some security efforts at improve the efficiency and resilience the level of the city could be another Many companies are already of food production and water use is contribution. As urbanization gathers dealing with the root causes of another example. pace, cities will increasingly rival states insecurity, directly or indirectly. From as the most natural level of government inefficient governance to corruption, Conclusion: A Call for a for harnessing technology to deliver environmental degradation, social public services and security. Cities disparity and unrest in surrounding Resilience Imperative have also proven their advantages communities, many companies as sites of innovation, employment have policies in place to protect their If the “new status quo” implies such creation and higher productivity, interests while also addressing these a high presence of global geopolitical because they, at times, prove to be drivers of insecurity within their core risks and realignment around interests more focused on practical problem areas of operations. For example, a rather than values, then a wider range solving than on the “status and mining company seeking to minimize of stakeholders needs to be involved in prestige” issues that tend to obscure environmental impacts on local setting the direction of the new global interstate relations. Devolving resources communities, a telecommunications security paradigm and implementing from national to municipal levels and company training local workers in solutions. creating new ways for city leaders the skills they require and thereby to collaborate on security matters also empowering those workers, and A first step is for private sector leaders may also be faster than reforming an infrastructure company working to place international security firmly on established mechanisms for multilateral with local government to improve their radar screen. International security collaboration among states. quality and transparency around and geopolitical trends are likely to have

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more influence on the global economy Endnotes in the future, thus demanding greater strategic attention from business 1 “Non-state actors” is a term widely used to describe everything from non-for-profit leaders. With a stronger understanding or commercial providers, non-governmental organizations across all thematics, of the issues and their own evolving role community-based organizations and faith-based organizations. Their characteristics include sufficient power to shape and cause change, although they are not part in the geopolitical and global security of the established institutions of a state and are thus not accountable to the same 2 Part landscape, the private sector can be standards as a state. In the global security context, however, the term is often used a constructive partner in addressing to refer to violent, criminal, terrorist and militarized groups or individuals with no ties to a state or state-like structures but who, through the use of asymmetric strategies many global security challenges and of warfare, declare war on states and state actors. Non-state actors can also be mitigating their driving forces. a force of good in terms of their significant role and emphasis on a specific area of focus, usually on common goods, for the advancement and promotion of issues. A second step is to have the traditional 2 Williams 2008. security actors – including international 3 IISS 2015. organizations and governments – 4 UNHCR 2015. adjust their own frameworks and 5 Institute for Economics and Peace 2015. processes to build in more public- 3 Part 6 Kaspersen and Shetler Jones 2015. private participation at the most 7 appropriate levels. The Extractive See UN Security Council Report S/2015/358, at www.un.org/en/sc/ctc/ docs/2015/N1508457_EN.pdf. Letter dated 19 May 2015 from the Chair of the Industries Transparency Initiative, action Security Council Committee pursuant to resolutions 1267 (1999) and 1989 (2011) taken by technological and social concerning Al-Qaida and associated individuals and entities addressed to the media companies to block terrorist President of the Security Council dated 19th May 2015. and violent extremist activity, and 8 Kaspersen 2015a. business alliances for action on climate 9 See Davis, Dusek, and Kaspersen 2015. change are promising examples of 10 Argueta de Barillas and Cassar 2015.

11 public-private arrangements that can Vision of Humanity 2015. 4 Part strengthen security. 12 Stoltenberg 2015. 13 Schwab 2015. Third, a renewed focus on prevention, 14 preparedness and resilience, rather Blanke and Kaspersen 2015. 15 than reaction and compliance, would George 2013. likely improve security actors’ ability to 16 Kaspersen and Hagan 2015. manage known and unknown security 17 Kaspersen 2015c. risks. There exists important know-how 18 Eide and Kaspersen 2015b. and resources in the private sector 19 Eide and Kaspersen 2015a. that can improve preparedness and 20 Hybrid threats and warfare refers to the blend of conventional, irregular means mission-critical planning processes in of combat and asymmetric tools, often with a strong cyber element, in military a global security context – using data strategies facing indistinct adversaries and aggressors in a complex battle domain, to track the progress of risk factors, complicating matters such as attribution and retribution. sharing information on where and 21 The term “cy-ops” refers to militarized cyber operations; “psy-ops” refers to military operations usually aimed at influencing the adversary mindset through when crimes occur, and establishing noncombative means. mechanisms for harnessing industry 22 Kaspersen 2015b. supply chains during complex 23 emergencies – are a few examples of Nye 2014. 24 how security arrangements could be Sally 2014. updated. 25 Beckstrom 2014. 26 See also the World Economic Forum 2015b. Rather than wait for crises to happen, 27 De Sola and Kaspersen 2015. or sleepwalk into the dystopian scenarios described above, it is critical to identify potential inflection points and focus on finding solutions rather than just containing problems, and adapt relevant structures accordingly. Prompting greater pliability through a genuine, forward-looking multistakeholder process in order to ensure against complacency and improve the outcomes in a fast-paced and interconnected world may be the best way to prevent the described dystopian futures from materializing.

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Williams, P. 2008. “Violent Non-State Actors and National and International Security”, 28 Novem-ber 2008. International Relations and Security Network, Swiss Federal Institute of Technology Zurich. http://www.isn.ethz.ch/Digital-Library/Publications/ Detail/?id=93880 World Economic Forum. 2012. Risks and Responsibility in a Hyperconnected World: Pathways to Global Cyber Resilience. Prepared in collaboration with Deloitte.

Geneva: World Economic Forum. 2 Part 2014. The Future Availability of Natural Resources: A New Paradigm for Global Resource Availability. Geneva: World Economic Forum. 2015a. Geo-economics: 7 Challenges to Globalization. Global Agenda Council on Geo-Economics, January 2015. 2015b. The Inclusive Growth and Development Report 2015. Geneva: World Economic Forum. Part 3 Part Part 4 Part

The Global Risks Report 2016 37 Part 1 Part

The previous sections of this Report have explored the ways in which global Part 3: risks are becoming more imminent, impacting more people’s lives, economies and institutions. This part

Part 2 Part of the Report explores the Global Risks Risks in Focus Landscape 2016 and the Global Risks Interconnections Map 2016 through a societal lens. Because well-functioning societies are at the core of international security and are key to strengthening resilience, this section presents an in-depth exploration of three distinct angles that relate to societies: the three Risks in Focus. To motivate action, Part 3 Part each of the Risks in Focus includes examples of practical initiatives that can be implemented to build resilience.

One of the key risks related to the advancing digitization of societies concerns the tension between the ways in which technology is empowering citizens and the growing sense of political disempowerment Part 4 Part felt by many of those citizens. Rising income disparity and a shortage of quality employment opportunities – that could be further exacerbated by the Fourth Industrial Revolution – along with extreme weather events and heightened migration flows are among the factors that could leave societies deeply unsettled.

Against this background, the first Risk in Focus introduces the concept of the “(dis)empowered citizen” and discusses potential consequences for social stability. The second contribution explores food security – a necessary condition for social stability – which is increasingly under threat from failure to mitigate and adapt to climate change; this Risk in Focus builds on the findings of Part 1. Finally, the third Risk in Focus discusses the potential of future pandemics to threaten social cohesion.

The world has navigated previous eras of profound transitions resulting from converging economic, technological and geopolitical developments. But with a faster pace of change and more complex interconnections, the stakes have never been higher.

38 The Global Risks Report 2016 Part 1 Part

positive outcomes will require profound 3.1 (Dis)Empowered Citizen changes to institutional and policy frameworks – but as citizens’ demands become more sophisticated, they also call into question the capacity and

willingness of political and business 2 Part leaders to respond. Social Stability at Risk: spike, associated with the 2011 Arab Analysis Spring. The Global Database of Events, Societal Change Mechanisms under Language, and Tone (GDELT) Project Pressure notes “elevated protest activity of the Social instability has re-emerged in last three years” in comparison to the Many societies try to channel the recent years as a prominent concern. previous “two decades of relatively stress associated with societal As discussed in Part 1, social instability reduced protest action.”1 Its data transformations into constructive is again the most interconnected suggest we are again approaching dialogue, enabling those affected to be

global risk (see Figure 2), ranking in 3 Part 1980s protest levels, when causes of and feel heard by their fellow citizens the top 10 over both 18-month and social turmoil ranged from Cold War and those in authority. Common 10-year time horizons (number 5 on tensions and anti-apartheid sentiment mechanisms for individuals to raise the 10-year time horizon; see Figure to the Tiananmen Square protests. public awareness of issues and ask for 1.1 and number 8 on the 18-month change include organizing or signing horizon, not displayed). Profound social Social stability is being challenged by petitions, donating to or joining social instability additionally ranks among the multiple and profound transformations or political groups, and standing for three most likely global risks to occur in that affect most countries worldwide. election. Latin America and the Caribbean and These transformations result from the Middle East and North Africa (see fast-paced technological progress,

However, not all societies have 4 Part Figure 3). globalization, wealth and income constructive mechanisms in place to concentration, shifting demographics, handle appeals for change. Faced with Although statistics related to social lack of job opportunities and a disquiet over societal transformations, instability vary – particularly because changing climate. Together they some respond by closing down the terminology used to describe are creating new opportunities, debate, deliberately or inadvertently instability fluctuates widely – data expectations and sources of frustration. stifling individuals and groups that suggest there has been a rise in Social instability is not per se always question existing structures. To some protests over the past two decades. a negative factor, because it can extent, social stability is in the eye of As illustrated in Figure 3.1.1, protest drive towards another and potentially the beholder: in some societies, a intensity has reached a new and better new equilibrium. Ensuring peaceful mass demonstration would higher plateau since the most recent that these transformations result in be regarded as threatening, subversive World Protest Intensity Figure 3.1.1: World Protest Intensity

2.5

1.5

0.5 World protest intensity score protest World 0 2015 Jul 1979 Jan 1983 Jan 1988 Jan 1993 Jan 1998 Jan 2003 Jan 2008 Jan 2013 Jan

Source: Computations and illustration by Kalev Leetaru, 2015, based on the GDELT data set (http://gdeltproject.org/).

Notes:

The World Protest Intensity score is the total number of protest events divided by all events seen that month. The timeline in this figure is created using data collected from print, broadcast, and web news media worldwide from over 100 languages (http://gdeltproject.org/). The data are normalized for the exponential rise in media coverage of the past 30 years.

Part 3.1 was contributed by Alexandra Lopoukhine, Silvia Magnoni and Nicholas Davis, World Economic Forum.

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and provocative; in others, it would be demands threaten to undermine a models consequently need to adapt regarded as an example of constructive country’s political stability (see Box to new demands and expectations. change mechanisms working as they 3.1.1 for a definition of (dis)empowered Increasingly customers want to know should. citizen). With more (dis)empowered not only about a business’s own citizens organizing and mobilizing, performance in areas such as child

Part 2 Part It is not clashing attitudes per se governments and businesses alike labour and environmental impact, but that cause social instability – there need to come to terms with the ways also about the operations of its entire will always be citizens demanding in which they may be exacerbating supply chain. They expect to have a change. Rather, social instability can the root causes of citizen discontent. voice in all aspects of its operations, emerge when transforming attitudes They must understand the risks and from how production processes are set come up against institutions that work out how to adjust to a changing up to how distribution operations are are unsuccessful in their struggle to operating environment and a new developed and investment decisions peacefully incorporate them into the societal landscape. around community initiatives are taken. broader social and political context. Around the world, trust in institutions is Beyond economic uncertainty, Drivers of (Dis)Empowerment Part 3 Part plummeting. The most recent edition the risks for countries include: of the Edelman Trust Barometer found (1) undermined legitimacy of the Social structures around the world that in a higher proportion of the government mandate; (2) increased are being transformed on three levels. surveyed countries than ever before in social polarization; (3) political impasse First, at the individual level there are the barometer’s 15 year history, people and the impossibility of actuating changes in how people feel and how were distrustful of both governments reforms, where relevant; and – they perceive the world and identify and businesses. Even NGOs are not under more severe circumstances with particular values; this is combined immune – although they still command – (4) possible disintegration of a with people’s increased ability to more trust than the public or private country’s governmental system and express and transmit their views, which sector, the 2015 Edelman Trust study other cascading risks that might in turn influences behaviour. Second, Part 4 Part showed a declining sense of trust in easily emerge in a truly globalized, at a collective level, rapid changes in those entities, too.2 interconnected and complex world. how social groups form and solidify An inclusive society with empowered have taken place, and in how these Social Stability at Risk societal actors who are aligned behind groups debate and develop common a joint vision for the country is a values and viewpoints and how they The global risk of social instability strong signal that a state is stable and interact with other stakeholders. Third, is heightened by uncertainty about confident, with greater transparency, often driven by and in response to the whether existing structures will be able lower corruption and a stronger rule individual and collective levels, formal to constructively resolve pressures of law – all important factors for doing institutions such as governments, when (dis)empowered citizens’ business.3 businesses, religious institutions, the media and civil society organizations From an economic perspective, are also changing the way they relate businesses benefit from a stable to and interact with both groups and Box 3.1.1: The (Dis) social and political environment for individuals. Empowered Citizen: A running their operations. They operate Definition according to forecasts and scenarios These evolving structural forces create that factor in socio-political risks, and new patterns of communication, instability increases their operational relationships, collaboration and The term “(dis)empowered citizen” costs, reduces margins on investments expectations, which in turn – in describes the dynamic that is and undermines local networks. combination with emerging emerging from the interplay of two Social and political unrest can cause technological, economic, political trends: one empowering, one losses in revenue, property damage, and environmental drivers – create disempowering. Individuals feel roadblocks, bureaucratic delays, new structures of empowerment and empowered by changes in overall economic slowdown and an disempowerment. technology that make it easier for unconducive business environment. them to gather information, For businesses, more specific risks Economic Drivers communicate and organize. At the include (1) reputational risk and other Many countries have recently seen same time, individuals, civil society dangers to brands; (2) potential loss of mobilizations against inequality, groups, social movements and local market share; (3) product boycotts; and persistent unemployment and communities feel increasingly (4) disruption of established business deteriorating economic environments. excluded from meaningful models. From the Arab Spring to the anti- participation in traditional decision- austerity protests in Europe, making processes and Particular risks to businesses may arise people have vocally rejected the disempowered in terms of their ability when local contexts and relationships consequences of what they perceive as to influence and be heard by change when people feel unable to a distorted and non-inclusive economic institutions and sources of power. effect change as citizens and look for and political system. Demands for ways to do so as consumers. Business reforms to tackle corruption, in both

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politics and business, are being heard perceived to be either unable or Repressive Reactions Fuel Social across the globe. Policies that neglect unwilling to regulate the activities Disruption or deepen inequality can exacerbate of large corporations, for example the combination of less sustainable by closing tax loopholes. Political Clear arguments can be made economic growth, weakened social leadership is seen to be colluding for governments to oppose some cohesion, and citizens feeling with, or even interchangeable with, citizen movements, such as those Part 2 Part disenfranchised from democratic business leadership, as “revolving that disregard human rights.10 In processes. door” practices shape the relationship most cases, however, many different between business and government. perspectives on what constitutes the Environmental Drivers Citizens’ view that their own voices social good can be valid. To establish Changes in society, regulatory policies are being ignored by political leaders trust and ensure broadly sustainable and business practices are crucial to is exacerbated – even apparently development, a country’s businesses, address our changing climate. In recent validated – by the perception that the citizens and government need jointly years a “climate justice” movement has wealthy enjoy privileged access to to elaborate a common viable national emerged from frustration with a lack decision-makers.7 vision.

of leadership, evident in international 3 Part negotiations characterized by long Technological Drivers Rather than looking for ways to win talks, vested interests and the ultimate Technology amplifies dissatisfaction back public trust, however, many incapacity to curb the effects of global caused by other drivers. Social governments have eroded that trust warming, despite progress at the movements are facilitated by digital further by responding harshly to COP21. Continued sluggish progress tools that allow the individual citizen to protests: closing down space for civil or a lack of any progress at all will be heard and also allow rapid mass society, demonizing protestors and increasingly fuel protests, especially mobilization, cyber-activism and harassing activists. In recent years, the as extreme weather patterns make a globally connected social movements space available for citizens’ actions progressively greater impact. that span traditional geographic and has shrunk in many countries. The Part 4 Part political boundaries (see Box 3.1.2). CIVICUS Civil Society Watch Report Political Drivers shows that core civil society freedoms The last three years have seen more While voter participation rates are of expression, association and peaceful elections and government collapses steadily declining, especially among the assembly were violated to a significant in major market economies than in young, digital technology is providing degree in at least 96 countries during 4 all of the previous decade. Approval new ways for people to mobilize and 2014.11 ratings of political leaders are sagging, challenge existing power structures to and established political parties articulate an alternative. This was most Technology is empowering across Europe are facing declines in visible in the 2011 wave of youth-led governments as much as citizens, membership and a need to reconsider revolts from North Africa to South notably to employ surveillance tools on 5 how they engage with the electorate. America, but there is general evidence their own populations – and sometimes Labour unions are not doing any of an increase of citizens’ movements those of other countries. In some better: although increasing in Asia worldwide in the past couple of cases, governments breach their own and South America, membership has decades. Studies of online content laws, as with the British intelligence been declining in Europe and North dating from 2010 and 2012 indicate a agency spying on international NGOs 12 America, particularly in the United positive relationship between political outside of proper procedures. States, where the unionized workforce content and youth who were previously Increasingly laws are being reformed 6 hit a 97-year low in 2013. A proliferation politically disengaged.8 to legitimize data collection and cyber of alternative political parties – some oversight, such as Canada’s Bill C-51, of them extremist or nationalist – has Online protests, strikes, cyber activism, which originally called for removing challenged established governance and online petitioning and boycott barriers to sharing security-related systems without necessarily delivering campaigns are increasing. For information. the outcomes hoped for by citizens example, the online activist and petition in terms of improved transparency network Avaaz.org grew by around Just as protestors are learning and equality. Indeed, a high turnover 40 million members in eight years, tactics from one another, anti- of governments or strong separatist and Change.org now has 80 million protest legislation is often inspired movements can end up making policy- users. Although some cynicism exists by experiences in other countries. making less stable and worsen distrust around “clicktivism”, which can be seen A growing number of governments in governance structures. as merely a form of virtue signalling, have implemented similar measures such web-based activist organizations imposing limits on peaceful assembly The perceived inability of governments have often complemented online and protest, narrowing the definition to respond to major global challenges activism with offline activities,9 thereby of what is considered permissible civil – from climate change and internet amplifying their impact. As the world society and media activity, banning civil governance to food security – is becomes more connected, mobile and society organizations from receiving eroding confidence in authorities. foreign funds for certain activities, and networked, protests that might once Combined with a sense of diminishing making new registration inordinately have been geographically limited can separation between the private and complex. CIVICUS has drawn attention spread ever more widely and quickly. public sectors, governments are to the shrinking space for civil society

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Box 3.1.2: Digital Government Technologies: The (Persisting) Challenges of Inclusiveness and Engagement

Part 2 Part The ability to leverage technology to improve relationships between governments and citizens depends on citizens being able to use that technology. In OECD countries in 2012, for instance, less than a quarter of people aged 65–74 said they interacted electronically (internet portals, social media) with their government, compared to more than half among the 16–24 age group on average across the OECD (Figure 3.1.2.1). To fully exploit the potential of digital technologies, governments should take steps to address existing digital divides and avoid the emergence of new forms of e-exclusion. As well as age, gaps persist in the level of uptake by education level and living area.

The two main reasons for e-exclusion are lack of physical access and limited technological skills. Therefore, alongside the development of a well-functioning digital government infrastructure, a crucial component of an effective digital government strategy is action to increase the population’s ICT literacy, raise awareness of existing online opportunities and boost the Part 3 Part comfort and familiarity of all age groups with the use of digital channels to interact with governments. A multi-channel approach to service delivery, providing services by various offline (e.g. in-person contact, postal mail) and online means (e.g. websites, mobile-based applications) in an integrated way, is more likely to guarantee access to public services to all citizens. Figure X: Citizens using the Internet to interact with public authorities by age group (2012) Figure 3.1.2.1: Citizens Using the Internet to Interact with Public Authorities by Age Group, 2012

16 to 24 years old 65 to 74 years old

90 Part 4 Part 80

Italy Israel Chile Spain OECD Ireland Iceland Finland Norway France Estonia Canada Austria Greece Poland Denmark Sweden Slovenia Germany Belgium Portugal Hungary Australia Switzerland Netherlands Luxembourg New Zealand Slovak Republic United Kingdom Czech Republic

Source: OECD ICT Database; Eurostat Information Society Statistics (database).

Governments can take further steps to use digital channels to foster engagement through the full policy-making cycle. Most governments still view social media as an additional tool to broadcast traditional communication messages. According to a recent OECD survey, fewer than one in four governments try to leverage social media for more advanced purposes such as transforming public service delivery or opening up public policy processes to key stakeholders.1 The 2014 OECD’s Recommendation of the Council on Digital Government Strategies provides principles for governments to harness new technologies to increase openness, transparency and inclusiveness of processes and operations, and to foster greater citizen engagement and empowerment. Government bodies need to identify and support businesses and citizens who can form a digital government ecosystem that promotes dialogue and exchange.

One important development has been the use of Open Government Data to make public data sets available to citizens to enable more informed engagement, greater social accountability of government, and opportunities to create public value by putting information into the hands of citizens. The OECD OUR Data Index assesses governments’ efforts to implement open data in three critical areas – openness, usefulness and re-usability of government data.2

Notes 1 OECD 2014. 2 OECD 2015; for more on the data, see https://data.oecd.org/.

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organizations seen lately in autocratic What Can Be Done? New Under pressure to deliver more regimes, emerging democracies and Approaches and Risk-Resilience proactively and effectively on corporate democratic countries alike. Strategies social responsibility (CSR), businesses are going beyond traditional and In combination with surveillance A range of innovative responses often-criticized CSR models to look for economic opportunities practices, such measures are creating by governments, businesses and 2 Part a growing sense of limitation on civil society organizations can build in socially and environmentally citizens’ freedom of speech and resilience to the risk of social instability. conscious business models based freedom of assembly. The Carnegie Just as new technologies are playing on innovative and people-centred Endowment for International Peace a role in driving the risk, so can they partnership approaches (see Innovative reported that, in 2014, 50 countries also be used to mitigate it, minimizing Response 2). An example of the recent placed restrictions on overseas funding the frustration of individuals and emergence of Hybrid Value Chain (HVC) for NGOs.13 The Committee to Protect groups by creating a transparent and models, representing a complete shift Journalists has recorded a disturbing inclusive enabling environment with in the way businesses and civil society number of restrictions of press freedom responsive forms of governance. interact,21 is the Viste Tu Casa (Dress in many countries.14 The combination This section presents innovative and Your Home) programme in Colombia: 3 Part of large commercial interests and weak emerging developments that can be an established tile manufacturer governance can give rise to businesses taken by three different stakeholders: worked with the cofounder of a being perceived as complicit in governments, businesses and civil human rights organization to create government repression of civil society society. employment for women and reach – a perception fuelled by action against new clients by raising awareness of organizations and activists protesting First, governments have the the hygiene benefits of tiling kitchens.22 against the activities of such large opportunity to re-empower citizens By leveraging the core assets of civil industries as construction, extractives politically, opening up space for society organizations and businesses, or agribusiness.15 In Cambodia, for dialogue and participation, embracing HVC partnerships generate risk example, the government has been transparency and accountability, resilience and new revenue sources 4 Part criticized for arresting and imprisoning and looking to enlist citizens as for businesses, improve the livelihoods campaigners against widespread land collaborators in public service.18 of low-income populations and help grabs that see subsistence farmers to meet the basic human needs of evicted from the land they farm to make Bland “participation washing” populations with which civil society way for large-scale industrial farms.16 approaches – described as the works. attitude of listening to requests but In many cases, the repression of not actively addressing them – are Third, civil society has the opportunity citizen movements reflects a profound not enough to truly contribute to more to find ways to leverage new uncertainty among governments and stable societies. Technology-based technologies and collaboration models businesses about how to deal with the innovations could offer options to to strengthen social fabric; improve questioning of established societal, modernize public service management services and shared spaces; make economic and political structures. and delivery, as happened in the socio-economic frameworks more Leaders may be unsure of what small Spanish town of Jun, which cohesive and inclusive; and improve policies to implement, or they may increasingly administers its municipal the ways in which stakeholders interact, be constrained by internal challenges services and communicates with deliberate and act. from implementing changes in a timely citizens through Twitter.19 Equally manner; either situation can result in importantly, the creation of a trust- A source of inspiration for engaging doing nothing – a response of hoping based space for multistakeholder and empowering citizens could be the that protests will pass.17 However, any partnerships represents a building “citizen science” movement, in which kind of failure to respond adequately block for effectively managing scientists have found ways to use to citizens’ demands merely adds to risks (see Innovative Response digital technologies to engage citizens their sense of disenfranchisement from 1) and successfully achieving in scientific research activity. Popular traditional change-making methods. good governance and inclusive platforms, such as Zooniverse,23 development.20 The effectiveness are taking science out of labs and As the rise of technology enables of such approaches depends on integrating hundreds of thousands citizens to harness new connections successfully tackling e-exclusion (see of knowledgeable volunteers in and form communities that Box 3.1.2). collaborative, people-powered transcend geographical limits, a research. Citizen science gives socially destabilizing vicious circle Second, businesses have opportunities participants a sense of belonging to could become entrenched: growing to win trust, build resilience and an effort that creates positive, lasting expressions of anger are met with minimize the risk of disruption change – it combines advancing increasingly harsh responses by by committing to transparency, scientific knowledge with educating governments, which in turn further fuel responsibility and higher standards citizens, raising awareness of issues, citizens’ feelings of disenfranchisement along their supply chains in areas such and encouraging wider participation and discontent. as worker rights and environmental in democratic debates about how sustainability, and by collaborating with science-related policy-making is done citizens in new ways. (see Innovative Response 3).

