The biggest threat to the stability of the world for the next 10 years comes from the risk of international conflict, according to the Global Risks 2015 report developed for the World Economic Forum with the support of Marsh & McLennan Companies and Zurich Insurance Group.
The report, which every year features an assessment by experts on the top global risks in terms of likelihood and potential impact over the coming 10 years, identifies interstate conflict with regional consequences as the number one global risk in terms of likelihood, and the fourth most serious risk in terms of impact. After interstate conflict, the next four most likely risks are extreme weather events, failure of national governance systems, state collapse or crisis, and high structural unemployment or underemployment.
“Twenty-five years after the fall of the Berlin Wall, the world again faces the risk of major conflict between states,” says Margareta Drzeniek-Hanouz, Lead Economist, World Economic Forum. “Today, however, the means to wage such conflict, whether through cyber-attack, competition for resources, or sanctions and other economic tools, is broader than ever. Addressing all these possible triggers and seeking to return the world to a path of partnership, rather than competition, should be a priority for leaders as we enter 2015.”
What I find interesting is that Axel P. Lehmann, Chief Risk Officer at Zurich Insurance, says the risks to business in a truly globalized world are too numerous and too interconnected to be completely avoided. While the more immediate risks are often easier to recognize, there also can be existential threats from pervasive risks that slowly drain a business of its vitality, he says.
“For a modern business to survive and prosper requires a holistic view of the world and the interconnected risks that permeate it,” says Lehmann. “For example, technology has made it possible for nearly any business to operate on a global level, but along with that, cyber-breaches and disruptions have become the new norm. The ripple effects of this have real implications.”
In a global risk landscape that is now commonly described as a “not if, but when” proposition, it’s tempting to focus solely on a defensive risk management strategy, Lehmann says. However, he adds, for your business to continually evolve, thrive and stay ahead of the competition requires proactively rethinking your risk management strategy to incorporate reinvigorated strength and layer upon layer of resiliency.
“Resilience is an absolutely key concept. If your business or part of your supply chain is located in a coastal area that’s about to be hit by a hurricane, there’s nothing you can do to avoid it. Nor can you opt out of the possibility that your business will suffer a cyber-attack. You can never prevent everything that you’d like to see prevented,” Lehmann says. “Prevention is obviously important, but so is resilience—the ability to bounce back at least as strong as before, and maybe stronger. The starting point is to understand the exposures you face. This isn’t just a technical matter: it requires a view across all dimensions of your company.”
Interestingly, Lehmann and his colleagues encourage businesses to think more broadly about how to enhance the long-term sustainability of an organization against what he calls, a backdrop of constant change. In so doing, businesses will not abandon measures that help manage and mitigate short-term disruptions, but they should also seek to expand existing risk management activities and supplement them with a broader focus on the factors that contribute to resilience. Moving from urgency-driven risk management to more collaborative efforts to strengthen risk resilience can serve to benefit not only the business itself, but the local and global communities it serves as well, he says.
Do you think your supply chain is resilient? How well does it bounce back after a disruption?