The World Economic Forum (WEF) has identified the greatest threat to global stability over the next decade as international conflict. This marks the return of geopolitical risks to the top of the list. The findings were published in the WEF’s 2015 edition of its annual Global Risks report, ahead of the WEF meeting in Davos which took place from 21 to 24 January 2016.
Risks identified were ranked according to likelihood and impact. Interstate conflict, extreme weather events and climate change, failure of national governance, state collapse and high unemployment were among the most likely risks. The highest ranking risks in terms of impact included water crises, disease pandemics, weapons of mass destruction and failure to adapt to climate change. The experts’ assessments of the preparations for dealing with severe weather and climate change were not positive.
The interconnection of risks was highlighted in the report, for example, the rapid pace of innovation and cyber risk. As John Drzik, president of global risk and specialties at Lloyd’s broker, Marsh, pointed out, “the cost of cyber attacks is estimated now at $400bn annually”.
Additionally, Mr Drzik highlighted risks associated with emerging technologies, such as synthetic biology (used in medicine and bio-fuels), which present new socio-economic threats arising out of “bio-error and bio-terror” and the importance of adequate governance.
Mr Drzik emphasized how insurance will aid in mitigating the financial effects of such risks and stressed the responsibility of insurers in improving risk resilience: “The insurance industry has a strong role to play in enforcing common standards that help improve risk assessment and management, from cyber security to flood defences, for example”.