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Conclusion The recent rise in impact investing November 2015, the UK government and social impact bonds (SIBs) expanded its commitment to SIBs Fundamental demands are being sees businesses and governments by announcing an allocation of expressed by people around the world, partnering to address pressing issues £105 million for new SIBs aimed at both as citizens and as consumers. that prevent citizens from enjoying enhancing financial support for locally 28

Part 2 Part Their hopes and expectations can stable, equal and diverse societies. designed schemes. potentially lead to improvements in governance and corporate systems, The SIBs funding concept is a type Positive quantitative results for the creating momentum to adapt new of “pay for success” model where Peterborough pilot, which generated practices, norms and government financiers invest capital in public global attention for the SIB model, policy. When other stakeholders listen, projects, usually aimed at measurable affirm that private investment in critical citizens can be enlisted to co-create the improvements in social outcomes social service programmes can be an future they desire. That is the promise for at-risk individuals, with the goal of effective way not only for a vulnerable of the empowered citizen – but it is a reducing government spending in the population to receive services but promise that can be met only when the long term.24 SIBs create a coalition of also for investors to diversify their Part 3 Part rate of transformation and innovation actors willing to share the investment investment portfolio to make financial in government, business and civil risk to deliver projects that address as well as social returns. society structures matches the rate of social and environmental problems that transformation in society itself. might otherwise generate significant SIBs hold substantial potential for risks for companies, governments and many developing and emerging individuals. markets around the world. In India, an empowering girls programme Three Innovative SIBs have been particularly useful is currently being piloted in 200 Responses to Encourage for pioneering new approaches to schools.29 In Mozambique, the malaria persistent and costly social ills. From performance bond has been designed

Part 4 Part Inclusive and Stable partnering vulnerable young people to increase funding for malaria Societies with toddlers to mentor as a way interventions over 10 years and protect to address youth unemployment up to 8 million people from infection.30 When people mobilize and social through personal empowerment to Several states in Latin America are stability is threatened, resilience tackling homelessness by providing experimenting in this area: for example, becomes critical. In a world facing huge accommodation,25 employment the Mexican state of Jalisco has been challenges, it is imperative to ensure and medical support, SIBs have working on the design of a programme that institutions, communities and fundamentally shifted how social to move single mothers out of poverty, individuals are prepared and able to service programmes are structured, while Brazilian states such as Minas respond to unexpected disturbances. impacting both governmental Gerais and Cearà are exploring SIBs The relationship between citizens, authorities and non-profit organizations to address prison reform and improve governments and businesses needs to operating in the social sector. school completion rates.31 The be designed to create a more inclusive Israel Arab Workforce Development and stable environment. Inspirational stories abound, with the SIB, currently in the development £5 million Peterborough SIB in the stage, aims to increase employment While recognizing that much more can United Kingdom in particular heralded opportunities for Arab citizens of Israel, be done in this space, the following as an example of fruitful public-private who are expected to represent 20% of pages explore three types of innovative financial collaboration.26 Launched in the state’s population by 2020.32 response aimed at creating more 2010, the United Kingdom’s first SIB transparent and open societies: re- was designed to reduce reoffending Many private sector investors, however, empowering individuals, introducing among short-sentence male prisoners. still believe that SIBs entail too much citizen-centric business innovations Private investors face the upfront risk for too little potential pay out. With and paving the way for critical investment costs – and associated this in mind, incentivized crowdfunding grassroots activism. These responses risks – of providing a not-for-profit has been emerging as an option for the intend to provide a source of inspiration organization with capital to carry out next generation of SIBs. Crowdfunding for pioneering and original ways to interventions. They are paid back a platforms such as Ethex, MicroGenius, promote social inclusion and ensure financial return by the government if Abundance and Trillionfund already stable societies. social outcomes are improved based have the technical profile and access to on some standard measurement; investors to facilitate the crowdfunding 1. Innovative Finance for Social recently released evaluation results process and engage citizens in impact Outcomes indicate that investors are on track investing.33 to receive returns in 2016.27 The As governments struggle to reconcile Peterborough project – as is often By involving people more directly budgetary pressures with increased the case for pilots – has gone in funding social investments, this social demands, innovative models of through alternate phases of progress crowdfunded SIBs model has an collaboration have been put in place and hindrance, while overall being even greater chance of revamping to tackle major societal challenges. recognized as a key test for opening public service delivery structures the way to the SIBs market to come. In towards more effective and responsive

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approaches – citizens who invest in consumer brands. Sensor technology with attempts to strengthen local the initiatives gain an incentive to raise on recycling containers and trucks communities. public support for them, and volunteer enables the company to track how their time to help them succeed. much recycling households are putting With the growth of smart technology Rigorous, increasingly crowdfunded out for curb-side collection, and reward and social media, behaviour-change- 35

SIBs could transform government, community members accordingly. focused business models will 2 Part putting people in charge for the benefit become more mainstream. These of citizens and society. Increasingly, it will be possible to move models represent a new approach beyond education, individual actions for businesses and citizens that 2. Citizens beyond Consumers: and pledges and to use the Internet of encourages dialogue and interaction Business Innovations for Social Things to reward verified behaviours. It and that strengthens a relationship Change is possible to imagine citizens signing based on collaboration, trust and up to have data collected by their transparency. By serving customers Companies have developed many appliances and utility companies. and engaging citizens – as individuals ways to give individual customers These data would be shared with with specific values, ambitions and incentives to be loyal to their brands, consumer brands prepared to offer aspirations, regardless of their age, 3 Part such as reward cards or money-off rewards for eco-friendly behaviour geography, education, income or social coupons for repeat purchases. Many such as using less water, turning the status – businesses can potentially companies also see value in spending thermostat down or switching off lights build their brands while simultaneously to position their brands as socially or in unused rooms. Sensors could be creating positive social impact. ecologically conscious, for example by fitted to a household’s cycles and cars, supporting community development and rewards offered when data show 3. Novel Ways to Engage Citizens: projects. that the bicycle, not the car, is being Putting Them in Charge through used during rush-hour periods. Science Technology is increasingly making it possible to combine these ideas, For small and medium-sized In recent years, “citizen science” has 4 Part which enables companies to provide enterprises, in particular, another been gaining attention as a way to incentives for individual customers emerging opportunity to win business engage citizens in scientific activity, to perform actions that benefit the by contributing to more cohesive with endeavours ranging from air community or environment. This is and sustainable societies is offered pollution assessments in Europe to a way for individual businesses to by community currencies such as chimpanzee counting in Tanzania. The profit by improving brand image and the Bristol Pound in Bristol, United proliferation of digital technologies enhancing customer loyalty, while Kingdom;36 the TradeQoin in the has provided scientists with innovative at the same time contributing to Netherlands;37 and Berkshares in ways to engage the wider public in community or environmental resilience Massachusetts, United States.38 The science and expand resources for and engaging consumers in their own motivation behind such currencies is research. Similarly, it has provided sustainability policies. These win-win typically to encourage citizens to spend citizens with new venues for developing situations lead to more accountable locally and to reward them when they online collaborative projects aimed at and transparent practices. do, thereby strengthening the local collecting quantitative analytical data to economy by making it more diverse improve transparency and outcomes in The apparel retailer Patagonia is an and resilient. public decision-making mechanisms. example. The company has reinforced its brand identity and image with a An estimated 250 community A great many aspects of daily life well-received campaign encouraging currencies are available at the global are amenable to a citizen science consumers to repair more frequently.34 level, from Kenya and Brazil to Japan, approach because science and data By trading the risk that customers with more to come.39 For local small impacts everything from the food we might buy a bit less of their product, and medium-sized enterprises, active eat to the policies we try to influence. Patagonia is betting on gaining a participation in community currencies Although many of the highest-profile bigger market share by attracting represents an opportunity to stay citizen science projects are limited to values-oriented buyers who want to relevant through changing consumer “crowdsourcing” – that is, to citizen shop at values-driven companies. By markets and to demonstrate solidarity participation in data gathering or asking people to keep products longer, with local authorities and citizens’ monitoring exercises led by scientists the company has made manifest its organizations, which are typically the – citizen engagement occurs on an values and involved customers in the driving forces in their establishment. ascending scale (see Figure 3.1.2). In achievement (and watchdogging) of its recent years a number of “extreme own sustainability goals. Although local currencies are a less citizen science” initiatives have obvious fit for major consumer brands, emerged in which citizens take the lead Similarly, the US-based Recyclebank it is possible to imagine incentives for in pursuing locally important goals by is paving the way for environmental environmentally conscious behaviour asking research questions, collecting behaviour change. By recycling, its being offered to consumers in the form and analysing data and using them to 4.4 million members in the United of local currency rather than discounts influence policy-making.40 States and the United Kingdom can – thereby associating the brand not earn discounts from over 3,000 major only with ecological issues but also

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Citizen science is more than just assessing a potential link between the for a new way to interpret monitoring a new outlet that engages public- way judges vote and how often they and evaluation mechanisms, by spirited citizens who have an existing incarcerate.44 The analysis showed entrusting citizens to play a role in these interest in science. It is increasingly that a particular judge suspected for processes while leveraging the power seen as a tool that could enable bias with his conviction rate of 95% of hyperconnectivity.

Part 2 Part a more participatory democracy was instead within the statistical by empowering individuals and norm vis-à-vis all other colleagues These examples show how a citizen communities to analyse, understand of the Reykjavik district court. Other science model of grassroots activism and ultimately take ownership of the examples include crowd-reading of can create new ways for citizens to issues that affect them, enabling them published oil contracts to promote engage, facilitate a wider range of lay to propose concrete and actionable more transparency in the extractive participation, and enable bottom-up solutions to decision-makers.41 Citizen industries,45 and leveraging open community participation. More and science projects have the potential to data by re-calculating the published more often, fact-based debates and keep public authorities accountable, accounts of municipalities to explain activities precede street action and influence the way they spend public arcane budgets more clearly to complement conventional activism

Part 3 Part funding, and inform them about citizens.46 with increased general awareness community priorities and needs. and understanding of the policies and A key citizen science initiative running interests at stake. While recognizing “Factivism” – evidence-based in conjunction with the United Nations’ the intrinsic limits of data and statistics activism42 – can come in many Sustainable Development Goals (SDGs) (they can be “based on a firm forms. Recently, an open research is the Open Seventeen Challenge, foundation of wet sand”), and the need investigation of the New South through which citizens can pitch for citizens to interpret them reasonably Wales pecuniary interests register crowdsourcing projects to tackle SDGs and accurately, citizen science is for the 2013–2014 fiscal year has via the use of open source data.47 By pushing citizens closer to deliberation forced political figures to correct their unlocking the power of the grassroots mechanisms and decision-making Part 4 Part disclosures of interests to the Australian efforts of citizens around the world, authorities. parliament and thereby comply with the challenge aims at identifying ideas current regulation, which requires the and proposals to hold all stakeholders declaration of all directorships and – including businesses, governments, shareholdings.43 In Iceland, a group NGOs, media and international of enthused citizen scientists parsed organizations – accountable, while a huge database of documents and also delivering on the UN global sentences to investigate for bias by goals. This initiative sets a precedent

World Protest Intensity Figure 3.1.2: Participatory Levels of Citizen Science

Level 4 - Extreme Citizen Science

- Collaborative science - problem deﬁnition, data collection and analysis

Level 3 - Participatory Science

- Participation in problem deﬁnition and data collection

Level 2 - Distributed Intelligence

- Citizens as basic interpreters - Volunteered thinking

Level 1 - Crowdsourcing

- Citizens as sensors - Volunteered computing

Source: Based on Haklay 2012.

46 The Global Risks Report 2016 Part 1 Part

Endnotes

1 Leetaru 2014. 2 Edelman Trust Barometer 2015. 3 Tripathi 2015. On this point, the World Economic Forum’s Inclusive Growth and

Development Report 2015 sheds light on how countries can make use of policy 2 Part incentives and institutional mechanisms in order to widen social inclusion while sustaining economic growth (World Economic Forum 2015b). 4 Fordham 2015. 5 van Biezen 2013. 6 Liu 2013. 7 AFL-CIO 2015; Bradner 2015; Sinclair 2015. 8 Bachmann, Correa, and de Zúñiga 2012; Van Laer and Van Aelst 2010. 9 Howard 2014. 10 Legrain 2015; The Economist 2014. Part 3 Part 11 CIVICUS 2015. 12 Corera 2015. 13 Carothers 2015. 14 CPJ 2015. 15 CIVICUS 2014. 16 The Guardian 2012. 17 OECD 2014; Wendling, Radisch, and Jacobzone 2013. 18 ACT Alliance 2011.

19 Kiss 2015. 4 Part 20 As global problems evolve and become intrinsically more complex to manage, the rise in the number of multistakeholder networks, such as the Global Solutions Networks (http://gsnetworks.org/), signals an important change in the way governments, businesses and societal actors organize around critical challenges. 21 Ashoka No date. 22 Uribe 2010. 23 https://www.zooniverse.org/ 24 BIREG LLC 2013. 25 Bridges Ventures 2012; UK Cabinet Office No date. 26 Cook 2014. 27 Social Finance 2014. 28 UK Cabinet Office 2015. 29 Educate Girls http://educategirls.in/ 30 Deveximpact 2013. 31 Levey and Bloomgarden 2015. 32 Social Finance Israel 2015. 33 Cohen 2015. 34 Patagonia 2015. 35 https://www.recyclebank.com/. 36 http://bristolpound.org/. 37 https://tradeqoin.com/en/. 38 http://www.berkshares.org/. 39 Smedley 2014. 40 European Commission 2013. 41 Scicurious 2013. 42 Bono 2013. 43 Evershed, Farrell, and Guardian readers 2015. 44 http://crowdcrafting.org/project/heradsdomar/ (in Icelandic). 45 http://repository.openoil.net/wiki/Main_Page 46 http://openkratio.org/ (in Spanish). 47 http://openseventeen.org/. 48 Easterly 2010.

The Global Risks Report 2016 47 Part 1 Part

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The Guardian, 24 September 2014. http://www.theguardian.com/society/2014/ AFL-CIO. 2015. “Trans-Pacific Partnership Free Trade Agreement (TPP)”. http:// sep/24/clicktivism-changed-political-campaigns-38-degrees-change Part 2 Part www.aflcio.org/Issues/Trade/Trans-Pacific-Partnership-Free-Trade-Agreement-TPP Kiss, J. 2015. “Welcome to Jun, the town that ditched bureaucracy to run on Ashoka. No date. “Hybrid value chain framework”. http://fec.ashoka.org/content/ Twitter”. The Guardian, 2 July 2015. http://www.theguardian.com/technology/2015/ hybrid-value-chain-framework jul/02/twitter-jun-spain-bureaucracy-local-government Bachmann, I., T. Correa, and G. de Zúñiga. 2012. “Profiling online political content Leetaru, K. 2014. “Did the Arab Spring really spark a wave of global protests?” FP, creators: Advancing the paths to democracy”. International Journal of E-Politics 3 30 May 2014. http://foreignpolicy.com/2014/05/30/did-the-arab-spring-really-spark- (4): 1–19. a-wave-of-global-protests/?wp_login_redirect=0 BIREG LLC. 2013. Pay for Success Bonds. http://www.payforsuccessbonds.com/ Legrain, P. 2015. “Welcome to the backlash era, Europe”. FP, 3 February 2015. Bono. 2013. “The good news on poverty (Yes, there’s good news)”. TED Talk, http://foreignpolicy.com/2015/02/03/welcome-to-the-backlash-era-europe- TED2013. filmed February 2013, https://www.ted.com/talks/bono_the_good_news_ podemos-syriza-elections/ on_poverty_yes_there_s_good_news?language=en Levey, Z. and D. Bloomgarden. 2015. “Social impact bonds are coming to Bradner, E. 2015. “How secretive is the Trans-Pacific Partnership?” CNN Politics 12 the tropics”. FOMIN. Blog, 15 July 2015. http://www.fomin.org/en-us/Home/ Part 3 Part June 2015. http://edition.cnn.com/2015/06/11/politics/trade-deal-secrecy-tpp/ FOMINblog/Blogs/DetailsBlog/ArtMID/13858/ArticleID/3077/Social-impact-bonds- Bridges Ventures. 2012. “Teens and Toddlers partners vulnerable young people with are-coming-to-the-tropics.aspx a toddler to mentor, creating transformational change in the young person’s life”. Lillington, K. 2014. “ ‘The Digital Economy’ author Don Tapscott looks back two Portfolio. http://bridgesventures.com/portfoliolist/tt-innovation-programme/ decades to look forward”. The Irish Times 4 December 2014. http://www.irishtimes. Carothers, T. 2015. “The closing space challenge: How are funders responding?” com/business/technology/the-digital-economy-author-don-tapscott-looks-back- November. Washington, DC: Carnegie Endowment for International Peace. http:// two-decades-to-look-forward-1.2024215 carnegieendowment.org/2015/11/02/closing-space-challenge-how-are-funders- Liu, E. 2013. “Viewtpoint: The decline of unions is your problem too”. Time, 29 responding/ikrg January. http://ideas.time.com/2013/01/29/viewpoint-why-the-decline-of-unions-is- CIVICUS. 2014. State of Civil Society Report 2014: Reimagining Global Governance. your-problem-too/ Johannesburg, Geneva, New York, and London: CIVICUS. OECD (Organisation for Economic Co-operation and Development). 2014. 2015. CIVICUS Civil Society Watch Report, June. http://www.civicus.org/images/ Recommendation of the Council on Digital Government Strategies: Adopted by Part 4 Part CIVICUSCivilSocietyWatchReport2015.pdf the OECD Council on 15 July 2014. http://www.oecd.org/gov/public-innovation/ Recommendation-digital-government-strategies.pdf Cook, S. 2014. “Editorial: A qualified success for the Peterborough prison social impact bond”. Third Sector, 8 August 2014. http://www.thirdsector.co.uk/editorial- 2015. Government at a Glance 2015. Paris: OECD Publishing. qualified-success-peterborough-prison-social-impact-bond/finance/article/1307221 Patagonia. 2015. “Better than new”. Patagonia Environmental and Social Cohen, R. 2015. “Hello, Crowdfunding! Meet social impact bonds”. NPQ Post 28 Responsibility. http://www.patagonia.com/us/common-threads/ January 2015. http://nonprofitquarterly.org/2015/01/28/hello-crowdfunding-meet- Scicurious. 2013. “Citizen Science, Citizen Policy”. Scientific American Blog social-impact-bonds/ Network, 7 January 2013, http://blogs.scientificamerican.com/scicurious-brain/ Corera, G. 2015. “GCHQ ‘broke rules’ when spying on NGOs”. BBC News, 22 June citizen-science-citizen-policy/ 2015. http://www.bbc.com/news/technology-33225194 Sinclair, S. 2015. “Investor vs. state: Canada is being pummeled by NAFTA CPJ (Committee to Protect Journalists). 2015. “10 most censored countries”. corporate lawsuits. Why do we put up with it?” Canadian Center for Policy Attacks on the Press. CPJ. https://cpj.org/2015/04/10-most-censored-countries. Alternatives, 1 July 2015, https://www.policyalternatives.ca/publications/monitor/ php investor-vs-state Deveximpact. 2013. “Goodbye Malaria: Mozambique Malaria Performance Bond”. Smedley, T. 2014. “Could community currencies produce a more sustainable https://www.devex.com/impact/partnerships/goodbye-malaria-mozambique- financial system?” The Guardian Sustainable Business, 15 May 2014. http:// malaria-performance-bond-362. www.theguardian.com/sustainable-business/community-currency-bristol-brixton- sustainable-finance Easterly, W. 2010. “Don’t cite global numbers unless you know they’re trustworthy (They usually aren’t)”. AIDWATCH blog post, 21 January 2010, http://aidwatchers. Social Finance. 2014. Peterborough Social Impact Bond reduces reoffending by com/2010/01/don%E2%80%99t-cite-global-numbers-unless-you-know- 8.4%; investors on course for payment in 2016. [Press release], 7 August 2014. they%E2%80%99re-trustworthy-they-usually-aren%E2%80%99t/ http://www.socialfinance.org.uk/peterborough-social-impact-bond-reduces- reoffending-by-8-4-investors-on-course-for-payment-in-2016/ The Economist. 2014. “Europe’s populist insurgents turning right: Parties of the nationalist right are changing the terms of European political debate”. The Social Finance Israel. 2015. “Employment opportunities for Arab citizens of Israel”. Economist, 4 January 2014. http://www.economist.com/news/briefing/21592666- Social Finance Israel. http://www.socialfinance.org.il/social-impact-bonds/21/ parties-nationalist-right-are-changing-terms-european-political-debate-does employment-opportunities-for-arab-citizens-israel Edelman Trust Barometer. 2015. “2015 Edelman Trust Barometer: Executive Tripathi, S. 2015. “What’s good for companies is good for NGOs too”. livemint, 15 Summary”. http://www.scribd.com/doc/252750985/2015-Edelman-Trust- June 2015. http://www.livemint.com/Opinion/3m6EyCcehT7ksaeeYq47IO/Whats- Barometer-Executive-Summary good-for-companies-is-good-for-NGOs-too.html European Commission. 2013. Science for Environment Policy: In Depth Report: UK Cabinet Office. No date. “London Rough Sleeping Social Impact Bond”, Centre Environmental Citizen Science. Science Communication Unit, University of the West for Social Impact Bonds, Case study. https://data.gov.uk/sib_knowledge_box/ of England, Bristol. Report produced for the European Commission DG Environment, london-rough-sleeping-social-impact-bond December 2013. http://ec.europa.eu/environment/integration/research/newsalert/ UK Cabinet Office. 2015. “Cabinet Office settlement at the Spending Review”. Press pdf/IR9_en.pdf Release 25 November 2015. https://www.gov.uk/government/news/cabinet-office- Evershed, N., P. Farrell, and Guardian readers. 2015. “Exclusive: NSW Liberal MPs settlement-at-the-spending-review-2015 failed to declare financial interests on register”. The Guardian, 26 March 2015. http:// Uribe, T. 2010. “Objeto Social: CORONA Viste Tu Casa 2010”. Video (in Spanish). www.theguardian.com/australia-news/2015/mar/27/exclusive-nsw-liberal-mps- https://vimeo.com/46780449 failed-to-declare-financial-interests-on-register van Biezen, I. 2013. “The decline in party membership across Europe means that Fordham, T. 2015. “Vox Populi Risk: A future where aggregate economic growth political parties need to reconsider how they engage with the electorate”. European no longer guarantees political stability”. Strategic Foresight: Perspectives on Global Politics and Policy and London School of Economics and Political Science. Blog Shifts. World Economic Forum. http://reports.weforum.org/global-strategic-foresight- http://blogs.lse.ac.uk/europpblog/2013/05/06/decline-in-party-membership-europe- community/tina-fordham-citigroup-vox-populi-risk/ ingrid-van-biezen/ The Guardian. 2012. “Conflict over land in Cambodia is taking a dangerous turn”. Van Laer, J. and P. Van Aelst. 2010. “Internet and social movement action Natural resources and development, Poverty matters blog. http://www.theguardian. repertoires”. Information,Communication & Society 13 (8): 1147–71. com/global-development/poverty-matters/2012/sep/25/conflict-over-land-cambodia

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Wendling, C., J. Radisch, and S. Jacobzone. 2013. “The use of social media in risk and crisis communication”. OECD Working Papers on Public Governance No. 24, OECD Publishing. http://www.keepeek.com/Digital-Asset- Management/oecd/governance/the-use-of-social-media-in-risk-and-crisis- communication_5k3v01fskp9s-en#page1 World Economic Forum. 2015a. Global Risks 2015, 10th Edition. Geneva: World Economic Forum. http:// www.weforum.org/reports/global-risks-report-2015 Part 2 Part 2015b. The Inclusive Growth and Development Report 2015. Geneva: World Economic Forum. Part 3 Part Part 4 Part

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As climate change gathers pace, the 3.2 Climate Change and Risks negative impacts on yields will become more pronounced.9 This is unlikely to Food Security to be a steady deterioration. Yield responses to biophysical stresses

Part 2 Part are highly non-linear – once critical thresholds for temperature or water are The Intergovernmental Panel on towards intensive systems that rely on breached, plants suffer severe damage Climate Change (IPCC)’s Fifth groundwater resources for irrigation, and yields can fall precipitously. If Assessment Report reaffirmed that along with the current growth in climate change is allowed to reach warming in the climate system is demand for water-intensive animal a point where these biophysical unequivocal and that it is “extremely products, agriculture becomes even thresholds are exceeded routinely, crop likely” that human influence has been thirstier. At the same time, urbanization failure will become the norm. the dominant cause. The climate is and industrialization in emerging and changing already1 – and, as the World developing economies are also driving A global temperature increase of

Part 3 Part Bank’s Turn Down the Heat report up demand for fresh water in energy 4.7°C – consistent with what might be explains, failure to limit warming to 2°C production, mineral extraction, and expected by the end of the century on will create a high risk of that change domestic use, further stretching the current emissions trajectories – would becoming catastrophic.2 There is already tight supply.6 see sharp increases in the risk of growing realization that failure to act, critical temperatures being exceeded. quickly and effectively, could reverse Against this backdrop of tightening The risk of failure will vary by crop and many of the advances of the 20th constraints, climate change seriously location. For example, researchers century. threatens food security in two ways. estimate that for maize in Illinois, in First, it will harm agricultural production: the Midwestern United States, the rising temperatures and changing likelihood of temperature exceeding Part 4 Part Risks to Food Security: rainfall patterns will slow yield gains, a critical threshold currently has a Analysis contributing to higher food prices and recurrence interval of 1 in 100 years; an increasingly precarious supply- this would increase to a 1 in 6 year The risk to food security is especially demand balance that will make return period. For single-variety rice in great because agriculture is already markets more prone to volatility. Jiangsu on the eastern coast of China, straining to meet a rapidly growing Second, it will increasingly disrupt the return period would increase from 1 demand from a finite resource base. food systems: more extreme weather in 100 years today to as often 1 in every The combined impact of a rising will destabilize tighter markets and 4 or 5 years.10 population and growth of the middle exacerbate volatility, imperil transport class – wealthier people eat more infrastructure and trigger local At lower levels of warming, yield losses cereal-intensive meat – is set to drive food crises. As a result, the risks of may be offset by higher concentrations a demand increase of 60% by 2050.3 humanitarian emergencies, national or of atmospheric carbon dioxide, Yet the global average yield growth for regional instability and mass migration resulting in a beneficial CO2 fertilization cereals has slowed in recent years; it will increase. In the words of a former effect. However, the extent of this effect already lags behind demand growth. Executive Director of the World Food has recently been questioned.11 Other This gap cannot be covered by an Programme, “without food, people factors associated with climate change expansion of cropland because of have only three options. They riot, they – such as elevated tropospheric the need to protect forests and other emigrate, or they die.”7 The security ozone,12 as well as increased biotic areas of high value for conservation implications will be felt by developing stress from weeds, pests and disease and carbon sequestration. Agriculture and developed countries alike. – represent further downside risk to is increasingly competing with other yields.13 uses for land – such as urbanization, Climate Impacts on Agricultural transport, bioenergy, forestry and Production Some of the most severe risks are mining – and so crop production is faced by countries or regions with high pushed towards ever more marginal Climate change will slow global yield levels of existing poverty and food soils.4 growth because higher average insecurity, which are highly dependent temperatures result in shorter growing on agriculture for livelihoods. Even Yet more worrying is the fierce seasons and lower yields. Shifting at low levels of warming, the most competition for water, the lifeblood of rainfall patterns can also reduce yields vulnerable countries will suffer serious agriculture. Water withdrawals have because lower rainfall reduces soil impacts. In Sub-Saharan Africa, for increased threefold over the last 50 moisture or increased rainfall waterlogs example, 1.5°C of warming globally by years, and demand is anticipated soils. Climate trends are already the 2030s could bring a 40% loss in to rise by a further 40% by 2030.5 believed to be diminishing global yields maize cropping areas. A world warmer With a shift in global production of maize and wheat.8 by 2°C would bring unprecedented heat extremes in summer across

Part 3.2 was contributed by Rob Bailey, Chatham House as well as Bernice Lee and Florian Reber from the World Economic Forum.

