Released earlier this week, the survey finds that the greatest perceived global risk in terms of likelihood was large-scale involuntary migration – such as that seen during the recent Syrian refugee crisis – followed by extreme weather events, failure of climate change mitigation, interstate conflict with regional consequences and major natural catastrophes.
The survey, conducted by the World Economic Forum, is informed by the responses of just under 750 experts, who assessed 29 distinct global risks for both impact and likelihood over the next 18 months as well as over a 10-year timeline.
The survey also found that the risk with the greatest potential impact – according to those surveyed – would be a failure to address climate change.
2016 is the first year climate change has topped the impact list, with survey respondents believing “failure of climate change mitigation and adaptation,” has greater potential damage than weapons of mass destruction, water crises, large-scale involuntary migration and the effects of an energy price shock.
The report also points out that risk connectivity and complexity is an increasing challenge for policy makers. At the top end of the scale, 2016’s two most interconnected risks – profound social instability and structural unemployment or under-employment – were considered the greatest threat. [See chart below].
"Events such as Europe’s refugee crisis and terrorist attacks have raised global political instability to its highest level since the Cold War," says John Drzik, president of global risk and specialities at Marsh & McLennan, a global professional services firm. "This is widening the backdrop of uncertainty against which international firms will increasingly be forced to make their strategic decisions. The need for business leaders to consider the implications of these risks on their firm’s footprint, reputation, and supply chain has never been more pressing".
“Climate change is exacerbating more risks than ever before in terms of water crises, food shortages, constrained economic growth, weaker societal cohesion and increased security risks,” says Cecilia Reyes, chief risk officer of Zurich Insurance Group. “Meanwhile, geopolitical instability is exposing businesses to cancelled projects, revoked licenses, interrupted production, damaged assets and restricted movement of funds across borders.”
She adds that these political conflicts are, in turn, making the challenge of climate change all the more insurmountable, reducing the potential for political co-operation, as well as diverting resource, innovation and time away from climate change resilience and prevention.
Surprisingly, technological risk, specifically cyber-attack, only ranked 11th in position in terms of both likelihood and impact overall. Nevertheless, a survey of business leaders assessing risks for doing business specifically finds cyberattacks to be the top risk in eight countries overall, including the USA, Japan, Germany, Switzerland and Singapore.
New Zealand respondents put cyberattacks third when it comes to doing business, with the greatest perceived threat in country being natural catastrophes, followed by an asset bubble in second place, cyberattacks, then potential fiscal crises in fourth place.
View the full report here (PDF download).