50 The Global Risks Report 2016 Part 1 Part

Figure 3.2.1:M3.3 Projected Climate changeImpacts will on Crop depress Yields agricultural in a 3°C Warmer yields World in most countries by 2050 given current agricultural practices and crop varieties Part 2 Part Part 3 Part Part 4 Part

Source: Müller and others 2009. Source:Note: WRI The 2013. figure shows the projected percentage change in yields of 11 major crops (wheat, rice, maize, millet, field pea, sugar beet, sweet potato, soybean, groundnut, sunflower, and rapeseed) from 2046 to 2055, compared with 1996–2005. The values are the mean of three emission scenarios Note:across –50% five change global = climate half as models,productive assuming in 2050 no as CO2 in 2015; fertilization +100% (see change note =54). twice Large as negativeproductive yield in impacts2050 as are in 2015. projected in many areas that are highly dependent on agriculture. World Development Report 2010

60–70% of South-East Asia. Warming Several attempts have been made to such as droughts, heat waves and of 4°C would likely bring increasing model the impact of climate change floods. These can trigger local food extremes in rainfall patterns in South on future food prices.15 The modelled crises, disrupt trade infrastructure Asia – up to a 30% decline in the dry impacts vary considerably, depending and have cascading systemic season and a 30% increase during the on the underlying model parameters, consequences – for example, crop wet season – increasing the risk of both climate scenarios, adaptation failure in a major breadbasket region 14 flood and drought. responses, and data employed. can precipitate international food price However, in the vast majority of cases spikes. As the map in Figure 3.2.1 indicates, the models find higher prices with the most severe yield impacts are not climate change than without. Taking Food Crises and Humanitarian confined to poor and food-insecure the mean of nine different models all Emergencies countries. Agricultural productivity using the IPCC “business as usual” Droughts or floods can have is also at risk in key exporting emissions pathway finds that global catastrophic localized consequences in breadbasket regions such as North crop prices will be 20% higher in 2050 regions where food insecurity is already America, South America, the Black than they would have been without high and markets do not function Sea area and Australia. The same climate change.16 These models show well. Recent history provides some is true for India and China – the two that oil seed prices typically increase tragic examples. The 2010 Pakistan most populous nations on Earth, both the most under climate change (up floods, caused by a wetter monsoon currently committed to self-sufficiency to 89% above a scenario with no consistent with climate change (in practice, trade neutrality) in climate change), though the largest predictions, devastated croplands and cereals. Should they have to abandon single climate-induced price increase led to a collapse in rural incomes and these policies of self-sufficiency, the modelled is for coarse grains, at 118% sharp deterioration in food security. consequences will be felt globally in above the 2050 baseline.17 One year later, a drought in East Africa the form of tighter international markets – since linked to climate change18 – and higher prices. Reducing the risk Extreme Weather and Disruption of triggered a regional food crisis affecting of climate change to crop yields will Food Systems 13 million people; in war-ravaged necessarily encompass adapting Somalia, over a quarter of a million agriculture to new regions (Box 3.2.1). Some of climate change’s most serious people died in the resulting famine. risks to food security arise from more frequent and extreme weather events

The Global Risks Report 2016 51 Part 1 Part

Box 3.2.1: Adaptation and Its Limits

The adaptation of agriculture is critical to reduce the risk climate change poses to food systems. A number of strategies and

Part 2 Part technologies have emerged to increase resiliency in individual livelihoods and the systems supporting agricultural value chains. These can be exercised at the farm level through techniques such as changing the cropping calendar, breeding plants that have increased tolerance to extreme conditions, or shifting crop production to new regions – however, such approaches are not without their challenges. Plant breeding takes time and is ultimately subject to biophysical limits that exhibit little genetic variation within or across crops; it is hard to selectively breed for tolerance to extremes. In addition, the limited availability of suitable land means crop production cannot always migrate as desired (for example, the poor quality of soils to the north of Russia’s wheat crop means production cannot simply track northwards as temperatures rise).

Therefore adaptation is also critical at the landscape level through economically viable strategies that protect biodiversity and enhance land and forest management. Market systems have a critical role to play too, especially through products such as Part 3 Part index-based weather insurance or information systems. Finally, enabling policies for the careful management and use of food reserves, early warning systems, open trade arrangements and price stabilization can help address volatility in the system.

Distribution and Transport limiting the rate of economic recovery international cereal markets reached Infrastructure in the longer term. When Cyclone Pam a crisis point when 40 governments Extreme weather events pose a risk not hit Vanuatu in March 2015, maritime imposed export restrictions on their only to the production of crops but also services to the islands were interrupted agriculture sectors in a vicious circle of to the distribution of globally traded for 10 days and 80% of the country’s collapsing confidence and escalating Part 4 Part supply. Critical transport infrastructure roads were blocked by debris.26 prices.30 Global governance was in many of the world’s largest cereal found wanting: while trade rules exist exporters is increasingly at risk of Preparedness for disruption to to limit restrictions on imports, there is disruption from acute and chronic transport infrastructure along food nothing comparable to prevent limits on climate stresses.19 supply chains is often low. Climate exports. proofing transport infrastructure In July 2012, for example, Russia’s brings higher maintenance costs Once again, the poorest countries are Black Sea ports were struck by flash while diverting investment away from most at risk. The 2008 crisis meant floods, damaging key grain export the expansion of network capacity.27 33 net food-importing developing infrastructure and interrupting trade in a Yet as competition for capacity countries saw an increase in their year when drought had already brought heightens, and just-in-time business total food import bill of 0.8% of GDP, a 25% drop in production.20 In the models favour cost-efficiency over contributing to deteriorations in the United States, the ageing network of system redundancies,28 the potential balance of payments and inflation.31 locks and dams along the Mississippi impact of climate events on transport Because of a high reliance on River – a key artery for wheat, maize infrastructure will rise, signalling an ever unprocessed staples, the poorest and soybean exports – has struggled more severe risk to food security in households are particularly exposed to cope with rainfall extremes: in 2011, import-dependent regions. to rises in primary commodity prices. flooding led to delays in barge traffic The World Bank estimates that the and rerouting of freight via road and Systemic Crises 2008 crisis put 100 million more people rail; the following year a severe drought Although developed economies may into poverty globally.32 Among these saw water levels fall to levels that were be largely untroubled by food price households, food expenditures may almost unnavigable.21 More frequent spikes, they are vulnerable to knock- account for more than half of income, heatwaves and floods are also exerting on effects – such as instability and leaving families in a very difficult increasing stress on the country’s migration – arising from the impacts of situation if prices spike. railways and roads.22 If sea levels rise price spikes in less resilient countries. by 4 feet by 2100 as projected in recent High food prices in turn increase the climate models,23 around two-thirds of Recent years have witnessed a series risk of riots and instability, particularly port facilities along the US Gulf Coast – of spikes in international cereal market in countries that are politically fragile.33 out of which 20% of the world’s maize prices triggered by extreme weather During the 2008 food crisis, protests and soy exports are shipped24 – will be since linked to climate change – most erupted in 61 countries and riots at risk of water damage or inundation.25 notably the 2010 Russian heatwave in 23.34 Such events can lead to and 2012 US Midwest drought.29 Price cascading risks that move rapidly Damage to port infrastructure following rises can be amplified if governments through markets and polities with an extreme climate event further prioritize domestic food security at near- and long-term consequences. exacerbates disaster situations, the expense of global food security The spike in international wheat prices hindering the delivery of critical food by panic-buying, hoarding and after the 2010 Russian heatwave was supplies to affected populations and unilateral export controls. In 2008, felt keenly in North Africa – the largest

52 The Global Risks Report 2016 Part 1 Part

Box 3.2.2: Reducing Food Waste

Current estimates suggest around one-third of all food produced for human consumption is lost or wasted along the food

value chain, with a direct economic cost of US$750 billion per year. Excluding land-use change, the annual emissions 2 Part footprint of food produced but not consumed is around 3.3 million tonnes of carbon dioxide equivalent (CO2e), more than the total national emissions of India; the land requirement is almost 1.4 billion hectares, close to 30% of the world’s agricultural land area; and the blue water (surface and groundwater) consumption is approximately 250 cubic kilometres, three times the volume of Lake Geneva.1

Approximately half of this volume (54%) is lost in upstream processes including agricultural production (a third of the total alone) and post-harvest handling and storage; the other half (46%) is wasted in downstream activities such as processing, distribution, and consumption. Consumption wastage is much higher in high- and middle-income regions (31–39% of total losses) than in low-income regions (4–16%). Significant low-income losses at the post-harvest stage result from a lack of adequate infrastructure to prevent spoiling.2 3 Part

Compounding the problem of direct losses are wasteful, or resource-inefficient, forms of food production: grain-fed livestock production, for example, results in significant losses of edible calories along the food chain from those available from plants to those ultimately consumed by humans. This inefficiency is expected to become increasingly significant as a growing global middle class consumes more meat.

The cost of food wastage is significant not only in economic terms, but also for current and future resource and food security. Addressing food wastage offers significant potential to alleviate pressures on natural resources and the tightening

balance of supply and demand: it is estimated that halving the current rate of wastage could meet over a fifth of caloric 4 Part needs by 2050,3 reducing required cropland by 14% and agricultural greenhouse gas emissions by 22–28% (saving approximately 4.5 GtCO2e per year) relative to the counterfactual of no reduction in food wastage.4

Currently the environmental costs of food waste are externalized and the market incentives to reduce waste are minimal. Maintaining supply chains that deliver year-round uninterrupted supplies of produce are inherently wasteful because retailers depend on over-ordering and suppliers on over-producing. But currently the economic benefits of this model outweigh the costs. Exacting retail quality and presentation standards, consumer expectations, and legislation governing food re-use all exacerbate the problem by rejecting perfectly edible but non-aesthetically pleasing produce. Minimizing waste will therefore require technical innovations, legislative reform, and a recalibration of consumer expectations.5

Notes 1 FAO 2013. 2 FAO 2013. 3 Lipinski et al. 2013. 4 Bajželj et al. 2014. 5 FAO 2014.

wheat-importing region in the world Droughts, floods and heatwaves will case scenario that could precipitate – where the price of bread was the become increasingly severe as climate a systemic crisis of unprecedented subject of initial protests that became change accelerates. Extreme El Niño magnitude.38 the 2011 Arab Spring. events, which can wreak havoc with harvests in breadbaskets and food Conclusions In the same year, a prolonged drought insecure regions alike, are expected in Syria – since linked to climate change to become more common.36 The risk Climate change presents a profound – contributed to rural-urban migration of production shocks with systemic threat to food security because that heightened tensions in the nation’s consequences is increasing, with biophysical stresses mean it will cities before conflict erupted, leading profound implications for the stability of become increasingly difficult for to a civil war that remains in progress.35 international markets: one recent study agriculture to meet demand, and The long-term consequences of the found that what would have been a more extreme weather increases the sequence of events, beginning with 1-in-100 year global production shock risk of both local and systemic food extreme weather and ending with the over the second half of the 20th century crises. The poorest countries are Arab Spring and Syrian civil war, are still may have become a 1-in-30 year most vulnerable, but crop failures in playing out through ongoing conflict, event by 2050 – a more than threefold systemically important production mass migration and increased risk of increase in risk.37 A double breadbasket regions will have global consequences terrorism. failure, in which two critical harvests are that may extend beyond food systems. lost, now represents a plausible worst-

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Trade will be critical to managing 1. Big Data and Improved Climate- increased data analysis and modelling short-term production shortfalls and Risk Information Services capabilities. For example: matching long-term changes in supply and demand as the impacts of climate Timely, accessible and actionable – For many least-developed change on production accelerate climate and weather information countries and small island

Part 2 Part and demand for food increases in enables farmers, communities and developing states, improved developing countries. However, local authorities to identify their specific early-warning systems for natural as markets become increasingly vulnerabilities to climate variability and disasters are a key enabler of vulnerable to destabilizing production to develop response strategies. This sustained and climate-resilient shocks in breadbasket regions, they information is also key to any design growth and development. will become a source of risk as well as of the kind of efficient and effective Responding to that need, the a means of managing risk. insurance schemes further explored government of France proposed at below, which could help reduce the Third UN World Conference on Adaptation of agriculture is a priority exposure to economic losses. Disaster Risk Reduction in March for both public and private sectors, 2015 in Sendai, Japan, to mobilize Part 3 Part but it is not a panacea (see Box 3.2.1). Tailored information is critical, given the the international community to Agriculture is only one part of the global complexity and geographic specificity improve the climate resiliency of food system. Transport infrastructure of climate change impacts. One vulnerable countries, namely Small must also be climate-proofed. System example is high-resolution topographic Island Development States and resilience requires new rules to militate data, which will be made available by Least Developed Countries. During against export controls and may the US Geological Survey following the COP21 meetings in Paris, necessitate efficiency trade-offs such a White House announcement last the Climate Risk Early Warning as increased strategic storage. September. The data, generated from Systems (CREWS) initiative NASA’s Shuttle Radar Topography was officially launched by the More fundamentally, there are limits Mission (SRTM) in 2000, previously governments of Australia, Canada, Part 4 Part to what agricultural adaptation can covered only the United States; it France, Germany, Luxembourg achieve and significant uncertainty is now also available for Africa, and and the Netherlands. Collectively, about where, and when, these limits next year will expand to include Latin the six countries pledged over will be reached. The longer climate America and the Caribbean. This kind US$80 million to scale up improved change continues, the more likely of topographic data could greatly climate-risk early warning systems it is that these limits will be found. enhance agricultural planning for across 80 countries. According to the IPCC, “there may drought, glacial retreat, inland flooding, be a threshold of global warming landslides and coastal storm surges.40 – UN Pulse is the response to a call beyond which current agricultural from the United Nations’ High- practices can no longer support However, enhanced information alone Level Panel on the Post-2015 large human civilizations.”39 Without is not enough. Equally essential is the Development Agenda for data ambitious, determined action to reduce capability to model potential impacts on to “improve accountability and emissions and contain climate change interconnected environmental, social decision-making, and to meet at manageable levels, long-term food and economic systems if vulnerable the challenges of measuring security cannot be guaranteed. communities are to develop the better sustainable development capacities and integrated policies progress.”41 Labs in New York, Spheres of Action to needed for long-term resilience. It Jakarta and Kampala are is challenging, however, to develop bringing together government, Mitigate the Climate Risk actionable information from a large UN agencies, academia and the on Food Security range of data gathered from different private sector to pioneer new sources. Data are mostly insufficient approaches to using big data for This section addresses three spheres to meet the information needs for development. in which action can be taken. These evidence-based climate adaptation, include the use of big data to boost the especially in vulnerable developing – The Climate Services for efficiency and specificity of climate-risk regions that have large agricultural Resilient Development information; the provision of insurance sectors exposed to increased climate Partnership was launched by innovations that can reduce risk to risk. the United States during the small farmers, who are an essential Climate Summit in partnership and fundamental aspect of agricultural Consequently, attention is increasingly with the United Kingdom, the success; and the incentivization turning towards broad-based Asian Development Bank, the of climate-resilient, low-carbon partnerships that bring together Inter-American Development Bank, investments. information services, policy resources, Google, the Skoll Global Threats technological and modelling skills Fund, the American Red Cross, and capacity building and training. and the GIS software company Many of these partnerships cut across Environmental Systems Research public and private sectors to leverage Institute (ESRI).

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– The World Resources Institute to economic losses and thereby food of insurance while increasing its developed Global Forest Watch insecurity. effectiveness. For example, because is an online system to monitor not all parts of the continent will be forests and provide information to Robust and affordable weather affected by drought at the same improve their management (see insurance depends on the availability of time, by pooling drought risk across

http://www.globalforestwatch.org/ accurate data, together with improved all member countries ARC can 2 Part about/awards_and_testimonials). capabilities to forecast weather reduce individual premiums paid It combines satellite data variability and extreme events such by governments by up to 50%. To with modern mapping and as droughts. Today a combination of be eligible for insurance through information and communication data provided by weather stations with ARC, governments have to develop technologies to enable a new kind remote sensing and satellite imagery evidence-based contingency plans. of environmental monitoring and are helping scale innovative insurance decision-support tools. schemes across developing countries. In addition to regular ARC insurance schemes covering the costs for – A partnership between Google and Weather index insurance schemes, immediate responses to weather the Brazilian environmental NGO also known as “index-based financial disasters, the ARC Extreme Climate 3 Part Imazon, Google Earth Engine risk-transfer mechanisms”, pay Facility will issue data-based climate integrates satellite measurements out based on weather rather than change catastrophe risk bonds to dating back decades with other crop losses. They use an index of participating countries.43 These bonds data feeds such as weather productivity-relevant weather variables are structured as concessional finance information to map changes such such as precipitation onset and that must be used to reduce risk as deforestation in remote areas. intensity, streamflow and temperature: exposure and vulnerability. This not Future applications will enable the insurance pays out, for example, if only provides countries with incentives monitoring of sea ice change and measured rainfall falls below a specified to invest in climate-smart agriculture,

illegal fishing. level. but also improves long-term planning 4 Part and reduces investment risks for the – IBM’s Insight Cloud Service, a One advantage of weather index private sector. By blending public and partnership with Twitter and the insurance is that it removes the need private finance, ARC hopes to generate Weather Company, combines for expensive field visits to assess crop over US$1 billion in additional finance open data with private data to damage, reducing costs and improving over the next 30 years. produce analytics enabling, for accessibility of insurance for low- example, insurance companies to income smallholder farmers. Having 3. Financial System Shift to Unleash issue weather warnings to policy- such insurance coverage can create a Climate-Resilient, Low-Carbon holders. virtuous circle: it often is a necessary Investments condition for accessing bank loans or Such programmes illustrate how large- other credit, which in turn can be used Effectively tackling climate-induced scale collaborative efforts that leverage to invest in improved agricultural inputs risks will require new ways to incentivize large data sets, scientific modelling, for increased productivity and reduced climate-smart investment. Despite computational power and capacity- risk exposure. Weather index insurance increasing recognition of the economic building programmes can improve local schemes also remove the possibility of risks, global financial systems are decision-making to increase resilience poorly designed crop failure insurance yet to incorporate them into financial and reduce exposure to important food schemes that effectively incentivize decision-making. Finding ways to security-related risks. farmers to allow crops to fail. adapt established risk assessment analytics, models and reporting 2. Reducing Economic Exposure With nearly two-thirds of its population frameworks could unleash larger flows through Insurance Innovations working in agriculture – 80% as of capital towards climate-friendlier smallholder farmers – Sub-Saharan investments. Crop insurance schemes do not Africa is especially vulnerable to food always deliver sufficient protection insecurity caused by droughts and For many executives and boards of for small farmers against potential temperature rises. World Bank data directors, climate risks seem less losses – either because they are too suggest that Sub-Saharan countries immediate than other issues. Even expensive for low-income smallholder will need between US$14 billion and where Environment, Social and farmers or because they provide US$17 billion per year from 2010 to Corporate Governance (ESG) data perverse incentives that discourage 2050 to adapt to climate change.42 are disclosed, investors often remain policy-holders from investing in crop The Africa Risk Capacity (ARC) is unaware of the severity of the threat: productivity. International aid for an innovative African Union initiative, these data tend to be appended in an disaster relief financing has often launched in 2014, to help close the annex rather than integrated into core proved to be slow, ad hoc and financing gap by improving insurance financial statements, and they do not expensive. Innovative climate-informed for climate-related risks. make clear the materiality of specific insurance schemes can help to climate and regulatory risks. The sheer address the shortcomings in these two ARC combines several risk transfer number of ESG criteria is a barrier models, efficiently reducing exposure mechanisms to reduce the cost to comparability and identification of

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material risk. Most analysts do not take outcome, goals and targets of the economic sectors to increase the opportunities such as earnings calls to Sendai Framework for Disaster resilience of balance sheets to raise questions on material climate risk. Risk Reduction 2015–2030.44 climate shocks, while increasing By engaging and expanding the transparency of a company’s Finding ways to factor climate and the number of private sector exposure to climate risk.

Part 2 Part regulatory risks into short-term organizations and others involved decision-making processes and related in supporting the implementation of financial metrics is essential for driving the Sendai Framework for Disaster, climate risk–informed investments. This AR!SE will provide a robust and requires not only using better, forward- effective mechanism to allow looking data and metrics, but also the private sector to implement mainstreaming these elements in core tangible projects and initiatives financial processes and indicators. One that deliver results critical to the major step in that direction is the recent achievement of the outcome and announcement of Mark Carney, the goal of the Sendai Framework.45

Part 3 Part Governor of the Bank of England and Chair of the G20’s Financial Stability – The Investor Confidence Board (FSB), for the FSB to support Project, led by the Environmental global efforts for voluntary standardized Defense Fund, seeks to create a reporting on financial risks associated marketplace for energy efficiency with climate change. by standardizing energy efficiency protocols. Standards are an Corporate commitments and domestic important enabler for growing regulatory reform can also be important investments in emerging industries drivers of change. At the COP21 in because they provide the Part 4 Part Paris a number of new corporate transparency, comparability and commitments to decarbonize security required by underwriters portfolios, issue green bonds, or and investors. Retrofitting buildings support more robust carbon pricing to be more energy efficient is were made. They send important one example where lack of signals to the broader business and standardization is a barrier to investment communities and help scaling up investment, despite the to win the trust of governments in clear economic benefits. corporate support for improved climate-friendly regulations. China’s – The Banking Environment Green Credit Policy, launched in 2007, Initiative (comprising Barclays, is an example of how regulators can BNP Parisbas, BNY Mellon, tip markets towards more sustainable Deutsche Bank, Goldman Sachs, investment. Lloyds Banking Group, Northern Trust, The Royal Bank of Scotland Understanding how regulatory reform (RBS), Santander, SMBC, across sectors can help align financial Standard Chartered, Westpac) markets with sustainable development has led the development of new is the objective of the United Nations trade finance instruments, such Environment Programme’s Inquiry as Sustainable Shipment Letter into the Design of a Sustainable of Credits, intended to incentivize Financial System. Other recently sustainable land use and to launched initiatives seek to align preserve forests when working in various aspects of the financial markets developing tropical nations. with climate-associated financial risk and sustainable development: – The 1-in-100 Initiative seeks to stimulate and reward – The AR!SE Initiative (Private climate-resilient investment Sector Alliance for Disaster through collaboration involving Resilient Societies), a global effort insurance companies, regulators, led by the United Nations Office for scientists, modellers, accounting Disaster Risk Reduction (UNISDR), professionals, investors and aims to provide a new vehicle for other stakeholders. The initiative collaboration between the private focuses on adapting lessons and public sectors that can unlock from the insurance industry about enormous potential at the local, how regulatory reform for capital national, regional and global levels requirements and accounting to contribute to achieving the procedures can be applied to other

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Endnotes References

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4 Lee et al. 2012, pp 46 and 109. Alexandratos, N. and J. Bruinsma. 2012. World Agriculture Towards 2030/2050: The 2 Part 2012 Revision. ESA Working Paper No. 12-03. Rome: United Nations FAO. 5 2030 Water Resources Group.2009. See also World Water Assessment Programme 2009. Bailey, R., T. G. Benton, A. Challinor, J. Elliott, D. Gustafson, et al. 2015. Extreme Weather and Resilience of the Global Food System. Final Report prepared for the 6 Lee et al. 2012. UK-US Taskforce on Extreme Weather and Global Food System Resilience, The 7 Rizzo 2009. Global Food Security programme, UK. 8 Lobell and Gourdji 2012. Bailey, R., L. Wellesley, and F. Preston. Forthcoming. Vulnerabilities and Chokepoints in Global Food Trade. London, UK: Chatham House. 9 Porter et al. 2014. Bajželj, B., K.S. Richards, J.M. Allwood, P. Smith, J.S. Dennis, et al. 2014. 10 Sanchez, Rasmussen, and Porter 2014. “Importance of food-demand management for climate mitigation”. Nature Climate 11 See, for example, Feng et al. 2015; Myers et al. 2014; O’Leary et al. 2015. Change 4: 924–29.

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NASA. 2014. “U.S. Releases Shuttle Land Elevation Data to Aid Global Climate World Bank. 2008. “Food Price Crisis Imperils 100 Million in Poor Countries, Zoellick Resilience”. News, features & press releases, 23 September 2014. https://www. Says”. World Bank News & Broadcast, 14 April 2008. nasa.gov/content/us-releases-shuttle-land-elevation-data-to-aid-global-climate- 2013. Turn Down the Heat: Climate Extremes, Regional Impacts, and the Case resilience/#.VnAOLEorJph for Resilience. A report for the World Bank by the Potsdam Institute for Climate Natalini, D., A.W. Jones, and G. Bravo. 2015. “Quantitative assessment of political Impact Research and Climate Analytics. Washington, DC: World Bank. fragility indices and food prices as indicators of food riots in countries”. Sustainability World Water Assessment Programme. 2009. The United Nations World Water 7: 4360–85. Development Report 3: Water in a Changing World. Paris, France: UNESCO and Part 2 Part Nelson, G.C., M.W. Rosegrant, A. Palazzo, I. Gray, C. Ingersoll, et al. 2010. Food London, UK: Earthscan. Security, Farming, and Climate Change to 2050: Scenarios, Results, Policy Options. WRI (World Resources Institute). 2013. World Resources Report 2013–2015: IFPRI Research Monograph. http://www.ifpri.org/publication/food-security-farming- Creating a Sustainable Food Future. Washington, DC: World Resources Institute. and-climate-change-2050 http://www.wri.org/our-work/project/world-resources-report/world-resources-report- Nelson, G.C., H. Valin, R.D. Sands, P. Havlík, H. Ahammad, et al. 2013. “Climate 2013-2015-creating-sustainable-food change effects on agriculture: Economic responses to biophysical shocks”. PNAS 111 (9): 3274–79. http://www.pnas.org/content/111/9/3274 Nelson, G., D. van der Mensbrugghe, H. Ahammad, E. Blanc, K. Calvin, et al. 2014. “Agriculture and climate change in global scenarios: Why don’t the models agree?” Agricultural Economics 45: 85–101. doi: 10.1111/agec.12091 O’Leary, G.J., B. Christy, J. Nuttall, N. Huth, D. Cammarano, et al. 2015. “Response Part 3 Part

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Part 4 Part Food security and food production systems. In: Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Field, C.B., V.R. Barros, D.J. Dokken, K.J. Mach, M.D. Mastrandrea, et al. (eds.)]. Cambridge, UK and New York: Cambridge University Press, pp. 485–533. Rizzo, A. 2009. “UN food agency says 1 billion people going hungry each day”, Associated Press, 20 June 2009. Sanchez, B., A. Rasmussen, and J. Porter. 2014. “Temperatures and the growth and development of maize and rice: A review”. Global Change Biology 20: 408–17. Schwartz, H. G., M. Meyer, C. J. Burbank, M. Kuby, C. Oster, et al. 2014. Ch. 5: Transportation. Climate Change Impacts in the United States: The Third National Climate Assessment, J. M. Melillo, Terese (T.C.) Richmond, and G. W. Yohe, Eds., U.S. Global Change Research Program, 130–149. doi:10.7930/J06Q1V53. Sims R., R. Schaeffer, F. Creutzig, X. Cruz-Núñez, M. D’Agosto, et al. 2014: “Transport.” In Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Edenhofer, O., R. Pichs-Madruga, Y. Sokona, E. Farahani, S. Kadner, et al. (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA. Tuttle, H. 2014. “Using cat bonds for climate change risks”. Risk Management Magazine 2 December 2014. http://www.rmmagazine.com/2014/12/02/using-cat- bonds-for-climate-change-risks/ US Department of Transportation. 2011. ‘Impacts of Climate Change and Variability on Transportation Systems and Infrastructure: The Gulf Coast Study.’ https://www. fhwa.dot.gov/environment/climate_change/adaptation/ongoing_and_current_ research/gulf_coast_study/gcs.pdf UNISDR (United Nations International Strategy for Disaster Relief). 2015. The Sendai Framework for Disaster Risk Reduction 2015–2030. Geneva: UNISDR. United Nations Global Pulse (Harnessing big data for development and humanitarian action). 2015. http://www.unglobalpulse.org/about-new Vanuatu, Government of. 2015. Vanuatu: Post-Disaster Needs Assessment – Tropical Cyclone Pam, March 2015. Government of Vanuatu. von Braun, J. 2008. Food and Financial Crises: Implications for Agriculture and the Poor. Washington, DC: International Food Policy Research Institute (IFPRI). Walsh, J., D. Wuebbles, K. Hayhoe, J. Kossin, K. Kunkel, et al. 2014: Ch. 2: Our Changing Climate. Climate Change Impacts in the United States: The Third National Climate Assessment, J. M. Melillo, Terese (T.C.) Richmond, and G. W. Yohe, Eds., U.S. Global Change Research Program, 19–67. doi:10.7930/J0KW5CXT. Willenbockel, D. 2011. Exploring Food Price Scenarios Towards 2030 with a Global Multi-Region Model. Oxfam Research Report. http://policy-practice.oxfam.org.uk/ publications/exploring-food-price-scenarios-towards-2030-with-a-global-multi- region-model-132376

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resistant strains, mutating viruses, or 3.3 Global Disease Outbreaks a pandemic that is so large it renders response supplies inadequate. Advances in research and the

discovery of diagnostics, drugs and 2 Part vaccines have saved millions of lives, Risk of Infectious Disease Causes for Concern but these gains remain very fragile Outbreaks: Analysis and are under threat from the growing By 2050, the world’s population will resistance of microorganisms to the have risen to 9.7 billion.2 Cities will most effective known medicines. The The recent Ebola crisis will not be the become increasingly dense and shanty number of deaths in the European last serious epidemic the world faces; towns – with inadequate housing and Union and the United States as a indeed, public health outbreaks are a lack of basic services such as water, direct result of antibiotic-resistant likely to become ever more complex sewerage and waste management bacteria is increasing every year,

and challenging. Despite progress in 3 Part – will swell. A combination of high and the burden in low- and middle- some aspects of public health over the population density, poverty, changes income countries is much higher.6 past two decades, endemic infectious in social structures, and a lack The emergence and spread of strains diseases remain a major problem, and of public health infrastructure will of HIV, tuberculosis and malaria that new or resurging infections, the spread create progressively more favourable have evolved resistance to current of drug resistance and the rise in conditions for communicable diseases. medicines are of particular concern, non-communicable diseases all pose as they could overturn much of the enormous challenges to often fragile Meanwhile the increasing transnational progress made against these diseases health systems.1 flow of commodities, people and in recent years. An independent review, animals coupled with increased spatial

funded by the Wellcome Trust and 4 Part Infectious diseases, which are density will magnify the transmission the UK government, estimates that among the leading causes of death of these diseases, both between by 2050, if no action is taken, these worldwide, do not confine themselves people and across the human-animal drug-resistant strains could cost an to national borders. Their capacity to barrier.3 Most large cities have airports additional 10 million lives each year and spread rapidly across geographies through which millions of passengers around US$100 trillion in lost output; – jeopardizing social and economic travel: over 2 billion global passengers approximately the equivalent of losing security as well as challenging human travelled annually by air in the first the UK economy from global output health and well-being – is amplified by decade of the 21st century, compared every year.7 ever-growing globalization, increased with just 68.5 million in the 1950s.4 trade and travel, the rise in urbanization, Continued growth in the movement Infectious diseases that are not and changes in the environment, of people and commodities between currently on the radar are also a cause behaviour and society. Some threats, urban centres intensifies the risk for concern. The greatest potential such as influenza, are known. Others of infectious transmissions across threats among unknown pathogens are not. Unknown just a few decades geographies and diminishes the ability are those that spread easily – through ago, HIV/AIDS has killed more than 30 to respond to, and effectively prepare the air, for instance – and to which million people from all socio-economic for, a global disease outbreak. humans have little or no immunity. The backgrounds. What might be the 2002–2003 SARS pandemic provides next HIV/AIDS, and are we sufficiently A recent study led by the University one recent case study: ultimately prepared for its arrival? of Cambridge identified 20 known governments, businesses and people infectious diseases that have re- came together to overcome the At the same time, new opportunities emerged or spread geographically, outbreak, although not before it had to predict, prevent, detect and including dengue, chikungunya, caused nearly 8,000 infections and 800 treat diseases are emerging from a typhoid, West Nile, artemisinin- deaths across 29 countries.8 The death better understanding of the social resistant malaria and the plague.5 Other toll would have been much higher had determinants of health and from trends known threats – such as influenza the virus been more easily spread: including new technologies in real-time (i.e. H1N1 Swine Flu), MERS-Cov, infectious disease experts believe that diagnosis, data analysis (including and Ebola – continue to raise fears, if SARS had been more contagious, it in the field of genomics), biomedical especially when they take hold in could have become one of the worst research, the internet and mobile data densely populated areas and when pandemics since the 1918 influenza and communications, often developed treatment and prevention measures outbreak that killed 50 million people.9 outside the traditional health sector. are not necessarily available. Even More innovative ideas, partnerships, when known infectious diseases can The SARS crisis demonstrates the and ways of working and financing will be mitigated by existing treatments or socially destabilizing potential of be critical for containing the dynamic vaccines, we face the risk of emerging unfamiliar new diseases. As affected threat of outbreaks in the 21st century.

Part 3.3 was contributed by Jeremy Farrar, The Wellcome Trust, Stéphanie Cristin, World Economic Forum and Priya Basu, The World Bank. The Global Risks Report 2016 59 Part 1 Part

areas came to a standstill, in cities by the recent Ebola outbreak, these Challenges in Containing the Risks such as Beijing, Singapore and Toronto reactions can be rational or they can people stayed home, public places dramatically overestimate risk, leading To know where to channel resources emptied and health workers were to a wide variety of factors that can most effectively, stakeholders face shunned.10 Next time an unfamiliar negatively impact the economy, from the challenges of preparing for

Part 2 Part disease causes panic, there is no stress to labour and supply scarcity, and responding to known threats guarantee that it will occur in a financial market instability, and price and anticipating the source of new geography where effective solutions increases. ones. The lack of adequate, resilient can be initiated as quickly as in this public health surveillance systems, instance. Furthermore, the risk posed The economic impact of aversion infrastructure to effectively deploy by the immediate effects of outbreaks behaviour may be significantly greater resources and a health workforce to must not minimize the long-lasting than the direct economic impact from provide accessible, quality care where effects on society as a whole. The sickness and death. In the Ebola crisis, needed leaves us vulnerable to regional recent Ebola crisis in West Africa the loss of life in Guinea, Liberia, and and global spread. Many emerging points to the intensified nature of the Sierra Leone was accompanied by infections and antibiotic-resistant Part 3 Part risk and its heightened complexity the closure of businesses, dramatic strains of common diseases originate in places where health systems are reductions in travel and tourism, in one location and then disseminate to vulnerable and lack diagnostic or and trade slowing to a trickle. At the new places at often alarming speeds: response measures. Over the course beginning of 2014, expected economic societies are only as strong as the most of the crisis, more than 11,000 people growth for the year was 5.9% in Liberia, fragile health system (see Initiative 1). died and more than 16,000 children 11.3% in Sierra Leone and 4.5% in were orphaned.11 Basic health services Guinea. By the end of the year, actual Preparedness and response measures such as prenatal consultations, routine growth was only 2.2% in Liberia and must therefore address three key vaccinations, antiretroviral therapies 4.0% in Sierra Leone, while in Guinea areas: behaviour; diagnostic, drug and and treatment of endemic diseases the economy shrank.14 In Liberia, more vaccine research and development Part 4 Part in the region were sharply reduced. than 70% of households reported (R&D); and regulatory and financial As stigma rose, schools closed while having insufficient money to buy environments. growing distrust and fear shifted food.15 The adverse impacts were not community interactions. The hours of restricted to countries that experienced Behaviour schooling lost, the reconfiguration of cases of Ebola: Burkina Faso, Côte The multifactorial nature of broader families, and decreased food security d’Ivoire and the Gambia all experienced global health issues poses an and employment, to name only a few of adverse impacts on GDP.16 For 2015, enormous challenge to all stakeholders the epidemic’s effects, will impact the the World Bank estimated a potential – governments, non-governmental affected region well beyond the halt of loss in GDP of more than US$1.6 billion organizations (NGOs), industry and the outbreak.12 in the three most affected countries, citizens. Changing demographics, and more than US$500 million across climate change, urbanization, travel, Economic Risks the rest of the continent. political instability, war and terrorism are only a few of the factors challenging Beyond direct effects on health, Any fears about an inability to our preparedness for and response infectious diseases impose significant contain a major epidemic will have to endemic and emerging infections economic costs. Adding to the direct economic effects outside the affected and the spread of non-communicable costs borne by sufferers and their areas because of the increasingly diseases. households, infectious diseases – interconnected nature of the global particularly those that are relatively fast- economy. The economic impact of There is an urgent need for society spreading or poorly understood by the the Ebola epidemic could have been to value and invest more in evidence- general population – have an additional much worse: at its height, the most informed public health strategies. economic impact through a response pessimistic epidemiological projections Despite major advances in the global called “aversion behaviour”. This was of how the disease could spread, economy over the past 50 years, demonstrated when Singapore came combined with economic modelling, millions of people worldwide still cannot to an economic standstill over SARS, suggested a potential impact of tens access basic needs, such as improved as well as in responses to Ebola in 2014 of billions of dollars in West Africa tap water and toilets. and HIV/AIDS in the early 1980s. alone.17 During the SARS outbreak in Even with political interventions to 2003, estimates of the potential impact provide the necessary infrastructure, Aversion behaviour includes actions ranged from US$30 billion to US$100 halting the spread of infectious taken by individuals to avoid any billion. In the case of SARS, too, the diseases will require addressing exposure to the illness, as well as actual impact was likely lower because individual and collective human actions taken by investors as they the epidemic was contained – but the behaviours. Proper prevention anticipate those individual decisions.13 economic damage was still significant.18 and responsible, fact-based Even individuals who have no direct crisis communication, including contact with the disease will take a educational campaigns and behaviour range of actions to avoid any risk of change strategies to facilitate the contracting the disease. As shown long-term adoption of health-

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of barriers hindered the ability to expedite clinical trials. Mobile data is Box 3.3.1: Health Communication another area where regulations on privacy need to be balanced with Health communication often receives less attention and fewer resources than public health imperatives, as it has

medical, scientific or policy areas. However, failure to convey the right information increasing potential to track the spread 2 Part risks costly consequences at the individual and societal levels. In a crisis situation, of epidemics (see Initiative 3). panic can spread quickly and the way communication is handled can either cost or save lives. Models that combine thinking from theories of complex systems, The sluggishness of progress towards crowd dynamics, group psychology and information are being used to assess the a regulatory environment specifically impact and effectiveness of mass communication in the event of a major health targeted to epidemic crisis situations outbreak. is a matter of growing international concern. This work needs to be Prevention is another area in which communication must be handled with care. For coordinated by an empowered and decades, governing bodies have considered that simply providing the most properly funded global health body: accurate information to people was the best way to improve public health the World Health Organization (WHO). 3 Part prevention. However, evidence for this approach has not been encouraging – A collaborative framework exists – messages on the dangers of smoking, for example, have had relatively little effect the International Health Regulations, on behaviour. As understanding grows about the circumstances in which originally created in 1969 to contain individuals do not make rational choices, a more subtle form of prevention is cholera, smallpox, yellow fever and the getting momentum. As well as providing information, this involves “nudges” – plague, and since expanded to cover evidence-informed strategies that, rather than forced compliance, encourage the more diseases – but it does not provide adoption of behaviours and habits that are good for people and social groups. adequate reassurance that countries are putting in place what is needed to

The incentives employed are not necessarily monetary; they could be compliance prepare for, and respond to, emerging 4 Part with social norms or aversion to risk, drawing on insights from behavioural crises. economics, psychology, anthropology and neuroscience. After the British government led the way in the late 2000s, many countries have set up behavioural Countries need to be empowered to insight units that have led to significant improvement in the effectiveness of public allow a timely and robust response so health prevention. On 15 September 2015, President Obama signed an executive they can request and expect speedy order to further the use of behavioural insights in improving policy-making. international assistance when needed. Incentives and financing mechanisms need to be generated to encourage maintaining behaviours, need to be diagnostics, drugs, and vaccines and investments in public health, and carefully designed, field-tested and compliance with treatments.19 countries need to be held accountable. implemented (see Box 3.3.1). Platforms such as the Global Health The recent Ebola outbreak arguably Security Agenda and the WHO’s Global Understanding the social and cultural illustrates the human cost of the Influenza Surveillance and Response contexts that may contribute to current development model in the System have had some success and epidemics, such as burial practices face of potential public health threats. aim to complement current regulations or misconceptions about how a Recent tests on an Ebola vaccine in and mitigate threats, but they fall short disease is transmitted, is also critical. Guinea seem to show that it provides of constituting a comprehensive, To increase trust in evidence-based remarkable and immediate protection; robust global system with the flexibility medical interventions, it is essential to however, the same vaccine had to defend against both known and gain insight into cultural sensitivities been tested on monkeys a decade unknown biological threats. and work in partnership with local ago, but subsequently languished in communities. scientific limbo (see Box 3.3.2).20 Had The Future of Collaboration resources been devoted to following Diagnostic, Drug and Vaccine through earlier, the development of a From logistics to communications, from Research and Development vaccine could have been accelerated, financial services to pharmaceuticals, It can take 20–30 years to develop a potentially saving many of the 11,000 the private sector has capabilities and new drug or vaccine, and the costs casualties. expertise that can be truly beneficial in and risks are high. R&D efforts are not a public health outbreak. To leverage coordinated to achieve their greatest Regulatory and Financial Environments them most effectively, however, impact: the current model prioritizes Despite the progress that has been requires common ground and trust- the development of profitable products made in the last two decades, more based cooperating mechanisms at that can generate maximum sales, needs to be done to create enabling local and global levels with the public usually through volume rather than regulatory environments. Development and non-government sectors that have benefits, instead of focusing on unmet of the aforementioned Ebola vaccine, been established in advance of an public health priorities. There is a lack for example, could conceivably have emergency (see Initiative 2). of mechanisms that incentivize and been accelerated more quickly as the stimulate the development of novel epidemic took hold, but a number

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Box 3.3.2: Developing an Ebola Vaccine: Reflections on the Current Regulatory Environment

In the 38 years between the first Ebola epidemic in Zaire (now the Democratic Republic of Congo) and its December 2013

Part 2 Part emergence in Guinea, methods for containing Ebola were standardized but few advances were made in the development of a vaccine.

By 2009, at least seven Ebola vaccines had been tested in monkeys.1 Yet by 2014 none had been through phase I safety testing in healthy human volunteers. There were no existing study protocols for evaluating experimental vaccines or treatments in an epidemic setting, which meant that it took time to design and agree on the way forward and gain ethical approval. Even when protocols were agreed, some organizations delayed supplying their therapeutics – not from lack of enthusiasm, but because they did not have pre-agreed frameworks in place to allow them to do so. As the crisis neared its peak in August 2014, three candidate vaccines were in development with the potential to be used in clinical trials:

Part 3 Part 1. Merck (Newlink) had VSV-EBOV, originally developed in partnership with the Canadian government. Merck had preclinical data, but the vaccine had not been tested for safety in phase I human trials. Safety trials commenced only in October 2014. 2. GlaxoSmithKline (GSK) had ChAd3-ZEBOV, originally developed by Okairos, but again with no human safety data. Phase I trials began in September 2014. 3. Johnson & Johnson’s phase I clinical trials began in January 2015.

Despite these delays, infectious disease experts argue that in some ways the world was relatively lucky with Ebola – vaccines had already been in development because the pathogen had been earlier identified as an infection with bioterrorism potential.

Part 4 Part This is not the case for other known diseases, such as MERS-CoV, chikungunya and West Nile, which will require a focused and coordinated R&D effort.

The current development model in vaccinology could be improved in three main ways. First, there should be leadership and coordination of clinical trial activities in epidemics by a neutral body to ensure that they are efficient and properly prioritized. As the Ebola outbreak took hold, a multitude of countries and research consortiums planned phase I and II/III clinical trials, but there was little coordination of these efforts. The WHO, working with member states, philanthropists, industry, NGOs and academia, should coordinate this priority-setting and ensure equitable access.

Second, phase I clinical trials must be conducted in the inter-epidemic period, at least for known diseases where a vaccine/ treatment is feasible or already in development. We must also develop novel platforms to allow for an assessment and preparation for hitherto unknown infections. Finally, agreed trial protocols, contracts and initial ethics approvals for phase II/III studies should be drawn up so that, when an outbreak begins, trials can start within days or weeks, not in months.

Note 1 Plotkin, Mahmoud, and Farrar 2015.

There is a long history of public-private – Ways to harness the data being – Ways to optimize in-country cooperation in response to infectious generated by businesses in a operators in source regions diseases. The Medicine for Malaria range of sectors to strengthen who can provide on-the-ground Venture (MMV) and the Global Alliance predictive models and improve capabilities for building stronger for Vaccine Initiative (GAVI), for instance, early detection and monitoring of health systems and early-stage are long-standing examples of cross- epidemics; logistical support in a crisis, and sector partnership that came out of a – Ways to drive forward the research who can undertake emergency projected public health disaster that agenda by pairing private vaccine, response measures; and was the result of escalating antimalarial drug and diagnostic researchers – Ways to promote responsible drug resistance in the late 1990s and with public health experts and media engagement as part of crisis the need for greater equitable access policy-makers; management communications, to vaccines. – Ways to improve regulatory with the identification of trusted frameworks and policies across sources of information and the Despite these and similar advances, nations; dissemination of messages new collaborative approaches are targeted to the right audience, – Ways to provide stable and flexible needed as the danger of outbreaks using the most appropriate local or long-term financing to deliver the grows. Such approaches could global information channels. explore: necessary interventions;

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Box 3.3.3: The Pandemic Emergency Financing Facility (PEF)

The world’s Ebola response has highlighted the need for new financing mechanisms that can quickly deploy emergency

funding and rapid response teams at the first sign of a crisis. 2 Part

The World Bank Group is working with the WHO and other partners, including Munich Re and Swiss Re, on one part of the solution: the Pandemic Emergency Financing Facility (PEF). The PEF would respond to the G20 Brisbane Leaders Statement on Ebola, and it received the endorsement of G7 leaders in Germany in June 2015. Its open platform structure will be able to function effectively within the evolving global pandemic financing architecture.

Simply put, the PEF would purchase private sector insurance coverage for developing countries to cover the immediate costs of crisis response. It would deliver financing swiftly to governments and international partners, once a pre-agreed parametric trigger is invoked. The payouts to the affected countries would come from the bond markets and (re)insurance companies. In both cases the insurance premium would need funding from donors, although potential beneficiaries could also contribute. 3 Part Over time, the PEF would grow in terms of size, geography and events covered, as the market for pandemic risk insurance in developing countries grows. Governments have already used this model to successfully manage climate and natural disaster risks.

Preventing future infectious disease outbreaks from becoming human and economic tragedies requires action on several fronts. First, countries must invest in better preparedness, which starts with focusing on core public health functions and strengthening health systems. Second, there is a need for a smarter, better-coordinated global epidemic preparedness and response system that draws on the expertise of many more players; in this context, more effective public-private partnerships

are critical, particularly around logistics and communications. Third, a better-resourced and empowered WHO that is 4 Part equipped to work with countries in monitoring outbreaks, identifying potential threats and mobilizing on-the-ground support is an imperative.

Because assessing insurance premiums creates incentives to quantify the risks, a financing mechanism such as the PEF could help on all the above fronts. It could create two important differences the next time there is a potential pandemic:

– Financing would be available quickly (within days) from the PEF, bringing discipline and rigour to the whole system because a response strategy is thought out pre-emptively. – The PEF’s design and in-built contingencies would drive the various concerned national and international players to work together more effectively and coherently in advance, thus ensuring the appropriate highest level of crisis preparedness and response readiness.

New predictive models, financing options, such as draw-down facilities, becomes ever more complex and mechanisms and leadership for the insurance programmes and bonds. our interdependency grows, it is preparedness and response of future clear that new equitable approaches, outbreaks and antimicrobial threats are The World Bank Group, in collaboration technologies and innovative community key to reducing the risks we face in the with the WHO and private sector and business models, and response short, medium and long term. players, including Swiss Re and strategies and financing mechanisms Munich Re, is developing an insurance will increasingly be needed to contain The Ebola response was financed by product that will provide early financing known and unknown threats that contributions from a range of non- to affected countries to respond to endanger social and economic stability governmental organizations, notably future epidemics (see Box 3.3.3). worldwide. There must also be better Médecins Sans Frontières, philanthropy Such initiatives and incentives could mechanisms in place to manage risks (the Bill & Melinda Gates Foundation, be linked with the willingness of through international cooperation, the Paul G. Allen Family Foundation, governments to invest sustainably involving both the public and private the Skoll Foundation, and the and in a verifiable way in critical public sectors beyond the traditional Wellcome Trust), governments, social health infrastructure. healthcare industry. sector organizations, private sector companies and individuals. However, Conclusion new models are needed if future response is to be faster, more stable, The Ebola crisis has put the spotlight flexible and long term. To enable such on the importance of reducing the models, the private and public sectors vulnerability of societies to infectious must jointly develop new financing disease threats. As public health

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Three Initiatives to Mitigate health systems; most strengthening 2. Harmonizing Public-Private interventions address only one of these Networks: The Key for Early the Risk and Impact of blocks. Some target health worker Detection and Response Global Disease Outbreaks training; others focus on demand financing and insurance schemes; Coordination and time are invaluable 1. Building Resilient Health Systems Part 2 Part still others aim to improve service assets in an emergency, so delivery and access to medicines and mechanisms that bring together As highlighted most recently by the technologies. Although all these efforts public and private players in high-risk Ebola crisis, a single and localized lead to meaningful improvements, their geographies to address emerging outbreak can put national and even impact remains limited because they epidemics are likely to pay dividends. international health systems at risk if do not address all dimensions of the Although response measures remain they are unprepared to react quickly. health system in a synchronized and primarily international, harnessing the The world will remain vulnerable to synergistic way. potential of national and local actors to public health emergencies until every optimize early detection and response state has comprehensive primary It is critical to understand the most on the ground is also critical. Part 3 Part care services, an adequate number efficient way for all health stakeholders of healthcare workers, available to collaborate. An extensive Local actors or in-country operators medicines, robust health information analysis of successful innovations (multinationals and small or medium- systems, infrastructure, public financing in emerging economies has shown sized enterprises) have the greatest and a strong government to deliver that well-thought-out ecosystems of incentive to act swiftly in any outbreak equitable and high-quality services to partnerships can significantly improve or epidemic.23 They are motivated all its citizens. the impact and financial sustainability of not only by responsibility to their health initiatives. communities but also by a desire to During and in the aftermath of an protect their operations, maintain outbreak, health systems become Ogun State in Nigeria, for instance, business continuity and reduce Part 4 Part more vulnerable to new crises. For is pioneering an ecosystem of business risks. Embedded in their example, in November 2014 fewer than partnerships that synchronizes all communities, and often operating half of the health facilities in Liberia projects and programmes in primary in remote areas with little public were seeing patients; the government service delivery, creating a model that infrastructure, they are likely to see estimates that from May to August will increase low-income individuals’ emerging public health issues at 2014, skilled birth attendance was access to basic healthcare that can be an early stage. They also have the 27% below 2013 levels, measles replicated in other Nigerian states. capacity to raise an alert in the event of immunization was down 50% and The World Economic Forum supported an emerging threat. overall health services were operating the state’s Commissioner of Health in at 40% lower capacity. Even in areas convening private and public sector The potential of private sector actors where essential health services stakeholders that together defined the to contribute in an emergency was have begun to resume, the loss of priorities and mapped out partners prominently witnessed in the Ebola these services during the height of that could contribute in a synergistic crisis. Although several multinationals the epidemic continues to have an way. Projects include a state- chose to shut down their operations impact.21 subsidized insurance scheme, work on and leave the area, many others – modernizing transport and logistics, along with domestic businesses During the United Nations Development upgraded equipment, improved – maintained their presence and Programme (UNDP)’s International sourcing of basic medical products, contributed meaningfully to the Ebola Recovery Conference in July and a community-based primary care response through channels such as the 2015, the international community facility model with elements of public- Ebola Private Sector Mobilizing Group pledged funds to build robust health private partnership. The intervention is (EPSMG). In-country operators such as systems to “get to zero and stay at coordinated by a project management ArcelorMittal conducted initiatives on zero” in the Ebola-affected countries. unit funded and managed by African community awareness and screening However, it took a global health threat Health Markets for Equity in partnership programmes, and used their machinery and close to 11,000 deaths to create with governments, foundations and and capacity to construct Ebola this momentum. private sector players from across Treatment Centres. Alcoa educated industries. its employees and their families on the One challenge to strengthening health transmission of Ebola and taught them systems is that very few programmes The programme is the first of its kind how to protect themselves. Firestone address the entire system. No single in aiming to build the resilience of an built its own isolation and treatment innovation or player can allow an entire entire health system. Although still in centre in its facility after a case was system to leapfrog in the way that, its early stages, it has already won detected and nearby hospitals were in the telecommunications industry Nigeria’s Excellence Award for 2015, unable to accommodate the patient. for example, mobile phones made it which recognizes efforts in healthcare Beyond funding and in-kind donations, unnecessary to establish expensive delivery. local actors also played an important infrastructure for landlines.22 The WHO role in influencing decision-makers has identified six building blocks of and mobilizing each other: the Sierra

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Leone EPSMG chapter successfully of defining a broader coordination social network analysis. The resulting lobbied to keep national ports open, mechanism to expand regionally and communications and data collection which enabled crucial supplies to be apply globally. system allows for faster identification shipped in as well as minimized the of transmission chains, which in turn loss of livelihoods through disruption to 3. Big Data and Infectious Diseases: allows for faster isolation of potentially

economic activity. Mapping the Outbreak contaminated individuals and a more 2 Part effective implementation of ring Although these and many similar efforts One key to determining how viruses vaccination when necessary. deserve and have received recognition, spread is to understand how people a lack of coordination limited the ability move around and interact with one The Ebola crisis also saw innovative of the private sector to apply its full set another on a daily basis. Big data attempts to use technology to predict, of capabilities, and their interactions allows the modelling of how a virus detect and prevent new cases, such were not aligned with public sector spreads, and the potential for it to as the mHero platform – supported efforts on a day-to-day basis. Local be contained by various possible by a consortium of partners including companies did not always know how interventions. UNICEF, UNAIDS and IntraHealth – best to contribute to the response, and to connect ministries of health with 3 Part national governments and responding The 2009 H1N1 Swine Flu pandemic frontline workers using text messaging agencies were not always aware of response in Mexico is an early services and analyse the resulting data. potential opportunities to partner with example of how mobile phone data However, the lack of interoperability the local private sector. can be used. As the outbreak began of data information systems between to spread, the Mexican government responders in the crisis highlighted the Building on the flexible partnership acted to limit the movement of people, need to review new fabric architecture, responses that complemented advising them to stay away from public diagnostics and logistics. The mHero the channels of official assistance places such as airports, hospitals and platform is under development to 26

to Ebola-affected countries, the universities. A digital research team overcome these barriers. 4 Part Forum has drawn up a wide set of in Telefónica, one of Mexico’s largest recommendations for public-private mobile network providers, saw an Finding the fastest and most efficient cooperation models to manage opportunity to test the effectiveness channel to disseminate information is any potential future outbreaks more of the advice by analysing patterns of key to fighting an infectious disease effectively and reduce the risk of their movement. Drawing from anonymized outbreak, and access to data for real- occurrence. The study disaggregates mobile phone call records of 1 million time monitoring, multi-path surveys private sector interventions into three customers in one of Mexico’s most and detailed analysis is essential. categories – in-country operators, affected cities, the team found that call The better the information, the more expert capability companies and traffic was lower or stable in hospitals sure decision-makers can be of their greater private sector contributors – and universities but increasing at the strategy. Real-time sharing of data in a and makes specific recommendations airport, suggesting that people were coordinated and collaborative manner for each category to enhance ignoring government advice and trying can make responses more efficient. collaboration. At a high-level dialogue in to leave the area. If ways can be found to reconcile the Cape Town, senior leaders expressed need for data with current regulatory a desire to home in on optimizing local Next, the team created a model to environments and the legitimate right actors in early detection and response simulate what would have happened to data privacy, lessons from the Ebola plans. if the government had not intervened. crisis could potentially be applied in Analysing more than five months of future emergency settings. With subsequent endorsement from encrypted call records, including the partners including the United Nations, period of government interventions, the African Development Bank and the research team found that the the Wellcome Trust, the Forum has intervention had resulted in between launched a 12-month initiative to a 10% and 30% drop in movement, mobilize in-country business operators postponed the peak of the epidemic and facilitate dialogue with ministries by nearly two days and reduced the of health for the local implementation number of infections by 10%.24 of networks in national preparedness and response schemes. This entails A more recent intervention has the creation of country-wide playbooks been witnessed in the use of GPS and communication platforms between technology in the roll-out of treatment- local actors across sectors to develop as-prevention to control the HIV a rapid and efficient response in the pandemic in Sub-Saharan Africa to event of an epidemic. Networks and construct predictive prevalence maps their implementation roadmaps will for migrating populations.25 Health be designed for specific high-risk workers can immediately report newly geographies including Mali, Guinea, identified cases through solar radios Liberia and Nigeria, with the vision or a new mobile application, facilitating

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Endnotes References

1 A well-functioning health system working in harmony is built on having trained and Butler, D. 2015. “How to beat the next Ebola”. Nature 524 (06 August): 22–25. motivated health workers, a well-maintained infrastructure and a reliable supply of Coburn, B.J. and S. Blower. 2013. “Mapping HIV epidemics in sub-Saharan Africa medicines and technologies, backed by adequate funding, strong health plans and with use of GPS data”. Lancet Global Health 1 (5): e251–3. evidence-based policies (WHO 2015). Coburn A., M. Chang, M. Sullivan, G. Bowman, and S. Ruffle. 2013. “Disease Part 2 Part 2 UN DESA 2015. outbreak: Human pandemic”. Cambridge Risk Framework: Profile of a Macro- Catastrophe Threat Type. Centre for Risk Studies Working Paper 201303.31, 3 Zoonoses – pathogenic organisms such as bacteria or viruses that humans share University of Cambridge Judge Business School. with animals – cause more than 60% of human infectious diseases and have been responsible for some of the most devastating disease outbreaks in recent years, Gubler, D.J. 2011. “Dengue, urbanization and globalization: The unholy trinity of the including HIV, Ebola and SARS. See http://www.thelancet.com/series/zoonoses. 21st century”. Tropical Medicine and Health 39 (4 Suppl): 3–11. More than more than 60% of the roughly 400 emerging infectious diseases that have Heymann, D.L., L. Chen, K. Takemi, D.P. Fidler, J.W. Tappero, et al. 2015. “Global been identified since 1940 are zoonotic. See Jones et al. 2008. health security: The wider lessons from the west African Ebola virus disease 4 Gubler 2011. epidemic”. The Lancet 385 (9980): 1884–901. Jones, K.E., N. Patel, M.A. Levy, A. Storeygard, D. Balk, J.L. Gittlelman, and P. 5 Coburn et al. 2013. Daszak. 2008. “Global trends in emerging infectious diseases”. Nature 451: 990–94. 6 Estimates suggest that in the United States at least 2 million people acquire serious Keogh-Brown, M.R. and R.D. Smith. 2008. “The economic impact of SARS: How

Part 3 Part infections with bacteria that are resistant to one or more of the antibiotics designed does the reality match the predictions?” Health Policy 88 (1): 110–20. to treat them, and at least 23,000 people die each year as a direct result of these antibiotic-resistant infections. Estimates of economic costs range as high as US$20 Plotkin, S. A., A. Mahmoud, and J. Farrar. 2015. “Establishing a global vaccine- billion in excess direct healthcare costs, with additional costs to society for lost development fund”. The New England Journal of Medicine 373 297–300. productivity as high as US$35 billion a year (2008 dollars). See http://www.tufts.edu/ Review on Antimicrobial Resistance. 2015. Securing New Drugs for Future med/apua/consumers/personal_home_5_1451036133.pdf (accessed 8 May 2013); Generations: The Pipeline of Antibiotics. Review on Antimicrobial Resistance. May extrapolated from Roberts et al. 2009. 2015. 7 Review on Antimicrobial Resistance 2015. Roberts, R.R., B. Hota, I. Ahmad, R.D. Scott 2nd, S.D. Foster, F. Abbasi, S. Schabowski, et al. 2009. “Hospital and societal costs of antimicrobial-resistant 8 Butler 2015. infections in a Chicago teaching hospital: Implications for antibiotic stewardship”. 9 Butler 2015. Clin Infect Dis. 49 (8):1175-84. 10 World Economic Forum 2015a. Telefónica. 2013. “Catching swine flu: How big data helped doctors to understand Part 4 Part a pandemic”. Telefónica UK, October. http://static.o2.co.uk/www/docs/business/ 11 UNICEF 2015. ourthoughts/vr2_o2_swine_flu_case_study_pdf.pdf 12 UNDG 2015. UN DESA (United Nations, Department of Economic and Social Affairs, Population 13 World Bank 2015. Division). 2015. World Population Prospects: The 2015 Revision, Key Findings and Advance Tables. New York: United Nations. 14 World Bank 2015. UNDG (United Nations Development Group). 2015. The Socio-Economic Impact of 15 World Bank 2014b. the Ebola Virus Disease in West African Countries: A Call for National and Regional 16 World Bank 2015. Containment, Recovery and Prevention. February. United Nations Development Group – Western and Central Africa. 17 World Bank 2014a. UNICEF (United Nations Children’s Fund). 2015. “Impact of Ebola”. 20 February. 18 Keogh-Brown and Smith 2008. http://www.unicef.org/emergencies/ebola/75941_76129.html 19 Heymann et al. 2015. USAID (US Agency for International Development). 2015. “Ebola response, recovery 20 Zimmer 2015. and resilience in West Africa: Call for partnership concept papers”. https://www. usaid.gov/sites/default/files/documents/15396/EbolaCallforPartnerships_APS- 21 USAID 2015. OAA-14-0000001.pdf 22 World Economic Forum 2015b. WHO (World Health Organization). 2015. Health Systems Strengthening Glossary. 23 World Economic Forum 2015b. Available at http://www.who.int/healthsystems/hss_glossary/en/index5.html 24 Telefónica 2013. World Bank. 2014a. “The Economic Impact of the 2014 Ebola Epidemic: Short and Medium Term Estimates for West Africa.” Washington, DC: World Bank. 25 Coburn and Blower 2013. 2014b. “The Socio-Economic Impacts of Ebola in Liberia – Results from a High 26 USAID 2015. Frequency Cell Phone Survey. Rounds 1-2.” November 19. Washington, DC: World Bank. 2015. “The Economic Impact of Ebola on Sub-Saharan Africa: Updated Estimates for 2015.” Washington, DC: World Bank. World Economic Forum. 2015a. “Fighting SARs (Severe Acute Respiratory Syndrome)”. Unpublished paper. 2015b. Health Systems Leapfrogging in Emerging Economies: From Concept to Scale-Up and Systems Transformation. Geneva: World Economic Forum. 2015c. Managing the Risk and Impact of Future Epidemics: Options for Public- Private Cooperation. Geneva: World Economic Forum. Zimmer, C. 2015. “For vaccines needed in an epidemic, timing is everything”. New York Times 6 August 6 2015.

66 The Global Risks Report 2016 Part 1 Part Part 2 Part Part 3 Part Part 4 Part

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Building resilience against global risks necessitates consensus in identifying Part 4: the risks that should most concern different stakeholders across regions and countries. The final part of The

Part 2 Part Global Risks Report therefore focuses Risks for Doing on the impact of global risks on the business community across different regions and countries. It draws on the Business at a views of executives in 140 economies covered by the World Economic Forum’s Executive Opinion Survey (see Box 4.1) about the risks of highest Glance concern for doing business.1

Part 3 Part The fact that today’s businesses are global is not news, but the extent of the globalization of trade and commerce – and the risks it presents – is far from understood. Foreign direct investment (FDI) inflows have increased a staggering 25-fold since 1980, rising from US$54 billion to US$1.23 trillion in 2014, 2 as marked by shifts from manufacturing to services and from Part 4 Part developed to developing and emerging markets. Indeed, South-South investments (that is, investments from one developing economy to another) have intensified, growing by two- thirds, from US$1.7 trillion in 2009 to US$2.9 trillion in 2013.3 Information and communications technologies (ICTs) have internationalized supply chains, linking trade and investment ever more tightly.4 While offering companies opportunities to lower production costs and countries the chance to develop economically by participating in global value chains, the internationalization of business increases exposure to global risks. From environmental to economic and political risks, companies are vulnerable even if they have no immediate presence in the geography where the risk arises.5 The resilience of any individual business depends heavily on the resilience of its suppliers and purchasers, whose supply chains can span many countries.

Increasingly, businesses need to strengthen their scenario and emergency planning capacity to analyse complex and often uncertain interdependencies if they are to build resilience to global risks. Likewise, countries also need to understand the global risks to doing business. Globally, FDI inflows fell by 16%, from US1.47$ trillion in 2013 to US1.23$ trillion in 2014 – well below the pre-crisis 2007 peak –

68 The Global Risks Report 2016 Part 1 Part

for reasons that include perceptions of global economic fragility, government policy uncertainty and elevated Box 4.1: The World Economic Forum’s Executive Opinion Survey geopolitical risks.6 Every year since 1979, the World Economic Forum has conducted its Executive

This part of The Global Risk Report Opinion Survey (EOS). Capturing executives’ perspectives on a broad range of 2 Part 2016 therefore aims to provide insight socio-economic issues, the EOS primarily informs the World Economic Forum’s for both business and policy-makers by annual Global Competitiveness Report and its derivatives. The 2015 edition of the drawing on the findings of the Forum’s EOS, conducted between February and June 2015, surveyed over 13,000 Executive Opinion Survey (EOS) about executives in 140 economies. EOS respondents were asked to select the five the risks for doing business in 140 global risks that they were most concerned about for doing business in their economies. It takes the global risks country within the next 10 years, choosing from the set of 28 global risks discussed in previous chapters to the presented in the The Global Risks Report 2015.1 See Appendix C for details of the country level and analyses regional methodology and the EOS. trends, country-specific responses and presents deep-dives into the five often- Note 3 Part 1 Following an expert review in spring 2015, the set of risks was increased from 28 to 29 global risks in this cited risks of highest concern. year’s Report. Formerly part of the risk of national governance, illicit trade is now treated as a separate global risk. See Appendix B for details regarding the difference in the list of global risks from last year and this edition. Regional Analysis

The risks of highest concern for central role in production processes, instance, no executive considers failure doing business differ considerably service provision and everyday life. In of climate mitigation and adaptation from country to country, according to emerging and developing economies, as the number one risk for doing EOS data. However, some patterns the top concern is unemployment and business in his/her country. This stands 4 Part emerge. In developed economies, underemployment as well as potential in contrast to the priorities considered economic risks such as asset bubbles energy price shocks. by members of the multistakeholder and fiscal crises are high on the community of the World Economic business agenda; concern is also A striking finding is the relative absence Forum who took part in the Global present about technological risks of environmental risks and, more Risks Perception Survey and perceived such as cyberattacks and data theft. generally, of long-term issues among it as the most impactful and the third In these economies, it is increasingly the top concerns of business leaders most likely risk on a global scale (see evident that connectivity plays a in their respective countries. For Figure 1). This finding highlights the

Figure 4.1: Global Risk of Highest Concern for Doing Business, by Country

Asset bubble Failure of urban planning Natural catastrophes Failure of national governance Cyberattacks Deﬂation Food crises Biodiversity loss and ecosystem collapse Interstate conﬂict Energy price shock Large-scale involuntary migration Extreme weather events State collapse or crisis

Failure of ﬁnancial mechanism or institution SOCIETAL Profound social instability Environmental catastrophes Terrorist attacks ECONOMIC Fiscal crises Spread of infectious diseases

Unemployment or underemployment Water crises GEOPOLITICAL TECHNOLOGICAL Unmanageable inﬂation ENVIRONMENTAL

Source: Executive Opinion Survey 2015, World Economic Forum. Note: In addition to the risk drawn on the map, the following countries have another risk as the risk of highest concern: Haiti: Unemployment or underemployment; Oman: Energy price shock; Peru: Profound Social Instability; Paraguay: Failure of ﬁnancial mechanism or institution; Senegal: Note:Energy price shock; Tunisia: Profound Social instability; Venezuela: unmanageable inﬂation; Viet Nam: Man-made environmental catastrophes In addition to the risk indicated on the map, the following countries have another risk as the risk of highest concern: Haiti: Unemployment or underemployment; Oman: Energy price shock; Peru: Profound social instability; Paraguay: Failure of financial mechanism or institution; Senegal: Energy price shock; Tunisia: Profound social instability; Venezuela: Unmanageable inflation; Vietnam: Man-made environmental catastrophes. The Global Risks Report 2016 69 Part 1 Part

divergence between national and high;9 in Poland and Macedonia, ranks second globally for online global interests when it comes to some where more than half of youth are business-to-consumer transactions.14 global risks such as climate change. unemployed;10 and in the Balkans, with The risk of terrorist attacks is third on It also calls for continued alignment unemployment sky-rocketing in Serbia the list (and 13th in Canada): according across stakeholders whose actions are and Bosnia and Herzegovina.11 Along to the House Committee on Homeland

Part 2 Part based on different time horizons. with challenges related to involuntary Security, the home-grown Islamist migration, high unemployment rates extremist threat in the United States The top global risks for doing business may help to explain why the risk of has escalated dramatically in 2015, with for each country are shown in Figure profound social instability also features more terror cases than in any full year 4.1. Full economy-level data are prominently in Southern and Eastern since September 11, 2011.15 available at www.weforum.org/risks. Europe. Throughout Part 4, the ranking of risks Table 4.2: North America: refers exclusively to the EOS question The risk of an asset bubble is the top Percentage of Economies in which a concern in Iceland, Luxembourg, on risks of highest concern for doing Risk Appears among the Top Five of 7 business. Norway, Sweden, the United Kingdom. Highest Concern for Doing Business Part 3 Part A related economic risk causing Europe concern across Europe is fiscal crises Risk Percent (this is the risk of highest concern in Cyberattacks 100 Across Europe,8 the risks that four countries and is among the top stand out as being of great concern five in 26 countries); although fiscal Asset bubble 100 for doing business are all in an consolidations are starting to pay Energy price shock 50 economic category. Unemployment off, government debt in advanced or underemployment is mentioned as economies is projected to aggregate at Fiscal crises 50 the risk of highest concern for doing 104.2% of GDP in 2016, much higher Failure of critical business in 12 countries in Europe than the pre-crisis level of 71.6% in Part 4 Part infrastructure 50 and is among the top five risks in 25 20 07.12 countries (Table 4.1). Failure of climate Although the extent of concern about change adaptation 50 cyberattacks is somewhat lower than Terrorist attacks 50 Table 4.1: Europe: Percentage of the above-mentioned risks (this risk is Economies in which a Risk Appears among the top five of highest concern Data fraud or theft 50 among the Top Five of Highest in 12 countries), it is of high concern in Concern for Doing Business Note: 2 economies considered Estonia, Germany, the Netherlands and Risk Percent Switzerland. Given the cross-border nature of cyberspace, there is obvious Energy price shock to the global Fiscal crises 67 potential for cyberattacks to have economy tops the list of concerns in Unemployment or ramifications well beyond the countries Canada, with the commodity price underemployment 64 in which they occur. drop hurting the Canadian economy and GDP growth projected to be Failure of financial North America around 1% in 2015, compared with mechanism or institution 62 2.4% in 2014.16 The risks of asset Energy price shock 56 In North America, which includes bubble and cyberattacks come second the United States and Canada, two and third in Canada (fifth and first in the Asset bubble 51 United States, respectively). risks have been selected as being Note: 39 economies considered among the five of highest concern for doing business in both countries: Asia and the Pacific Unemployment threatens to de-skill an cyberattacks and asset bubbles entire generation in parts of Europe, (Table 4.2). Central Asia and Russia further aggravating businesses’ search The end of the commodity boom, for employees with the right type of In the United States, the top risk is the economic slowdown in Russia, skills to compete in today’s fast-paced cyberattack, followed by data fraud the weaker-than-expected growth global economy. These concerns are or theft (the latter is in 7th position in China and the slow recovery in not limited to the crisis-hit Southern in Canada, which is why it scores the Eurozone are among the factors European economies – such as 50% in Table 4.2). Interestingly, the putting pressures on Central Asia’s Cyprus, Greece, Italy, Portugal and risks related to the internet and cyber economies.17 Although the region’s Spain – where unemployment remains dependency are considered to be of countries feature a diverse range of well into the double digits eight years highest concern for doing business, risks of highest concern for doing after the crisis, well beyond a typical following recent important attacks business, the most prominent are business cycle. They are also strong in on businesses. The United States is fiscal crises, unmanageable inflation, countries such as Austria, Finland and extremely well connected, and ICT interstate conflicts and unemployment France, where unemployment rates are usage is high – 87% of the population and underemployment (Table 4.3). considerably lower although historically use the internet,13 and the country

70 The Global Risks Report 2016 Part 1 Part

East Asia and the Pacific Nargis, respectively.22 Executives Table 4.3: Central Asia and Russia: The global risks of highest concern for are concerned about the region’s Percentage of Economies in which a Risk Appears among the Top Five of doing business in East Asia and the vulnerability to natural catastrophes Highest Concern for Doing Business Pacific are mainly economic: energy – earthquakes, tsunamis, volcanic price shock and asset bubble (Table eruptions and geomagnetic storms – Risk Percent 20

4.4). While energy price shock tops as well as man-made environmental 2 Part Fiscal crises 100 the list only in Lao PDR and Indonesia, catastrophes, emphasizing the it is among the top five in 12 countries. importance for business of sustainable Unmanageable inflation 86 Many countries in the region are energy development that respects the Unemployment or importers and soaring prices could environment. In New Zealand, the underemployment 71 be damaging. The risk of an asset most worrisome risk for executives is bubble ranks top in seven economies natural catastrophes, reflecting that the Table 4.2: North America: Interstate conflict 71 (Australia, Cambodia, China, Hong country’s position on the Alpine Fault Percentage of Economies in which a Risk Appears among the Top Five of Failure of financial Kong SAR, Myanmar, New Zealand makes it vulnerable to earthquakes Highest Concern for Doing Business mechanism or institution 57 and Thailand), reflecting the recent and tsunamis. The region’s need to equity market turmoil in China and build resilience against climate and 3 Part Risk Percent Note: 7 economies considered potential spillovers into the other weather risks could also help to explain Cyberattacks 100 countries from the region as well as why risks such as failure of critical Oil-exporting countries are suffering over-evaluation of property in some of infrastructure and national governance Asset bubble 100 from lower prices and volumes of trade, the economies such as Hong Kong or rank high in some of the economies. Energy price shock 50 which negatively affects government Sydney. revenues; and while the lower price South Asia Fiscal crises 50 is helping the region’s oil importers, it Fiscal crises is among the five most With four of the region’s countries Failure of critical is unlikely to make up for the effects concerning risks for 41% of executives identifying energy price shock and on fiscal balances of weak domestic infrastructure 50 in the region. The slowdown of the three economies identifying fiscal 4 Part demand and Russia’s economic Chinese economy is likely to moderate crises among their top five, concern for Failure of climate contraction. Rising public debt helps growth and could negatively impact doing business is centred on economic change adaptation 50 to explain why fiscal crises are one public finances in neighbouring risks (Table 4.5).23 Unemployment and Terrorist attacks 50 of the top three concerns in all the countries.21 Along with these two underemployment is also among the region’s countries. With only moderate risks, cyberattacks – the risk of highest most-cited risks in South Asia, with Data fraud or theft 50 economic prospects, unemployment concern for doing business in three the whole region facing the challenge Note: 2 economies considered is likely to surge in the region and is economies – is further explored in the of jobless growth and vulnerable and among the top five risks of highest deep-dives below. informal employment: vulnerable concern in five countries. employment accounted for over three- quarters of all employment in 2014 in Table 4.4: East Asia and the Pacific: A combination of factors could explain South Asia.24 Youth unemployment Percentage of Economies in which a the fear of unmanageable inflation Risk Appears among the Top Five of is also a concern, especially in South in several of the region’s countries. Highest Concern for Doing Business Asia, where the rate is already four These factors include the recent times higher than among adults and an volatility in foreign exchange markets, Risk Percent additional 2.1 million youth will enter the 25 with regional currencies depreciating Energy price shock 71 labour force over the next five years. against the US dollar and reserve losses;18 a second factor is the relatively Asset bubble 59 Table 4.5: South Asia: Percentage of recent experience of hyperinflation Cyberattacks 41 Economies in which a Risk Appears 19 during the 1990s transition period; among the Top Five of Highest and a third is the concern that weak Fiscal crises 41 Concern for Doing Business institutions will be unable to implement Natural catastrophes 35 the deep structural and fiscal reforms Risk Percent necessary to foster sustainable growth. Unemployment or Energy price shock 67 underemployment 35 The dispute between Russia and Failure of national Unmanageable inflation 35 governance 67 Ukraine, the annexation of Crimea, and Russian military intervention in Note: 17 economies considered Fiscal crises 50 Syria are among many geopolitical Unemployment or developments in the region that may One of the features of the region is underemployment 50 be affecting the views of business how frequently environmental risks are executives who mentioned the risk mentioned. For example, executives Failure of climate- of an interstate conflict with regional in both the Philippines and Myanmar change adaptation 50

consequences. identified extreme weather events Note: 6 economies considered as among their leading concerns, in the wake of the recent experiences of Typhoon Haiyan and Cyclone

The Global Risks Report 2016 71 Part 1 Part

Failure of national governance is Middle East and North Africa a proliferation of conflicts is putting the another leading concern, highlighting region’s geopolitical stability at stake. the difficulties posed for business in the Executives in oil-exporting countries region by the current unstable political in the Middle East and North Africa Sub-Saharan Africa situation: for instance, according to the are most concerned about the risk Corruption Perception Index, Nepal Part 2 Part of an energy price shock (the top By 2035, Sub-Saharan Africa is ranks 126 th and Bangladesh 145th out concern in nine countries) (Table 4.7),29 projected to have more young of 175 economies.26 with low prices already leading to a people reaching working age than decline of exports and revenue, hurting the rest of the world put together.34 Latin America and the Caribbean public finances, undermining financial This demographic pressure helps planning and ultimately threatening to to explain why unemployment and Failure of national governance is expose often-insufficient diversification underemployment is the most a prominent concern across Latin of the economy. concerning risk for executives in the America and the Caribbean,27 region. Creating high-productivity, especially in South America, Table 4.7: Middle East and North non-agricultural jobs is among the Part 3 Part where corruption and mistrust in Africa: Percentage of Economies in region’s biggest challenges, requiring the functioning of institutions are which a Risk Appears among the businesses to adapt and diversify. increasingly compounding the Top Five of Highest Concern for Failure to reform Sub-Saharan Africa’s difficulties of running a business (Table Doing Business labour market could fuel social 4.6). The region’s weak economic Risk Percent instability, another widespread concern growth prospects and low levels according to survey respondents (Table of investment lie behind concerns Unemployment or 4.8). about failure of critical infrastructure;28 underemployment 71 increasing investment in infrastructure would stimulate the economy as well as Energy price shock 71 Table 4.8: Sub-Saharan Africa:

Part 4 Part Percentage of Economies in which a strengthen resilience to global risks. Fiscal crises 71 Risk Appears among the Top Five of Terrorist attacks 64 Highest Concern for Doing Business Table 4.6: Latin America and Risk Percent the Caribbean: Percentage of Asset bubble 43 Economies in which a Risk Appears Interstate conflict 43 Unemployment or among the Top Five of Highest underemployment 88 Concern for Doing Business Note: 14 economies considered Energy price shock 70 Risk Percent Unemployment or underemployment, Failure of national Failure of national especially among youth, is also of governance 55 governance 91 high concern in the region, with youth Failure of critical Energy price shock 82 unemployment as high as 33% in infrastructure 45 Jordan (2013 data) and above 20% Unemployment or in Oman, Saudi Arabia, and Algeria.30 Fiscal crises 39 underemployment 64 Informal employment is a growing Note: 33 economies considered Profound social trend,31 adding to the potential for the instability 59 job market situation to fuel profound With fiscal pressures increasing for oil Fiscal crises 45 social instability – a risk that makes the top five in five countries amid a and gas exporters, the risk of energy price shock is prominent in executives’ Note: 22 economies considered regional humanitarian crisis that sees neighbouring countries coping with thinking. The aggregated benefits of lower prices for the region’s oil The region relies heavily on exports refugees from Syria. One in four of importers are likely to be offset by falls of commodities that have declined in the world’s refugees is now Syrian, in the prices of other commodities that price – such as oil, gas, copper and with 95% located in surrounding they export.35 The macroeconomic iron – explaining the prominence of the countries;32 in Lebanon, over a fifth of climate is a related concern, especially risk of an energy price shock among the population is refugees. Another the region’s leading concerns. Low potential cause of social disruption is fiscal crises and inflationary pressures. commodity prices reinforce existing water crises (among the top five risks challenges such as high public debt in four countries), a particular concern Africa’s urban population is expected 36 and low economic growth, and for business because water is a key to triple by 2025, as reflected in the increasing the associated risk of fiscal input in many industries,33 agricultural prominence of the risk of failure of crises. products and energy production. urban planning and pointing to the need for more investment in urban Finally, concerns about unemployment Unsurprisingly, the risks of terrorist infrastructure. This helps to explain why reflect how skills mismatch and rigid attacks and interstate conflict also failure of critical infrastructure is another labour markets are affecting business weigh on the minds of executives, as high-ranking risk: lack of infrastructure development in the region. – both physical and virtual – is

72 The Global Risks Report 2016 Part 1 Part

estimated to reduce company The below deep-dives into the wage jobs and in temporary and fixed- productivity up to 40%.37 The cost of implications for business also explore term employment. At the same time, filling the gap in Africa’s infrastructure asset bubbles, fourth on the global technological disruptions and the move has been estimated at around US$93 list, and cyberattacks, among the top towards automation are accelerating billion a year.38 three risks in 18 economies. While change in the nature of work. Currently

not exhaustive, these analyses of it is estimated that by the year 2020 2 Part mechanisms through which these nearly half of all current occupations Deep-Dives into Five global risks affect businesses at the could be affected by advances in national level are intended to raise robotics and machine learning.39 Global Risks awareness of the need for action. Given the unprecedented nature and Between them, two economic risks Unemployment or pace of these displacements, large- account for the global risks of most Underemployment scale reforms will be needed, both concern for doing business in half by government and business. Short- of the 140 economies covered: Unemployment or underemployment term, reactive measures based on unemployment or underemployment, is perceived as the global risk of past successes will not be enough: for 3 Part and energy price shock. Third on the highest concern for doing business example, efforts to place unemployed list is failure of national governance, in 41 countries, and is among the top youth in apprenticeships in certain which affects businesses in many five global risks in 92 countries (Figure job categories may not be a high- ways, including the failure to stamp out 4.2). Unemployment affects business value investment if that job category illicit trade (Table 4.9). in multiple ways, from holding back is likely to be obsolete in five years’ economic growth to threatening social time as a result of automation or other Table 4.9: Number of Economies in stability. With a growing mismatch disruptions, while growth comes from which a Risk Appears as the Risk of between the skills demanded by a wholly new occupations. Three main Highest Concern for Doing Business

fast-changing jobs market and those reforms are needed. 4 Part Risk Number possessed by unemployed workers, businesses are struggling to recruit First, the education systems must be Unemployment or workers with the capabilities they need. redesigned to focus on learning to underemployment 41 Expected job growth is concentrated in learn and collaboration. As knowledge- Energy price shock 29 occupations for which today’s workers based work will increasingly be are inadequately prepared. handled by technology, we need to Failure of national educate future generations in skills governance 14 Structural unemployment has where humans can still be expected to Asset bubble 11 increased in all major economies since outperform machines – collaboration- the 2007 crisis. Even where growth based attributes such as teamwork, Fiscal crises 10 has picked up, labour productivity and interaction, relationships and cultural Cyberattack 8 job creation often have not. Layoffs sensitivity. In a more automated future, disproportionately affected middle- value will come from emotional and Note: out of 140 economies globally skilled jobs, while most job creation in contextual intelligence. the recovery has taken place in lower-

Figure 4.2: Unemployment or Underemployment, rank

Rank

1 1 2 3 4 5 6 7 8 9 10 11 12 13 17 18 19 19

Source: Executive Opinion Survey 2015, World Economic Forum. Note: The darker colour, the higher the concern. The Global Risks Report 2016 73 Part 1 Part

Second, while businesses must work makers because reforms are unlikely to curtailing production despite price with educators and governments pay off within the timeframe of political declines. Another factor is the extent to to help education systems keep up tenures. which investment will fall in response with the needs of the labour market, to low prices, leading to a potential rise companies must also fundamentally Energy Price Shocks to the Global in unemployment rate of oil-exporting

Part 2 Part re-think their role as consumers of Economy countries. Key oil and gas producers ready-made human capital, obtaining are estimated to have cut over US$200 pre-trained talent from schools, With lower oil prices making the billion in capital expenditure on new universities and other companies. headlines recently, the risk of energy projects, deferring oil and gas projects Some companies understand this and price shocks to the global economy with reserves equating to 20 billion are investing more in the continuous ranks first in 29 out of the 140 barrels of oil equivalent.40 learning, re-skilling and up-skilling of economies represented in the 2015 their employees. Given the ongoing EOS and appears in the top five risks in If current low prices continue, the rapid changes in the skill sets 93 of them (Figure 4.3). implications for oil-exporting countries required for many occupations, talent may be severe. For instance, oil export Part 3 Part management is no longer the preserve “Price shocks” can refer to either losses in 2015 are expected to reach of the human resources function but sudden increases or decreases in the about US$300 billion in the Gulf will be a critical part of any company’s price of energy – whether in the form of Cooperation Council (GCC),41 which will growth and innovation strategy – electricity, oil, natural gas or liquid fuels have a heavy impact on governments’ especially with younger cohorts of derived from these sources. From 2010 budget balances. The International workers increasingly valuing a sense of until June 2014 world oil prices were Monetary Fund expects more than 10 purpose and diversity of experiences in fairly stable, at around $110 a barrel million people to be looking for work their working lives. for Brent crude; since then they have by 2020 in the region’s oil-exporting ranged between around US$45 to countries, which will challenge fiscal Third, governments must look beyond US$60, a plunge that surprised many. sustainability over the medium term. Part 4 Part the education system to redesign the Natural gas prices, often indexed to A combination of rising import prices broader enabling environment for oil, have followed a similar trajectory. hurting the populations of many talent. Human capital development This has resulted in significant shifts oil-producing countries and a lack of depends on a series of interventions of wealth from oil and gas producers job opportunities may lead to social across a person’s lifetime, including to consumers, meaning lower input instability.42 hiring and firing practices, women’s costs for industry, lower inflation and integration, retirement policies, visa more money available to spend in other Whether demand for oil picks up regulations, social safety nets, and, sectors. depends on factors such as whether in particular, regulatory support for growth recovers in China and other entrepreneurship and small and The outlook for oil prices is uncertain. emerging economies, as well as the medium-sized enterprises – one of On the supply side, one key factor is extent to which economies become the most under-utilized means of whether or not the Organization of less fuel intensive as a consequence unleashing creativity, enhancing growth the Petroleum Exporting Countries of new technology and energy- and generating employment. Such (OPEC) – and in particular Saudi Arabia efficiency measures. It is possible areas often go neglected by policy- – will continue with its strategy of not that if prices start to recover, they

Figure 4.3: Energy Price Shock to the Global Economy, rank

Rank

1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 27 18

Source: Executive Opinion Survey 2015, World Economic Forum. Note: The darker colour, the higher the concern. 74 The Global Risks Report 2016 Part 1 Part

could unexpectedly spike: with the (Figure 4.4). This risk captures the can be serious enough to become current low prices leading to reduced inability to efficiently govern a nation, unsustainable in the long run. investment and job losses, there is which is caused by or results in factors less slack in the system to deal with such as weak rule of law, corruption, One aspect of poor governance – illicit unanticipated demand increases.43 illicit trade, organized crime, impunity, trade – can undermine corporate

and political deadlock. Weak national brands and supply chains, because 2 Part Such a price spike could lead to slower government is not the result only of logistics and transport sectors often global output and disrupt business poor governance; governance is a unwittingly contribute to the spread of models. Even many developed multi-faceted phenomenon in which illicit goods. Illicit trade is estimated to countries are vulnerable – for example, business, civil society and the general cost the world economy up to US$2 geopolitical tensions threaten energy public also play roles. trillion, although it is difficult to quantify security in Europe, which gets around accurately.46 Counterfeiting and piracy a quarter of its gas from Russia.44 Still, As discussed in the most recent alone are estimated to amount to the risks of a price spike destabilizing edition of the World Economic US$1.77 trillion in 2015,47 nearly 10% of society are greatest in less-developed Forum’s Global Competitiveness world merchandise trade.48 economies, which are highly Report, the consequences of failures 3 Part dependent on imports and have little of governance seriously undermine The World Economic Forum’s scope for alternatives to take up the many countries’ competitiveness, job Meta-Council on the Illicit Economy slack. Indeed, the risks associated creation and economic development. has published, in its State of the with an undiversified energy sector Weak or failing national governance Illicit Economy report, a range of are not limited to oil – for example, creates space for organized criminals suggested ways in which technological in 2008 water shortages caused by and terrorists to profit from illegal improvements can be leveraged as an extremely harsh winter impacted trading in humans, weapons, solutions in this space: energy production in Tajikistan, counterfeit goods, and so on. The

which relies heavily on hydro power. cross-sector and transnational nature – Big data. Sex traffickers have 4 Part Ramifications in that instance included of these illegal activities means they been uncovered by a collaboration interruptions in medical care for many pose a risk to all, creating economic, among financial institutions, the people (power shortages and cold social, and environmental damage at Thomson Reuters Foundation, and weather deprived more than 50% of regional and global levels. New York prosecutors.49 the country’s hospitals of their water – Satellite tracking. Illegal fishing is supply).45 Businesses face additional risks being tackled by the Eyes on the as well as costs from operating in Seas project – a digital platform Failure of National Governance countries affected by poor governance. that helps governments to monitor Both the risks and the costs arise the world’s oceans, backed by the Failure of national governance is from the difficulties of working in Pew Charitable Trusts.50 perceived as the highest risk to an unpredictable environment and – Crowdsourcing. In combination doing business by executives in 14 complying with international standards with big data and satellite tracking, economies – half of them in Latin when fragile governments do not Global Forest Watch is enabling America, four in Sub-Saharan Africa, themselves adhere to international the tracking of illegal forestry two in Eastern Europe and one in Asia regulatory regimes. These costs operations by using crowdsourcing

Figure 4.4: Failure of National Governance, rank

Rank

1 1 2 3 4 5 6 7 8 9 10 11 12 13-16 17-20 21-23 24-27 27

Source: Executive Opinion Survey 2015, World Economic Forum. Note: The darker colour, the higher the concern. The Global Risks Report 2016 75 Part 1 Part

to combine images and provide to build relationships, initiatives and countries, monetary and fiscal policy near-real time data on the world’s mechanisms to curb the rates of illicit after the financial crisis of 2007–2008 forests.51 trade. had some success in stimulating the – DNA analysis. A genetic library economy to minimize the depth of the of life on Earth is being used to Asset Bubble recession. However, as post-recession 52 Part 2 Part detect food fraud, while forensic growth proved elusive, easy monetary laboratories are able to link stolen Executives in 11 economies, mostly policy was maintained or even stepped ivory to specific animals.53 in Europe and Asia, rate asset up. Low interest rates sent investors bubbles as their highest concern; it on a search for yield, creating an – Encryption: Although organized ranks among the top five risks in 40 environment that is highly conducive to criminals use encryption to evade countries, representing more than bubbles. The impact of another bubble detection, it can also be used half of the world GDP (Figure 4.5). bursting now in a major economy to enable the secure sharing Far from affecting only speculators, would be especially damaging of information between law the bursting of asset bubbles hits because the weakness of the recovery enforcement organizations and the businesses across the whole economy and high levels of government debt

Part 3 Part private sector. – particularly where leverage induces mean there would be little remaining contagion through the banking system. policy space for further stimulus. Individual companies can take some As business confidence falls, so do steps to protect their own operations, consumption, incomes and investment, Asset bubbles can never be identified reputation or assets – but for which can lead to a prolonged with certainty while they are building businesses to build resilience against recession. up, as there is always a narrative of the risk of failure of national governance “this time is different”. Nonetheless, ultimately requires finding ways to The trigger for the global financial when attempting to evaluate the risk contribute towards improving the crisis, to take one example, was a of a bubble bursting, three types of overall situation. That includes setting widespread default on US subprime potential bubbles can be distinguished: Part 4 Part an example for political leaders by mortgages and loss of value of related upholding international best practice, securities. The bursting of the dot- – Equity bubbles. These bubbles frameworks and standards, and com bubble in 2000–2002 destroyed are often a side effect of low looking for ways to collaborate with US$5 trillion of stock market wealth in interest rates, as investors look governments and civil society on the the United States (equivalent to half of to stock markets for higher yields development of more coherent policies annual GDP) in 30 months.54 Japan than they can get from fixed and smart governance strategies. was mired in a low-growth deflationary income assets. Companies can It is clear that the problem cannot environment for over two decades use their highly-valued stock to be resolved with policies alone, but after this combined real estate and make cross-border acquisitions requires the support of the business stock market bubbles burst in the early – but when the bubble bursts, sector as well as awareness of the 1990s. they can in turn become takeover general public. Discussions need to targets for companies in other move beyond political commitment – Recent global economic developments countries. the public sector, private sector and have increased both the likelihood and civil society need to come together potential impact of bubbles. In many

Figure 4.5: Asset Bubble, rank

Rank

1 1 2 3 4 5 6 7 8 9 10 11 12 13-16 17-20 21-24 25-27 27

Source: Executive Opinion Survey 2015, World Economic Forum. Note: The darker colour, the higher the concern. 76 The Global Risks Report 2016 Part 1 Part

– Real estate bubbles. Real estate The bursting of any of these three also opened the door to a growing bubbles are not usually a major types of bubble can tip an economy wave of cyberattacks – including concern for companies while they into recession. For consumer-facing economic espionage, cybercrime, and are inflating, though they make businesses without regional or global even state-sponsored exploits – that office and factory space more diversification, this is a concern that is are increasingly perpetrated against

expensive. However, because not easily mitigated. Besides shoring businesses (Figure 4.6). In 2014, The 2 Part banks play a major role in real up the balance sheet – for example, by Center for Strategic and International estate finance, the bursting of issuing long-dated debt – and putting Studies and McAfee estimated that a real estate bubble can have adequate credit lines in place, most cybercrime alone cost the global catastrophic impacts on business mitigation mechanisms would be economy US$ 445 billion.56 Businesses finance, as seen recently in Ireland: more strategic and affect the business in all industries and of all sizes have with banks struggling, credit can model, such as alliances to tap more been affected by the increased dry up completely and companies diversified markets. complexity, novelty and persistence find it hard to finance their of cyberattacks, with consequences operations. From a policy perspective, some ranging from the reputational to – Government bond bubbles. studies suggest that the development economic and legal. A sharp increase 3 Part Government bonds might be of financial markets – with increased in high-profile cases in 2014 has inflated by a quantitative easing integration, sophistication of trading continued into 2015, and shows no of purchases by central banks techniques, and removal of frictions sign of slowing down. and new liquidity requirements to arbitrage – may be increasing the increasing demand among private prevalence of bubbles.55 A fundamental The EOS results indicate that sector banks. As prices are rethink of regulation and contract cyberattack is perceived as the pushed up, yields go down, which design in financial markets could be risk of highest concern in eight drives investors into higher-yield necessary, to accept the inevitability of economies: Estonia, Germany, Japan,

corporate bonds, raising the risk bubbles and seek to limit their scope. Malaysia, the Netherlands, Singapore, 4 Part of a bubble here, too. In the short Switzerland, and the United States. term, this can be good news for Cyberattacks Public sector bodies in at least two of corporate issuers – but the ending these countries have recently been of quantitative easing programmes From personal finances to business disrupted by cyberattacks: the US could rapidly make it harder for operations and national infrastructure, Office of Personnel Management and businesses to raise capital. Some public and private services and the Japanese Pension Service. The observers have raised concerns amenities are increasingly managed via 2015 Fortune 500 CEO survey found about whether current market some form of computer network and that cyber security came second structures can deal with the are consequently vulnerable to attack. when CEOs were asked about their resulting large swings in demand The Internet of Things is a growing companies’ biggest challenges.57 for bonds, potentially triggering reality, introducing new efficiencies severe volatility in the financial as well as new vulnerabilities and Attempts to detect and address attacks system. interconnected consequences. Recent are made harder by their constantly technological advances have been evolving nature, as perpetrators quickly beneficial in many respects, but have find new ways of executing them.

Figure 4.6 Cyberattacks, rank

Rank

1 1 2 3 4 5 6 7 8 9 10 11 12 13-16 17-20 21-24 25-28 28

Source: Executive Opinion Survey 2015, World Economic Forum. Note: The darker colour, the higher the concern. The Global Risks Report 2016 77 Part 1 Part

Businesses trying to match this speed It is also becoming clearer that in their development of prevention and cybercrime cannot be fought response methods are sometimes unilaterally. Although businesses can constrained by a poor understanding follow standard industry practices of the risk, a lack of technical talent, or adopt individually tailored ways to

Part 2 Part and inadequate security capabilities. deal with cybercrimes, cooperation Although CEOs worry about rising throughout the value chain (because cyber risks, the ownership of and attacks can be made through supplier responsibility for the cyber risk is less systems) and with law enforcement clear. Who in the corporation is the is also helpful, As is often the case, actual owner of the risk? While there however, public-private partnership are many “C” level owners (CISO, can be held back by lack of trust and CFO, CEO, CRO, Risk Management), misaligned incentives. Businesses may each of these owners has differing but fear exposing their data and practices related interests and unfortunately often to competitors or to law enforcement Part 3 Part does not integrate risk or effectively agencies. And the private sector’s collaborate on its management. primary interest in rapid recovery and Defining clear roles and responsibilities continuity of business operations for cyber risk is crucial. may not align with the public sector’s primary interest in apprehending Outdated laws and regulations inhibit and prosecuting perpetrators. In governments’ ability to capture addition, governments need to balance criminals but also to expedite their investments in cyber offensive the often lengthy procedure of weapons and efforts to enhance elaborating and implementing legal capabilities for cybersecurity and Part 4 Part and regulatory frameworks to reflect defence. evolving realities. The sophisticated threats of government-sponsored economic espionage also exceed Conclusions the defensive capabilities of many commercial enterprises, which are Addressing global risks lies beyond more and more frequently looking to the capacity of individual businesses. other governments to intervene. The Businesses need to strengthen G-20 recently took an unexpected, their resilience to ensure continued but applauded, step and collectively operation and survival in the face affirmed “that no country should of risks. At the same time, the clear conduct or support ICT-enabled theft role for collaboration among public of intellectual property, including trade and private sector actors becomes secrets or other confidential business evident, for example, to develop better information, with the intent of providing cybercrime prevention methods, to competitive advantages to companies establish cybersecurity norms for 58 or commercial sectors.” both governments and industry, and to align international approaches to Businesses are increasingly accepting enforcement and establish industry the fact that they cannot hope to norms. Above all, it is in the key interest prevent all cyberattacks. The difficulty of businesses to find new ways to in preventing attacks is not outmatched partner with governments to address by the difficulty in identifying and global risks. Many risks, ranging from effectively mitigating them. Given energy security to unemployment, can the types of vulnerabilities utilized only be addressed through diverse by attackers and their methods, stakeholders recognizing the need for many attacks and intrusions are not joint action. Such collaboration requires immediately discovered – some are the identification of key risks and recognized only months and in some related interests and strong alignment cases years later. The emphasis needs and robust agreement among business to be on streamlining mechanisms for and other stakeholders on the need to early detection, response and recovery, address them. to mitigate and better manage the consequences – limiting the damage, and ensuring business continuity.

78 The Global Risks Report 2016 Part 1 Part

Endnotes 29 Middle East and North Africa includes Algeria, Bahrain, Egypt, the Islamic Republic of Iran, Israel, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, 1 The results presented thus far are drawn from the Global Risks Perception Survey; Tunisia and the United Arab Emirates. the results presented here in Part 4 are derived from another survey, the Executive 30 World Development Indicators, World Bank, retrieved 21 October 2015 from Opinion Survey (see Appendix C). http://data.worldbank.org/indicator/SL.UEM.TOTL.ZS/countries 2 UNCTAD 2014; UNCTAD 2015. 31 ILO 2015. Part 2 Part 3 UNCTAD 2015. 32 UNHCR (The UN Refugee Agency). Facts and Figures about Refugees, available 4 Athukorala and Menon 1997; Baldwin 2011. at http://www.unhcr.org.uk/about-us/key-facts-and-figures.html 33 5 Research from the Fukushima event has shown that although just 3% of total Kochhar et al. 2015. companies were directly affected, this figure increased to 50–60% for second-order 34 Sub-Saharan Africa include Benin, Botswana, Burundi, Cameroon, Cape Verde, companies and to 90% for third-order companies. See Saito 2012. Chad, Côte d’Ivoire, Ethiopia, Gabon, Gambia, Ghana, Guinea, Kenya, Lesotho, 6 UNCTAD 2015. Liberia, Madagascar, Malawi, Mali, Mauritania, Mauritius, Mozambique, Namibia, Nigeria, Rwanda, Senegal, Seychelles, Sierra Leone, South Africa, Swaziland, 7 Tables 4.1 to 4.8 present a selection of risks that are among the five risks of highest Tanzania, Uganda, Zambia and Zimbabwe. See IMF 2015d. concern in each region (i.e. risk selected based on the highest number of countries in 35 the region in which the risk is among the top five and country-level data are available IMF 2015d. at www.weforum.org/risks). 36 UN DESA 2015. Part 3 Part 8 Europe includes Albania, Austria, Belgium, Bosnia and Herzegovina, Bulgaria, 37 African Development Bank Group 2011. Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, 38 Foster and Briceño-Garmendia 2010 was a part of the Africa Infrastructure Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, Macedonia, Country Diagnostic (AICD) project by the World Bank and co-sponsored by ICA Malta, the Republic of Moldova, Montenegro, the Netherlands, Norway, Poland, partners. Portugal, Romania, Serbia, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, Ukraine and the United Kingdom. 39 Frey and Osborne 2013. 9 Unemployment rate for 2015 (IMF estimates): Austria: 5.8%, Finland: 9.5%, 40 Adams 2015. France: 10.2%, Greece: 26.8%, Italy: 12.2% and Spain: 26.1%. Retrieved on 22 41 IMF 2015c. October 2015 from http://www.imf.org/external/pubs/ft/weo/2015/02/weodata/ 42 weorept.aspx?pr.x=66&pr.y=5&sy=2013&ey=2020&scsm=1&ssd=1&sort=country&d IMF 2015a. s=.&br=1&c=122%2C172%2C132%2C184%2C174%2C136&s=LUR&grp=0&a= 43 Randall 2014. 10 4 Part 2013 data are from the World Development Indicators, Unemployment, youth 44 The Economist 2014. total (% of total labour force ages 15–24) (modelled ILO estimate). Retrieved on 22 45 October 2015 and available at http://data.worldbank.org/indicator/SL.UEM.1524.ZS WHO 2008. 46 11 The unemployment rate for 2015 (IMF estimates): Bosnia and Herzegovina: 27% UNODC 2011. and Serbia: 20.6%. Retrieved on 06 November 2015 from http://www.imf.org/ 47 See the ICC-BASCAP study commissioned by Frontier Economics (Foster external/pubs/ft/weo/2015/02/weodata/weorept.aspx?pr.x=34&pr.y=3&sy=2013&ey Economics 2011). =2020&scsm=1&ssd=1&sort=country&ds=.&br=1&c=943%2C963%2C960%2C94 48 WTO 2015. 2&s=LUR&grp=0&a= 49 Anderson 2014. 12 IMF 2015f. 50 The Economist 2015. 13 World Bank: Internet users (per 100 people). “Internet users” are individuals who have used the internet (from any location) in the last 12 months. Internet can be used 51 Sizer, Cheung, and Anderson 2014. via a computer, mobile phone, personal digital assistant, games machine, digital 52 Neimark 2015. TV etc. Retrieved on 11 November 2015 from http://data.worldbank.org/indicator/ IT.NET.USER.P2?order=wbapi_data_value_2014+wbapi_data_value+wbapi_data_ 53 BBC News 2015. value-last&sort=desc. 54 Gaither and Chmielewski 2006. 14 World Economic Forum 2015. 55 Jones 2015. 15 Homeland Security Committee 2015. 56 McAfee, Inc. 2014. 16 IMF 2015f. 57 Fortune Editors 2015. 17 Central Asia includes Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, the 58 Cabinet of Prime Minister Trudeau, Canada, 2015. Russian Federation and Tajikistan. See IMF 2015e. 18 IMF 2015e. 19 Roaf et al. 2014. 20 East Asia and the Pacific includes Australia, Cambodia, China, Chinese Taipei, Hong Kong SAR, Indonesia, Japan, the Republic of Korea, Lao People’s Democratic Republic, Malaysia, Mongolia, Myanmar, New Zealand, the Philippines, Singapore, Thailand, and Vietnam. 21 IMF 2015b. 22 Guha-Sapir, Hoyois, and Below 2014; UNISDR 2015. 23 South Asia includes Bangladesh, Bhutan, India, Nepal, Pakistan and Sri Lanka. 24 “Vulnerable employment” is defined by the ILO as “the share of own-account work and contributing family employment, categories of work typically subject to high levels of precariousness”; see ILO 2015. 25 ILO 2015. 26 See Transparency International’s Corruption Perception Index, 2014 results. Available at http://www.transparency.org/cpi2014/results 27 Latin America and the Caribbean includes Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Trinidad and Tobago, Uruguay and Venezuela. 28 IMF 2015g.

The Global Risks Report 2016 79 Part 1 Part

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Part 3 Part Cabinet of Prime Minister Trudeau, Canada. 2015. G20 Leaders’ Communiqué, topics/emergencies/disaster-preparedness-and-response/country-work/tajikistan/ Antalya Summit, 15–16 November 2015. http://pm.gc.ca/eng/news/2015/11/16/ extreme-cold-and-energy-shortages g20-leaders-communique WTO (World Trade Organization). 2015. “Modest trade recovery to continue in 2015 The Economist. 2014. “Paying the piper: European efforts to reduce the Russian and 2016 following three years of weak expansion”. Press release 14 April 2015. state-owned company’s sway over gas prices have been partially successful”. The UNCTAD (United Nations Conference on Trade and Development). 2014. UNCTAD Economist 2 January 2014. Handbook of Statistics 2014. New York and Geneva: United Nations. 2015. “Combating illegal fishing: Dragnet: A new satellite-based surveillance 2015. World Investment Report 2015: Reforming International Investment system will keep a sharp eye on those plundering the oceans”. The Economist 22 Governance. Geneva: United Nations. January 2015. UN DESA (United Nations Department of Economic and Social Affairs). 2015. World Fortune Editors. 2015. “The results of the 2015 Fortune 500 CEO survey are in...” 4 Urbanization Prospects: The 2014 Revision. New York: United Nations. http://esa. June 2015. http://fortune.com/2015/06/04/fortune-500-ceo-survey/ un.org/unpd/wup/FinalReport/WUP2014-Report.pdf

Part 4 Part Foster, V. and Briceño-Garmendia, eds. 2010. Africa’s Infrastructure: A Time for UNISDR (United Nations International Strategy for Disaster Relief). 2015. Global Transformation. Washington, DC: World Bank. Assessment Report (GAR) on Disaster Risk Reduction 2015. New York: United Frontier Economics. 2011. Estimating the Global Economic and Social Impacts of Nations. http://www.preventionweb.net/english/hyogo/gar/2015/en/gar-pdf/ Counterfeiting and Piracy: A Report Commissioned by Business Action to Stop GAR2015_EN.pdf Counterfeiting and Piracy (BASCAP), February. London: Frontier Economics. UNODC (United Nations Office on Drugs and Crime). 2011.“Illicit money: How Frey, C.B. and M.A. Osborne. 2013. “The future of employment: How susceptible much is out there?” Available at https://www.unodc.org/unodc/en/frontpage/2011/ are jobs to computerisation?” September 2013, Oxford Martin School, University October/illicit-money_-how-much-is-out-there.html of Oxford. http://www.oxfordmartin.ox.ac.uk/downloads/academic/The_Future_of_ World Economic Forum. 2015. The Global Information Technology Report 2015. Employment.pdf Geneva: World Economic Forum. Gaither, C. and D. C. Chmielewski. 2006. “Fears of Dot-com crash, version 2.0”. Los Angeles Times 16 July. Guha-Sapir, D., Ph. Hoyois, and R. Below. 2014. Annual Disaster Statistical Review 2013: The Numbers and Trends. Brussels: CRED. Homeland Security Committee. 2015. Terror Threat Snapshot, October. https:// homeland.house.gov/wp-content/uploads/2015/10/HHSC-October-Terror-Threat- Snapshot1.pdf ILO (International Labour Organization). 2015. World Employment and Social Outlook: Trends 2015. Geneva: International Labour Office. IMF (International Monetary Fund). 2015a. “Low oil prices, conflict weigh on Middle East’s prospects”. IMF Survey Magazine: Countries & Regions. IMF Survey 21 October. http://www.imf.org/ external/pubs/ft/survey/so/2015/car102115a.htm 2015b. Regional Economic Update, Asia and Pacific Department, 9 October 2015. http://www.imf.org/external/pubs/ft/reo/2015/apd/eng/pdf/areo1015.pdf 2015c. Regional Economic Update, Middle East and Central Asia: Learning to Live with Cheaper Oil Amid Weaker Demand, January. http://www.imf.org/ external/pubs/ft/reo/2015/mcd/eng/mreo0115.htm 2015d. Regional Economic Outlook: Sub-Saharan Africa: Navigating Headwinds. April. Washington, DC: IMF. 2015e. Transcript of the Middle East and Central Asia press briefing. Lima, Peru, 9 October 2015. http://www.imf.org/external/np/tr/2015/tr100915.htm 2015f. World Economic Outlook: Adjusting to Lower Commodity Prices, October. Washington, DC: IMF. 2015g. World Economic Outlook: Uneven Growth: Short- and Long-Term Factors, April. Washington, DC: IMF. http://www.imf.org/external/pubs/ft/weo/2015/01/ Jones, B. 2015. “Asset bubbles: Re-thinking policy for the age of asset management”. IMF Working Paper WP/15/27. Washington, DC: IMF. Kochhar, K. C. A. Pattillo; Y. Sun, N. Suphaphiphat, A. Swiston, et al. 2015. “Is the glass half empty or half full? Issues in managing water challenges and policy instruments”. Staff Discussion Notes No. 14/11, Washington, DC: IMF. McAfee, Inc. 2014. Net Losses: Estimating the Global Cost of Cybercrime. Center for Strategic and International Studies, June. Santa Clara, CA: McAfee, Inc. http:// www.mcafee.com/us/resources/reports/rp-economic-impact-cybercrime2.pdf

80 The Global Risks Report 2016 Part 1 Part Part 2 Part Part 3 Part Part 4 Part

The Global Risks Report 2016 81 The 11th edition of The Global Risks Report has explored how global risks Conclusions are becoming increasingly imminent and materializing in new and sometimes unexpected ways. From climate change to the imperative for improved water governance, from large-scale involuntary migration to reviving growth in the Fourth Industrial Revolution, global risks are affecting the lives of citizens and the functioning of institutions and economies. We now need to move beyond mitigation to adaptation and building resilience. Understanding the drivers of the global security landscape, boosting governance and strengthening policy agility is ever more important. Building a better understanding of how the new security landscape and technological change will impact countries, economies and peoples’ lives is, therefore, essential for building sustainable, resilient growth strategies and stable societies.

Global risks remain beyond the domain of just one actor, highlighting the need for collaborative and multistakeholder action – the key message that The Global Risks Report series has highlighted over the past decade. Recognizing joint interests and aligning stakeholders on key priorities across the different areas of global risks is the first step to make action through collaboration happen. We hope that this Report will contribute to recognizing the need for action, create an imperative towards greater resilience, and motivate change and concrete action towards a better future for everyone.

82 The Global Risks Report 2016 The Global Risks Report 2016 83 Appendices

84 The Global Risks Report 2016 Appendix A: Description of Global Risks and Trends 2016

Global Risks A “global risk” is defined as an uncertain event or condition that, if it occurs, can cause significant negative impact for several countries or industries within the next 10 years.

Global Risk Description Unsustainably overpriced assets such as commodities, Asset bubble in a major economy housing, shares, etc. in a major economy or region. Prolonged ultra-low inflation or deflation in a major Deflation in a major economy economy or region.

Collapse of a financial institution and/or malfunctioning of a Failure of a major financial mechanism or institution financial system impacts the global economy.

Failure to adequately invest in, upgrade and secure infrastructure networks (e.g. energy, transportation and Failure/shortfall of critical infrastructure communications) leads to pressure or a breakdown with system-wide implications. Excessive debt burdens generate sovereign debt crises Fiscal crises in key economies and/or liquidity crises. A sustained high level of unemployment or underutilization of the productive capacity of the employed population High structural unemployment or underemployment prevents the economy from attaining high levels of

Economic Risks employment. Large-scale activities outside the legal framework such as illicit financial flow, tax evasion, human trafficking, Illicit trade (e.g. illicit financial flow, tax evasion, counterfeiting and organized crime undermine social human trafficking, organized crime, etc.) interactions, regional or international collaboration and global growth. Energy price increases or decreases significantly and Severe energy price shock (increase or decrease) places further economic pressures on highly energy- dependent industries and consumers. Unmanageable increase in the general price level of goods Unmanageable inflation and services in key economies. Major property, infrastructure and environmental damage Extreme weather events (e.g. floods, storms, etc.) as well as human loss caused by extreme weather events. Governments and businesses fail to enforce or enact effective measures to mitigate climate change, protect Failure of climate-change mitigation and adaptation populations and help businesses impacted by climate change to adapt. Irreversible consequences for the environment, resulting Major biodiversity loss and ecosystem collapse (land in severely depleted resources for humankind as well as or ocean) industries. Major property, infrastructure and environmental damage Major natural catastrophes (e.g. earthquake, as well as human loss caused by geophysical disasters

Environmental Risks Environmental tsunami, volcanic eruption, geomagnetic storms) such as earthquakes, volcanic activity, landslides, tsunamis or geomagnetic storms. Failure to prevent major man-made catastrophes, causing Man-made environmental catastrophes (e.g. oil spill, harm to lives, human health, infrastructure, property, radioactive contamination, etc.) economic activity and the environment.

The Global Risks Report 2016 85 Global Risk Description

Failure of national governance (e.g. failure of rule of Inability to govern a nation of geopolitical importance due law, corruption, political deadlock, etc.) to weak rule of law, corruption or political deadlock. A bilateral or multilateral dispute between states escalates Interstate conflict with regional consequences into economic (e.g. trade/currency wars, resource nationalization), military, cyber, societal or other conflict. Individuals or non-state groups with political or religious Large-scale terrorist attacks goals successfully inflict large-scale human or material damage. State collapse of geopolitical importance due to internal Geopolitical Risks State collapse or crisis (e.g. civil conflict, military violence, regional or global instability, military coup, civil coup, failed states, etc.) conflict, failed states, etc. Nuclear, chemical, biological and radiological technologies Weapons of mass destruction and materials are deployed creating international crises and potential for significant destruction. Poorly planned cities, urban sprawl and associated Failure of urban planning infrastructure create social, environmental and health challenges. Access to appropriate quantities and quality of food and Food crises nutrition becomes inadequate, unaffordable or unreliable on a major scale. Large-scale involuntary migration induced by conflict, Large-scale involuntary migration disasters, environmental or economic reasons. Major social movements or protests (e.g. street riots, social Profound social instability unrest, etc.) disrupt political or social stability, negatively impacting populations and economic activity. Societal Risks Bacteria, viruses, parasites or fungi cause uncontrolled spread of infectious diseases (for instance due to Rapid and massive spread of infectious diseases resistance to antibiotics, antivirals and other treatments) leading to widespread fatalities and economic disruption. A significant decline in the available quality and quantity of Water crises fresh water resulting in harmful effects on human health and/or economic activity. Intended or unintended adverse consequences of technological advances such as artificial intelligence, Adverse consequences of technological advances geo-engineering and synthetic biology causing human, environmental and economic damage. Cyber dependency increases vulnerability to outage of Breakdown of critical information infrastructure and critical information infrastructure (e.g. internet, satellites, networks etc.) and networks causing widespread disruption. Large-scale cyberattacks or malware causing large

Technological Risks Technological Large-scale cyberattacks economic damages, geopolitical tensions or widespread loss of trust in the Internet. Wrongful exploitation of private or official data that takes Massive incident of data fraud/theft place on an unprecedented scale.

86 The Global Risks Report 2016 Trends A “trend” is defined as a long-term pattern that is currently taking place and that could contribute to amplifying global risks and/or altering the relationship between them.

Trend Description

Ageing populations in developed and developing countries driven by declining fertility Ageing population and decrease of middle and old age mortality.

Changing landscape of Changing landscape of global or regional institutions (e.g. UN, IMF, NATO, etc.), international governance agreements or networks.

Change of climate which is attributed directly or indirectly to human activity that alters Climate change the composition of the global atmosphere, in addition to natural climate variability.

Environmental Deterioration in the quality of air, soil and water from ambient concentrations of degradation pollutants and other activities and processes.

Growing middle class in Growing share of population reaching middle-class income levels in emerging emerging economies economies.

Increasing national Increasing national sentiment among populations and political leaders affecting sentiment countries’ national and international political positions.

Increasing polarization of Inability to reach agreement on key issues within countries because of diverging or societies extreme values, political or religious views.

Increasing rates of non-communicable diseases, also known as chronic diseases, Rise of chronic diseases leading to long-term costs of treatment and threatening recent societal gains in life expectancy and quality.

Rise of cyber Rise of cyber dependency due to increasing digital interconnection of people, things and dependency organizations.

Rising geographic Increasing mobility of people and things due to quicker and better-performing means of mobility transport and lowered regulatory barriers.

Rising income and wealth Increasing socio-economic gap between rich and poor in major countries or regions. disparity

Shifting power from state to non-state actors and individuals, from global to regional Shifts in power levels, and from developed to emerging market and developing economies.

Urbanization Rising number of people living in urban areas resulting in physical growth of cities.

The Global Risks Report 2016 87 Appendix B: Global Risks Perception Survey and Methodology 2015

Definitions and widespread misuse of Raw responses were cleaned in order technologies (e.g. 3D printing, artificial to improve overall data quality and The Global Risks Report 2016 is based intelligence, geo-engineering, synthetic completeness. All questionnaires with a on the same methodology adopted in biology, etc.) was reformulated into the completion rate below 50% were the previous year and results are risk “Adverse consequence of dropped, reducing the number of therefore largely comparable. The technological advances”. The definition available responses from 933 to 742. Report adopts the following definitions of each risk also went through a review The respondents did not provide any of global risk and trend: process. information about their gender or the sector in 3 and 49 cases, respectively, Global risk: an uncertain event or The following section describes the but it was possible to infer this condition that, if it occurs, can cause survey and methodology in greater information from the rest of the records significant negative impact for several detail. provided for the gender and for 39 countries or industries within the next cases for the sector. Similarly, 92 10 years. The Global Risks respondents did not indicate the region in which they are based and 77 were

Trend: a long-term pattern that is Perceptions Survey manually assigned to a region on the currently taking place and that could basis of their country of residence. contribute to amplifying global risks The Global Risks Perception Survey and/or altering the relationship between (GRPS), discussed in Part 1, is the main Figure B.1 presents the profile of the them. instrument used to assess global risks 742 survey respondents remaining in in this Report. The survey was the sample. To capture the voice of The list of risks and trends assessed in conducted between mid-September youth, the survey also targeted the the Global Risks Perception Surveys and the end of October 2015 among World Economic Forum’s community of has changed slightly. The risk “Illicit the World Economic Forum’s Global Shapers.1 Respondents under trade” was extracted from the risk multistakeholder communities of 30 accounted for slightly more than “Failure of national governance” to leaders from business, government, one-fourth of total respondents. create another risk in the economic academia and non-governmental and category. Moreover, the risk “Massive international organizations.

Figure B.1: Survey Sample Composition

Number of participants Expertise Organization type Geopolitics Academia 14.6% 15.6% Government 742 Society Business NGO 11.1% 1.23% 23.8% 44.7% 16.2% Economics 34.5% Gender International organizations Technology 8.6% 17.9% Environment 9.2% Other 3.8% Male Female 68.9% 31.1%

Central Asia including Russia Europe 2.3% Age distribution Region 32.2%

North America East Asia 17.7% and the Pacific 12.5% Middle East and North Africa 6.5%

Latin America Oceania 26.3% 21.4% 18.6% 19.1%19.1% 8.2% 6.3% and the Caribbean 1.2% 12.8% South Asia <30 30–39 40–49 50–59 60–69 >70 Sub-Saharan Africa 5.9% 8.8%

Source: Global Risks Perception Survey 2015. Note: Reported shares are based on number of valid responses: Gender: 742 responses; Expertise: 726; Organization type: 732; Age distribution: 742; Region: 727.

88 The Global Risks Report 2016 Analysis Similarly, for the Risks-Trends above); the biggest trend is the one Interconnections Map 2016 considered to be the most important in The Global Risks Landscape 2016 respondents had to identify up to three shaping global development. (Figure 1) trends that they consider important in shaping the global agenda in the next The placement of the nodes in the Respondents were asked to assess the 10 years and the three risks that are Global Risks-Trends Interconnections likelihood and global impact of each of driven by each of those trends. For Map was computed using ForceAtlas2, the 29 risks. For each risk, they were completeness, the two questions read a force-directed network layout asked, “How likely is this risk to occur “From the list of trends below, which are algorithm implemented in Gephi globally within the next 10 years?” and the three most important trends that will software, which minimizes edge lengths “What is the estimated impact globally if shape global development in the next and edge crossings by running a this risk were to materialize? (Impact is 10 years”; and “For each of the three physical particle simulation.2 to be interpreted in a broad sense trends identified in [the previous Global Risks of Highest1 Concern in beyond just economic consequences)”. question], select up to three risks from Ni The possible answers ranged from 1 the list below that are most strongly 2016 (Figure 1.2)1 likelihoodi likelihoodi,n Ni (“very unlikely” and “low” impact, driven by these trends”. The information n=1 respectively) to 7 (“very likely” and “high” thereby obtained was used to construct Although the Report� � generally looks at impact, respectively). the Risks-Trend Interconnections Map global risks on a time horizon of 10 2016. years, respondents were asked to

Respondents were given the possibility identify the risks of highest2 concern Ni to choose a “Don’t know” option if they In both cases, a tally was made of the within two different1 timeframes: 18 months andimpact 10i =years. impactTo identifyi,n the top felt unable to provide an informed number of times each pair was cited. Ni n=1 answer. Respondents could also leave This value was then divided1 by the five global risks of highest concern Ni � the question completely blank. For each count of the most frequently1 cited pair. described in Part 1, respondents likelihoodi likelihoodi,n risk, partial responses, i.e. those As a final step, theN isquare root of this answered the following question: “In this n=1 1 survey, we are looking at risks within the assessing only the likelihood or only the ratio was taken to� dampen�Ni the long-tail 1 N impact, were dropped. A simple effect (i.e. a few very strong links, and next 10 years. For this questionn=1 pairij,n only, likelihoodi likelihoodi,n interconnection = average for both likelihood and impact many weak ones) andNi to make the please select the fiveij globalpair risks that n=1 ∑ max � � you believe to be of most concern within for each of the 29 global risks was differences more apparent2 across the � Ni calculated on this basis. Formally, for weakest connections.1 Out of the 406 the next 18 months and 10 years, impact = impact N1 any given risk i, its likelihood and impact, possible pairs ofi risks, 167 ori,n 41% were respectively”. i N1 Ni i n=1 1 not cited. Similarly, out2 of the possible denoted respectively1 likelihoodi and N likelihoodi likelihoodi,n likelihood likelihood �i Ni N i i,n For any given risk i fromn=1 the list of 29 impact, are: Ni 377 trend-risk combinations,1 33 or 9% i n=1 impact = impact pairmax= max ( pairij,n ) 1 i i,n risks, we obtained�ij the� n=1share of total � �Ni were not cited. Formally,Ni the intensity of 1 n=1 the interconnection �between risks i and j respondents (N = 742)� that have likelihoodi likelihoodi,n Ni N declared to be concerned about that n=1 (or between trend i and risk jpair), denoted interconnection = n=1 ij,n � � interconnection , corresponds ij to: risk: N2 2 ij pairmax i Ni ∑ 1 N 1 impact = 1impact � N i i,n impact = impact % concernNi = ci,n i i,n n=1 pairij,n in=1 Ni interconnection = N n=1 ij n=1 2 pairmax � �Ni ∑ �� 1 � where N isimpact the number= impact of respondents with c {0,1} and equal to 1 if i i i,n N i,n Ni for risk i, and likelihoodn=1 and impact respondent N selected risk i as a risk of i,n i,n pairmax= max ( pairij,n ) ij are respectively the �likelihood and n=1 ∈ N concern. The risks with Nther pairfive highest N pair � interconnection =1 n=1 ij,n impact assigned by respondentn=1 ij,n n to risk N shares were% likelihood selected=ij as pairthel risks of interconnectionij= where N is the number of respondents. ir i,nmax pair Nr∑ i and measured on a scale frommax 1 to 7. pairmax= max ( pairij,n ) most concern. n=1 ∑ ij n=1 � N is the number of respondents� for risk i �� i N pair Variable pair is 1 whenN respondent n who assessed both the likelihoodn=1 ij,n and ij,n �1 interconnectionij= The Most Likely Global Risks 2016: A pair selected the% concernpair of risks= i andci,n j as part impact of that risk. ∑ max i N Regional Perspective (Figure 3) of his/her selection. Otherwise,n=1 it is 0. � N �N � � Nj N The value of the interconnection 1 pairmax= max1( pairij,n ) The Global Risks Interconnections In the survey,% respondentsC =ij n=1c were asked pairmax= max ( pairij,n ) determines% theconcern thicknessi= ofc i,neach ij i,n Map 2016 (Figureij 2) andn=1 The Risks- N to identify up to threeNr risks that were the connecting line in the graph,n=1 with the �n=1 Trends Interconnections � Map 2016 �� most likely to occur in� the� region� in N N most frequently cited pair rhaving the 3 (Figure pair4) max= max ( pairij,n ) 1 which they are based. ij n=1 thickest line.% likelihoodir= li,n Nr N n=1 1 � N To draw the Global Risks1 �Nr � � For any given% concern risk i from= theci,n list of 29 In the Global Risks Landscape and i N % concerni= ci,n 1 Interconnections MapN in Part 1, survey % likelihood = l risks, we obtained the n=1share of n=1 Risks-Trends Interconnectionsir i,n Maps, � � respondents were asked to answer the Nr � �N � � n=1 respondents from region r (Nr) who think 1 the size of each risk is scaled according following question: “In your view, which �� that risk i is the most likely to occur in % concern = ci,n Nj i N to the “weighted degree”1 of that node in are the most strongly connectedn=1 their region: the system. Moreover,% Cij= inc thei,n Risks- risks? Please select at least�� three� pairs Nr Nr n=1 Nr Trends Interconnections Map, the size 1 and up to six pairs from1 the 29 risks �Nj � � % likelihoodir= li,n % likelihood = l of the trend represents the perception of Nr ir i,n 1 n=1 below (one risk can beN rconnected to % C = c n=1 its importance inij shaping i,nglobal any one of the other 28 risks)”. Nr �� Nr � � development (answern=1 to the first part of 1 �� with li,n {0,1} and equal to 1 if % likelihood ir= li,n the question on trend as explained respondent N selected risk i. Nr n=1 ∈ �� Nj Nj The1 Global Risks Report 2016 89 1 % Cij= ci,n % C = c Nr ij i,n n=1 Nr n=1 �� Nj � � 1 % Cij= ci,n Nr n=1 �� Appendix C: The Executive and Opinion Survey 2015: Views of the Business Community on the Global Risks of Highest Concern for Doing Business

Every year since 1979 the World Interested readers can visit the portal at Economic Forum has conducted the http://wef.ch/risks2016 to access the Executive Opinion Survey (EOS). This results for individual economies and survey captures invaluable information regions. on a broad range of socio-economic issues. In the 2015 edition, over 13,000 1 executives in 140 economiesNi were 4 1 surveyed.likelihood i likelihoodi,n Ni n=1 The 2015 edition� of� the EOS, conducted between February and June 2015, included a question on the risks of 2 highest concern forN ithe second time. 1 More specifically,impacti= respondentsimpacti,n were Ni asked to select then=1 five global risks that they believe to be of� most concern for doing business in their country within the next 10 years. N pair interconnection = n=1 ij,n The list of 28 globalij riskspair presented in ∑ max the EOS is derived from� the list of global risks of The Global Risks Report 2015 and is almost similar to the global risks

of The Global Risks Report 2016 (see Appendix B for the differencesN in global pairmax= max ( pairij,n ) risks between theij twon=1 editions). The size and nature of the� EOS and the GRPS respondents differed significantly: they comprised a N multistakeholder group1 of experts in the % concern = c case of the GRPSi andN businessi,n n=1 executives in the case� of� the� EOS. The EOS results provide a complementary perspective – that of businesses on the

impact of global risks onNr their businesses. 1 % likelihoodir= li,n Nr n=1 Formally, for each country�� j the� share of respondents selecting each global risk i is: Nj 1 % Cij= ci,n Nr n=1 ��

where Nj is the sample size of the

country j and ni,j is the number of respondents who selected the risk i in their five global risks of highest concern

for doing business in country j. Ci,j is the share of respondents who selected risk i in country j.

90 The Global Risks Report 2016 Endnotes

1 The Global Shapers Community is a network of hubs developed and led by young people who are exceptional in their potential, achievement and drive to make a contribution to their communities; see http://www.weforum.org/community/global- shapers 2 3 See Jacomy et al. 2012. 3 Respondents indicated the region in which they were based from the following list: Europe, Central Asia including Russia, East Asia and Pacific, South Asia, Sub-Saharan Africa, Middle-East and North Africa, Latin America and the Caribbean, North America, and Oceania. 4 For more information about the Survey, see Browne et al. 2014.

References

Browne, C., A. Di Battista, T. Geiger, and T. Gutknecht. 2014. “The Executive Opinion Survey: The Voice of the Business Community”. The Global Competitiveness Report 2015–2016. Geneva: World Economic Forum. 75–85.

Jacomy, M., S. Heymann, T. Venturini, and M. Bastian. 2012. “ForceAtlas2: A Continuous Graph Layout Algorithm for Handy Network Visualization”.

The Global Risks Report 2016 91 The Global Risks Report 2016 synthesizes the insights, ideas and Acknowledgements contributions of many individuals through workshops, group calls and research. The World Economic Forum is grateful to all who took part in the challenge to think about global risks. Without their dedication, guidance and support, it would not have been possible to develop this Report.

The World Economic Forum would like to thank our Strategic Partners Marsh & McLennan Companies and Zurich Insurance Group for their guidance, input and support. We also thank our academic advisers, the National University of Singapore, the Oxford Martin School at the University of Oxford and the Wharton Risk Management and Decision Processes Center at the University of Pennsylvania.

The project was led at the World Economic Forum by Margareta Drzeniek Hanouz and The Global Risks Report 2016 team including Gaëlle Marti (Project Manager), Caroline Galvan (Content Lead), Ciara Browne (Partnerships), Attilio Di Battista, and Stéphanie Verin.

The Global Risks Report 2016 governance is represented by the Steering Board, the Advisory Board and the Activation Board, all of which have provided invaluable input and guidance.

The Steering Board includes: John Drzik, President, Global Risk and Specialties, Marsh, United States Richard Samans, Head of the Centre for the Global Agenda, Member of the Managing Board, World Economic Forum, Switzerland Cecilia Reyes, Chief Risk Officer, Zurich Insurance Group, Switzerland

The Advisory Board is composed of: Rolf Alter, Organisation for Economic Co-operation and Development (OECD) Mario Blejer, Banco Hipotecario SA Winnie Byanyima, Oxfam International Marie-Valentine Florin, International Risk Governance Council (IRGC) Steven Kou, National University of Singapore Julian Laird, Oxford Martin School

92 The Global Risks Report 2016 Pascal Lamy, Jacques Delors Institute Chris Lang Box 3.2.2: Environment team, World Ursula von der Leyen, Federal Minister Oscar Lee Economic Forum of Defence of Germany Holly Meidl Box 3.3.1: Olivier Oullier, World Maleeha Lodhi Ambassador and Maurizio Quintavalle Economic Forum Permanent Representative of Pakistan Daniel Radov Box 3.3.2: Jeremy Farrar, The to the United Nations Chris Smy Wellcome Trust and Stéphanie Cristin, Erwann Michel-Kerjan, Wharton Risk Alex Wittenberg World Economic Forum Management and Decision Processes Box 3.3.3: Priya Basu, The World Bank Center, University of Pennsylvania Zurich Insurance Group (in addition Nicolas Mueller, Federal Chancellery of to those listed above) Part 2: Security: The Security Switzerland Daniel Eherer Outlook 2030 Moisés Naím, Carnegie Endowment for John Scott A special thank you goes to the International Peace participants of the Security Outlook Jonathan Ostry, International Monetary 2030 initiative workshops including the The Global Risks Report 2016 Fund Members of the Global Shapers Academic Advisers (in addition to Manuel Pulgar-Vidal Otalora, Minister of Community for their unique those listed above) Environment of Peru contributions. Please see the full list of Nouriel Roubini, New York University participants at the end of this section. National University of Singapore Anders Sandberg, University of Oxford Tan Chorh Chuan Richard Smith-Bingham, Marsh & Part 4: Deep-Dives Ho Teck Hua McLennan Companies Unemployment or Underemployment: Michelle Tuveson, Centre for Risk Saadia Zahidi, World Economic Forum Studies, University of Cambridge Oxford Martin School, University of Energy Price Shocks to the Global Judge Business School Oxford Economy: Espen Mehlum, World Steve Wilson, Zurich Insurance Group Ian Goldin Economic Forum Sandra Wu Wen-Hsiu, Japan Asia Failure of National Governance: Karen Group Limited Wharton Risk Management and Wong, World Economic Forum Decision Processes Center, Asset Bubble: Michael Drexler, World University of Pennsylvania The Activation Board includes: Economic Forum Howard Kunreuther Laura Castellano, Zurich Insurance Cyberattacks: Ushang Damachi, World Group, Switzerland Economic Forum Jason Groves, Marsh & McLennan The project team would like to thank Companies, United Kingdom the following for their contribution to the A special thank you also goes to the Report: Gregory Renand, Zurich Insurance following for their contribution and Group, Switzerland support to The Global Risks Report Pavel Osipyants, Zurich Insurance Boxes 2016: Group, Switzerland Box 1.2: Bernice Lee, World Economic Charles Baubion, Organisation for Stephen Szaraz, Marsh & McLennan Forum Economic Co-operation and Companies, United States Box 1.3: Sara Pantuliano and Caitlin Development (OECD); Juan Carlos Wake, Overseas Development Institute Castilla-Rubio, Planetary Skin Institute Box 1.4: Thierry Geiger, World and Space Time Ventures; Celine The Global Risks Report 2016 Economic Forum Charveriat, Oxfam International; Strategic Partners Box 1.5: GAC on Risk and Resilience Stephen Cross, AON Plc; Geza Box 2.1: International Security team, Andreas von Geyr, Federal Ministry of Partner Content Leads World Economic Forum Defence of Germany; Stephane Richard Smith-Bingham, Director, Jacobzone, Organisation for Economic Global Risk Center, Marsh & McLennan Box 2.2: International Security team, World Economic Forum Co-operation and Development Companies, United Kingdom (OECD); Trudi Lang; Kirstjen Nielsen, Steve Wilson, Chief Risk Officer, Box 2.3: Peter Maurer, International Committee of the Red Cross (ICRC) Center for Cyber and Homeland General Insurance, Zurich Insurance Security; Paul Nicholas, Microsoft Box 2.4: International Security team, Group, Switzerland Corporation; and Laura Wellesley, World Economic Forum Chatham House. Box 2.5: International Security team, Marsh & McLennan Companies (in World Economic Forum addition to those listed above) At the World Economic Forum Ralph Bone Box 3.1.1: Society and Innovation team, World Economic Forum Founder and Executive Chairman Johnny Chan Box 3.1.2 Guillaume Lafortune, Klaus Schwab Jay Doherty Organisation for Economic Co- Evan Freely operation and Development (OECD) Executive Committee Bruce Hamory Box 3.2.1: Environment team and Lorin David Aikman; Marco Albani; Arnaud Patrick Howell-Day Fries, World Economic Forum Bernaert; Jennifer Blanke; Roberto

The Global Risks Report 2016 93 Bocca; Sebastian Buckup; Denise the production of this Report would not The project team would like to thank Burnet; Nicholas Davis; Jean-Loup have been feasible. the individuals who contributed to the Denereaz; Margareta Drzeniek Hanouz; report by participating in workshops: Miroslav Dusek; Espen Barth Eide; The project team would like to thank Diana El-Azar; Paolo Gallo; Julien the Members of the Global Agenda The participants in the workshop on Gattoni; Malte Godbersen; Mike Council on Risk & Resilience and the The Global Risks Report 2016 were Hanley; Lee Howell; Jeremy Jurgens; Meta-Council on the Illicit Economy for (in addition to those listed above): Elsie Kanza; Anja Kaspersen; Martina their contribution. Abdulla Al Basti, The Executive Office, Larkin; Helena Leurent; Emma Loades; Government of Dubai; Saeed Al Nazari, Fon Mathuros Chantanayingyong; Global Agenda Council on Risk & The Executive Office, Government of Adrian Monck; Olivier Oullier; Gilbert Resilience: Dubai; Carl Benedikt Frey, Oxford Probst; Pedro Rodrigues de Almeida; Lauren Alexander Augustine, National Martin Programme on Technology and Mel Rogers; Philipp Rösler; Richard Academy of Sciences; Stanley M. Employment, University of Oxford; Samans; Olivier Schwab; Murat Bergman, Henry Schein; Michael Bastian Bergmann, ETH Risk Center; Sönmez; Mark Spelman; Terri Toyota; Berkowitz, Rockefeller Foundation; Yves Daccord, International Committee Akira Tsuchiya; Jean-Luc Vez; Dominic Edwin Macharia, Dalberg Global of the Red Cross (ICRC); Tina Fordham, Waughray; Alex Wong; Justin Wood; Development Advisers; Victor Meyer, Citi; Cameron Hepburn, The Institute Saadia Zahidi; and Alois Zwinggi. Deutsche Bank; Paul Nicholas, for New Economic Thinking, University Microsoft Corporation, Kirstjen Nielsen, of Oxford; Evgueni Ivantsov, European The Global Risks Report 2016 Public Center for Cyber and Homeland Risk Management Council; Moncef Engagement Team Security; Satoru Nishikawa, Japan Klouche, The Executive Office, Oliver Cann and Laura Clementi. Water Agency (JWA); Yuichi Ono, Government of Dubai; Alexander Tohoku University; Sara Pantuliano, Leveringhaus, Oxford Institute for Production Team Overseas Development Institute; Joe Ethics, Law and Armed Conflict, David Bustamante; Marta Chierego; Ruiz, The UPS Foundation; Armen University of Oxford; Robyn Norton, Kamal Kimaoui, World Economic Sarkissian, Eurasia House The George Institute for Global Health, Forum; and Peter Grundy, Designer, International;; Dan Smith, International University of Oxford; Herbert Hope Steele, Freelance Editor; Moritz Alert; Elizabeth Hausler Strand, Build Oberhänsli, Nestlé; Kazem Rahimi, The Stefaner, Freelance Information Change; Jaan Tallinn, Centre for the George Institute for Global Health, Visualizer; and Andrew Wright, Study of Existential Risk; Michael University of Oxford; Claudette Freelance Writer. Useem, Wharton School; Nick Thompson, Cabinet Office; Barry Wildgoose, Zurich Insurance Group; Vaughan, Department of Taoiseach; The project team expresses its and Alexander Wolfson, Citi. and Alexander Weis, Royal College of gratitude to the colleagues from the Defence Studies. World Economic Forum who provided Meta-Council on the Illicit Economy feedback throughout the development Adam Blackwell, William J. Perry The individuals who took part in the of The Global Risks Report 2016 (in Center for Hemispheric Defense and private session at the Summit on the addition to those listed above): Security Studies, National Defense Global Agenda 2015: University, USA; Wolfgang Goetz, Sanjay Bhatnagar, WaterHealth Marisol Argueta de Barillas; Adeyemi European Monitoring Centre for Drugs International (GAC Water); Juan Carlos Babington-Ashaye; Giancarlo Bruno; and Drug Addiction (EMCDDA); Castilla-Rubio, Planetary Skin Institute Caterina Clifone; Gemma Corrigan; Steven Simske,Hewlett-Packard and Space Time Ventures (GAC Alexander Crueger; Diane Davoine; Company; Rolf Alter, Organisation for Forests); Céline Cousteau, Dessislava Dimitrova; Sean Doherty; Economic Co-operation and CauseCentric Productions Inc. (GAC Lisa Dreier; John Dutton; David Development (OECD); Hans J. Schwab, Oceans); J. Carl Ganter, Circle of Blue Gleicher; Stefan Hall; Tatiana Tech Trace SA; Dimitri Vlassis, United (GAC Water); Sturla Henriksen, Kalashnikova; Andrej Kirn; Isabelle Nations Office on Drugs and Crime Norwegian Shipowners’ Association Lecouls Carbonnier; Emma Loades; (UNODC); Christina Bain, Babson (GAC Artic); Renat Heuberger, South Muireann Mageras; Alan Marcus; Viraj College; Anton Du Plessis, Institute for Pole Carbon (GAC Climate Change); Mehta; Stephan Mergenthaler; Fulvia Security Studies (ISS); Steven Broad, Naina Lal Kidwai, HSBC Asia Pacific Montresor; Marie Sophie Müller; Alex TRAFFIC International; Raymond (GAC Water); Michael Lodge, General, Mung; Sarita Nayyar; Derek O’Halloran; Baker, Global Financial Integrity; International Seabed Authority (GAC Bernhard Petermeier; Florian Reber; Jean-Paul Laborde, United Nations; Oceans); Nick Mabey, Third Generation Sophia Sandström; Jim Snabe; Paul Jay Cziraky, North Degrees; Linah K. Environmentalism (GAC Governance Smyke; Lisa Ventura; Jean-Luc Vez; Mohohlo, Bank of Botswana; for Sustainability); Adil Najam, Pardee Regula Waltenspuel; Bruce Weinelt; Gaozhang Zhu, World Customs School of Global Studies, Boston Shannon Wells; and Alex Williams. Organization (WCO); Laura Lane, UPS; University (GAC Climate Change); Oyun and Alan D. Cohn,Georgetown Sanjasuuren, Member of Parliament of Mongolia (GAC Water); Greg Stone, The project team is grateful to the 742 University Law Center. Conservation International (GAC respondents to the Global Risks Oceans); John Tanzer, WWF Perception Survey 2015 without whom International (GAC Oceans); Mead

94 The Global Risks Report 2016 Treadwell, LLC (GAC Artic); Gary White, American States; David Boehmer, Emirates; Amanda Ellis, New Zealand Water.org (GAC Water); and Jan- Heidrick & Struggles; Jesper Boll, Ambassador to UN; Dominic Emery, Gunnar Winther, Norwegian Polar Gulftainer Company Limited United BP Plc; Arnaud Erbin, GDF SUEZ; Institute (GAC Artic). Arab Emirates; Ian Bond, Centre for Jonathan Eyal, Royal United Services European Reform; Juan Boulos, Institute; Ulrik Federspiel, Haldor List of participants to The Security Consolidated Contractors Company; Topsoe A/S; Marco Fiorese, The Outlook 2030 Security Initiative Steven Boutelle , CISCO; Ernest Bower, Monaco-Asia Society; Peter Florenz, workshops: Center for Strategic and International Henkel AG & Co. KGaA; Jim Freeth, Hafsat Abiola-Costello, Government of Studies; Karl Bream, Alcatel-Lucent; JPMorgan Chase & Co United Arab the State of Ogun; Yoshihiko Aihara, Binta Brown, Fermata Entertainment; Emirates; Hor Wuen Fung, Weatherford Mitsubishi Heavy Industries; Gemma Juan Carlos Pinzón Bueno, Ministry of International; Li Fuzhen, Little Bird Aiolfi, Basel Institute on Governance; National Defence of Colombia; Nilda Hotline for Migrant Workers; J. Carl Fahad Al Binali, Police Force of Bahrain; Bullain, International Center for Not-for- Ganter, Circle of Blue; James Gifford, TalalAl Gaddah, MAG Property Profit Law; Mely Caballero-Anthony, Harvard University; Elissa Golberg, Development United Arab Emirates; Nanyang Technological University; Foreign Affairs, Trade and Development Moafaq Ahmad Al Gaadah, MAG Corina Calugaru, Ministry of Foreign Canada; Pinchas Goldschmidt, Group of Companies United Arab Affairs and European Integration of Conference of European Rabbis; Emirates; Luay Al Kattheb, Iraq Energy Moldova; Jack Campbell, Marsch and TamurGoudarzi-Pour, Lufthansa Institute United Kingdom; Abdulrazzaq Mclennan; Jose Manuel Carrera, PMI German Airlines United Arab Emirates; Al-Buaijan, Kuwait Investment Authority Comercio Internacional SA ; Jain Kjell Grandhagen, Norwegian (KIA); Alanoud Al-Sabah, Kuwait Chaitan, IATA; Kamala Chandrakirana, Intelligence Service; Sam Gregory, National Security Bureau; Antanas Indonesia untuk Kemanusiaan; Ilias WITNESS; Jesse Grossman, Aleknavičius, Ministry of Defence of Chantzos, Symantec Corporation; Community Bucket; Jean-Marie Lithuania; Patrick Allman-Ward, Dana Mushtaq Chhapra, Citizens Guehenno, International Crisis Group; Gas PJSC United Arab Emirates; Foundation; John Chipman, The Ahmed Hamzawy, BT Group Plc Andreas Alnes, Statkraft AS; Suad International Institute for Security United Arab Emirates; David Harland, Alshakrani, Bahrain Mumtalakat Studies; Jackie Cilliers, IIS South Africa; Centre for Humanitarian Dialogue; Holding Company BSC (c); Husodo Noel Clehane, BDO International Ltd; Andrew Harper, United Nations High Angkosubroto, PT Gunung Sewu Alan D. Cohn, US Department of Commissioner for Refugees; Rick Kencana; Rashyid Redza Anwarudin, Homeland Security; Jean Francois Hathaway, Habitat for Humanity Sime Darby Berhad; Doug Arent, Condamine, UPS United Arab International; Gary Haugen, National Renewable Energy Emirates; James Cottrell, Deloitte LLP; International Justice Mission; Richard Laboratory; Jon Arons, FTI Consulting; Stephen D’Esposito III, RESOLVE; Haythornthwaite, Mastercard; Renat Nigel Aston, Amadeus IT Group SA; Ida Martyn Davies, Frontier Advisory Pty Heuberger, South Pole Carbon; John Auken, Parliament of Denmark Ltd; Ilona Szabo de Carvalho, Igarapé Hewko, Rotary International; (Folketinget); Dionysia-Theodora Institute; Rafael Fernandez de Castro, TerryHeymann, World Gold Council; Avgerinopoulou, Circle of the Instituto Tecnologico Autonomo de Seema Hirani, DuPont Products SA Mediterranean Parliamentarians on Mexico; Cedric de Coning, Norweigan United Arab Emirates; Bill Hughes, Sustainable Development; Ronit Avni, Institute of International Affairs; Nishan TIBCO Software Inc.; Jonathan Ibbott, Just Vision; Bahruz Bahramov, State Oil Degnarain, Mauritius Government; Susi XL Catlin; Ahmad Iravani, Center for the Fund of the Republic of Azerbaijan Dennison, European Council on Study of Islam and the Middle East; (SOFAZ); Evelyn Balais-Serrano, Asian Foreign Relations; Ghislain Desjardins, WolfgangIschinger, Munich Security Forum for Human Rights and DuPont Products SA United Arab Conference ; Majid Jafar, Crescent Development; Baldeo P. Banka, Ispat Emirates; Edmund DiSanto, American Petroleum United Arab Emirates; Sir Indo PT; Anat Bar-Gera, Yoo Mee Tower Corporation; Dino Patti Djalal, Mohammad Jafar, The Kuwaiti Danish Africa; Mehdi Barhkhodar, MKS PAMP Deputy Foreign Minister, Republic of Dairy Company KCSC, Kuwait; Chaitan Group; Julien Barnes-Dacy, European Indonesia; Erika Dominguez, Sixsigma Jain, International Air Transport Council on Foreign Relations; Networks México; Stephen C. Association (IATA); Kil Jeong-Woo, AnaBarresi, Proyecto Indigo; Maricel Donehoo, McLarty Associates; Kathryn Member of Parliament, Republic of Barros, Phillippine National Police; Dovey, Organisation for Economic Korea; Mahmoud Jibril, Leader of the Katinka Barysch, Allianz SE; Biza Co-operation and Development National Forces Alliance; Haythem Barzo, Institute of Regional and (OECD); Richard Dowdon, Royal Jlassi, Armed Forces of Tunisia; Lars International Studies (IRIS); Raymond J. African Society; Florin Druga, Jannick Johansen, The Social Capital Baxter, Kaiser Permanente; Rod Romanian Intelligence Service; Anton Fund; Bruce Jones, The Brookings Beckstrom, Rod Beckstrom Group; du Plessis, IIS South Africa; Anthony Institute; Yoko Kamikawa, Ministry of Sebastian Bellagamba, The Internet Dworkin, European Council on Foreign Justice of Japan; Ajay Kanoria, Kanoria Society (ISOC); Erik Berglöf, London Relations; Toby Edwards, Agility; Peter Group; Robert D. Kaplan, Stratfor; School of Economics and Political Eggleston, Chevron Asia Pacific Dennis Karpes, Naga Foundation; J. Science; Andrey Beskodarov, PAO Exploration & Production; Amel Randall Kerr, Caterpillar Inc.; Sanjeev LUKOIL; Carl Bildt, Former Prime Benchikh El Hocine, The Dow Khagram, Occidental College; Parag Minister of Sweden; Rajiv Biswas, IHS; Chemical Company Algeria; Wael El Khanna, New America Foundation, Adam Blackwell, Organization of Kabbany, BT Group Plc United Arab Singapore; Sirilaksana Khoman,

The Global Risks Report 2016 95 National Anti-Corruption Commission Institute; Karim Nabulsi, Deloitte Susan L. Segal, Council of the of Indonesia; Nomo Khumalo, Henry Jordan; Yoshinobu Nagamine, Americas; Chris Seiple, Institute for Schein Inc.; Ms Shoko Kimjima, Lixil International Committee of the Red Global Engagement; Sergei Sereda, Corporation ; Marion Kipiani, Cross (ICRC); Chandran Nair, Global OJSC PhosAgro; Nasreen Seria, Norweigian Helsinki Committee; John Institute for Tomorrow; Raman Bloomberg News; Ramesh Knight, Statoil ; Kadiatou Konate, Narayanan, Air Asia; Nasser Nasser, Shivakumaran, Gulftainer Company Minitry of Foreign Affairs, African Middle East Scientific Institute for Limited United Arab Emirates; Landry Integration and International Security; David Nbarro, UN Special Signe, Stanford University; Tove Cooperation of Mali; Khalid Koser, Envoy on Ebola; Hellen Ndwiga, Kenya Sjøblom, Statoil ASA; Silje Skogstad, Global Community Engagement and Police Service; Jonas Neihardt, Hilton Deutsche Post DHL Group; Dan Smith, Resilience Fund; Michael Krobok, Worldwide; Robin Niblett, Chatham Stockholm International Peace Department of Security Policy, Federal House; Kirstjen Nielsen, Center for Research Institute; Natalia Soebagjo, Government of Germany; André Cyber and Homeland Security; Helen Transparency International; Dario Kudelski, Kudelski Group; Umit Alderson Reat Noch, International Speranza, Eni SpA; Rajesh Kumar Kumcuoglu, Kare Yatirim; Josh Committee of the Red Cross (ICRC); Srivastava, Jubilant Bhartia Group; Kurlantzick, Council on Foreign Victor Ochen, African Youth Initiative Jürgen Stock, INTERPOL; Olga Relations; ScottLammie, University of Network-Uganda; Kenichi Oki, Stoliarchuk, Schoenherr Ukraina LLC; Pittsburgh Medical Center - Health Mitsubishi Heavy Industries Ltd; Jens-Christian Stougaard, Pension Plan; JoshuaLandis, University of George Ombima, IFC Asset Danmark; Timur Sukirno, Hadiputranto, Oklahoma USA; Maged Latif, HSBC Management Company LLC; Mina Hadinoto & Partners; Malek Sukkar, United Kingdom; Nadiah Hanim Abdul Oraibi, Asharq Al-Awsat Newspaper; Averda Lebanon; Paul Surprenant, Latif, Sime Darby Berhad; Todd William Overholt, Fung Global Institute; Mercer; Hiroyuki (Bob) Takai, Sumitomo Lauchlan, Jones Lang LaSalle; Seung Christine Ownell, Owenell Global Corporation Global Research Co. Ltd; Bok Lee, Air Force of the Republic of Consultancy; Anju Patwardhan, Pavlo Tanasyuk, BlockVerify; Yana Korea; Mark Leonard, European Center Standard Chartered Bank; Eliot Pence, Buhrer Tavanier, Fine Acts; Simon S. for Foreign Policy; Rob Leslie, Sedicii; McLarty Associates; Robert Pepper, Tay, Singapore Institute of International Daniel Levy, European Council on Cisco; Peter Phillips, PT Marsh Affairs (SIIA); Jim Thomas, Zurich Foreign Relations; Geoffrey Lipman, Indonesia (MMC); Katarzyna Pisarska, Insurance; Andrew Thomson, Acciona; International Coalition of Tourism European Academy of Diplomacy; Wim Pingtjin Thum, University of Oxford; Partners; Clare Lockhart, ISE; Nick Plaizier, A.T. Kearney (Pty) Ltd; Oscar Adolfo Naranjo Trujillo, Minister Mabey, E3G, Third Generation ToddPlatt, Hillwood; Arthur Nigel Pont, of Post Conflict of Colombia; Environmentalism; Otto Malmgren, Mercy Corps Lebanon; Vijay Magdalena Trzpil-Halota, Polish Norwegian Ministry of Foreign Affairs ; Poonoosamy, Etihad Airways; Brillianti Ministry of Defence; Givi Tsagereishvili, Felix Maradiaga, Pioneer Capital Putri, Ministry of Foreign Affairs of Georgian Ministry of Internal Affairs; Partners; Valerie Marcel, Chatham Indonesia; Arjen Radder, Royal Philips Bert Turner, Digital Globe; Sergey House; Robert Mardini, International United Arab Emirates; Hilal Rahim, Vakulenko, JSC Gazprom Neft; Anshu Committee of the Red Cross; Hector Afghan Ministry of Foreign Affairs; Vats, Oliver Wyman (MMC) United Arab Marquez, Manpower Group; Thom Aashmi Rajya Lakshmi Rana, Educomp Emirates; Ravi Kumar Vennelaganti, Mason, Oak Ridge National Lab; Solutions Ltd; Karim Raslan, KRA Crescent Enterprises United Arab Tatsuo Masuda, Nagoya University of Group; Douglas A. Rediker, Peterson Emirates; Stefano Vescovi, Federal Commerce and Business Graduate Institute for International Economics; Department of Foreign Affairs of School; Luis Maza, Kio Networks; Tito Nicola Reindorp, Crisis Action; Neil Switzerland; Mark Vlasic, Georgetown Mboweni, South Africa Reserve Bank Reznolds, CH2M HILL United Arab University; Joerg Volkmann, German (SARB); Rory Medcalf, Australian Emirates; Nilmini Rubin, US House of Armed Forces; Siobhan Walsh, National University; Souad Mekhennet, Representatives Committee on Foreign Concern Worldwide US; WeiWei, Little The Washington Post; Ricardo Affairs; Ruediger Ruediger, University of Bird Hotline for Migrant Workers; Alice Meléndez-Ortiz, International Centre for Vienna; Dina Sabry, Egyptian Ministry G. Wells, US Ambassador to Jordan; Trade and Sustainable Development; of Foreign Affairs; William H. Saito, Achim Wenmann, Geneva Peace- Gerard Meuchner, Henry Schein Inc.; Cabinet Office of Japan; Ghassan building Platform; Andre Wilkens, Melody Boone Meyer, Chevron Salame, Universite des Sciences Rainbow Minerals; Abiodun Williams, Corporation; Takashi Mitachi, Boston Politiques, Paris Sorbonne; Razeen Hague Institute for Global Justice; Nick Consulting Group; Viktoriia Mizerna, Sally, National University of Singapore; Witney, European Council on Foreign Ministry of Internal Affairs of Ukraine; Sir John Sawers, Former Chief of the Relations; Lee Xiaodong, China Internet Michael Moller, Head of the United UK Secret Intelligence Service; Juan Network Information Center (CNNIC); Nations in Geneva; Robert Mood, Pedro Schaerer, Relegación Regional Wu Xinbo, Fudan University; Yasuyuki United Nations Supervision Mission in del CICR para México, América Central Yamaji, Mizuho Bank Ltd; Helena LiYan, Syria; Justin Moore, Axcient; Moosa Al y Cuba, International Committee of the Trina Solar Ltd; Takashi Yao, Marubeni Moosa, The Dow Chemical Company Red Cross (ICRC); John Christian Corporation; Bo Ram Yi, Old Dominion United Arab Emirates; Gemma Schandy, Schandy; Michael Schroeder, University; Mohamed Bihi Yonis, Mortensen, Crisis Action; Amr Moussa, Royal Belgian Armed Forces; Robyn Ministry of Foreign Affairs and Former Secretary-General of the Arab Scott, Brothers for All; Demba Seck, International Cooperation of League; Robert Muggah, Igarapé Customs Administration of Senegal; Somaliland; Lamberto Zannier,

96 The Global Risks Report 2016 Organization for Security and Cooperation in Europe (OSCE); Almira Zejnilagic, FTI Consulting; Lassina Zerbo, Preparatory Commission for the Comprehensive Nuclear-Test-Ban Treaty Organization; and Daniel Zovatto, International Institute for Democracy and Electoral Assistance.

Figure: Scenarios Methodology, Workshops’ Composition

19% Academia

17% Government

Business 41%

13% NGOs4

International 7% 3% Other 4 organizations

Note: In total, the 10 workshops gathered 281 experts

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