(PDF) Global Risks 2013 Eighth Edition - World Economic Forum

Resilient Dynamism is the theme for this year’s World Economic Forum Annual Meeting in Davos-Klosters, and I am pleased to introduce the Global Risks 2013 report in the same spirit. Based on an extensive survey of over 1,000 experts worldwide, the report – now in its eighth edition – serves to orient and inform decision-makers as they seek to make sense of an increasingly complex and fast-changing world. I hope this report challenges, provokes and inspires you, and I invite you to engage – if you have not already done so – with the World Economic Forum’s Risk Response Network, which provides private and public sector leaders with a collaborative platform to build national resilience to global risks. Klaus Schwab,Founder and Executive Chair, WEF

Insight Report Global Risks 2013 Eighth Edition An Initiative of the Risk Response Network 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. © 2013 World Economic Forum All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying and recording, or by any information storage and retrieval system. ISBN: 92-95044-50-9 978-92-95044-50-0 REF: 301211 World Economic Forum 91-93 route de la Capite CH-1223 Cologny/Geneva Switzerland Tel.: +41 (0) 22 869 1212 Fax: +41 (0) 22 786 2744 contact@weforum.org www.weforum.org 2 Global Risks 2013 Global Risks 2013 Eighth Edition An Initiative of the Risk Response Network Lee Howell World Economic Forum Editor in Chief World Economic Forum in collaboration with: Marsh & McLennan Companies National University of Singapore Oxford Martin School, University of Oxford Swiss Reinsurance Company Wharton Center for Risk Management, University of Pennsylvania Zurich Insurance Group Global Risks 2013 3 Figure 1: Global Risks Landscape 2013 versus 2012i Economic Environmental Major systemic financial failure Chronic fiscal imbalances 4 4 Extreme volatility in energy and agriculture prices Failure of climate change adaptation Severe income disparity Recurring liquidity crises Unmanageable inflation or deflation Irremediable pollution Chronic labour market imbalances 3.5 3.5 Antibiotic-resistant bacteria Hard landing of an emerging economy Unprecedented geophysical destruction Unforeseen negative consequences of regulation 2.5 2.5 3 3.5 Impact if the risk were to occur Impact if the risk were to occur Prolonged infrastructure neglect 3 2.5 Mismanaged urbanization Species overexploitation 3 3.5 Societal Water supply crises 4 Diffusion of weapons of mass destruction Food shortage crises Global governance failure 3.5 Terrorism Critical fragile states Unmanaged migration Backlash against globalization Impact if the risk were to occur Impact if the risk were to occur Entrenched organized crime Widespread illicit trade 2.5 2.5 3 3.5 4 Likelihood to occur in the next ten years 3 2.5 2.5 3 Likelihood to occur in the next ten years 4 Critical systems failure Impact if the risk were to occur Unforeseen consequences of new life science technologies Mineral resource supply vulnerability Cyber attacks Massive incident of data fraud/theft Massive digital misinformation Unforeseen consequences of climate change mitigation Unforeseen consequences of nanotechnology Failure of intellectual property regime Proliferation of orbital debris 2.5 3 3.5 4 Likelihood to occur in the next ten years Source: World Economic Forum 4 NB: Some of the movements are due to changes in the composition of the sample. For more detail please see Section 4 Survey Findings. Global Risks 2013 Rising rates of chronic disease Ineffective illicit drug policies Technological 3.5 Mismanagement of population ageing Vulnerability to pandemics 3.5 Pervasive entrenched corruption Unilateral resource nationalization Militarization of space Rising religious fanaticism Unsustainable population growth Failure of diplomatic conflict resolution i 4 Likelihood to occur in the next ten years 4 2.5 Land and waterway use mismanagement 2.5 4 Geopolitical 3 Rising greenhouse gas emissions Vulnerability to geomagnetic storms 3 Likelihood to occur in the next ten years 3 Persistent extreme weather 3.5 4 Figure 2: Global Risks Landscape 2013 4.2 4.1 Major systemic financial failure 4 Water supply crises Diffusion of weapons of mass destruction 3.9 Chronic fiscal imbalances Failure of climate change adaptation Rising greenhouse gas emissions Extreme volatility in energy and agriculture prices Food shortage crises 3.8 Chronic labour market imbalances Failure of diplomatic conflict resolution Mismanagement of population ageing Rising Recurring Irremediable pollution religious liquidity Critical systems failure fanaticism Persistent extreme weather crises Vulnerability Terrorism to pandemics Unmanageable inflation or deflation Antibioticresistant Critical fragile states Land and waterway bacteria Cyber attacks use mismanagement Hard landing of an emerging economy Pervasive entrenched corruption Mineral resource supply Unilateral resource nationalization vulnerability Unforeseen consequences of new life science technologies Unmanaged migration Mismanaged urbanization Unsustainable population growth 3.7 3.6 3.5 3.4 Backlash against globalization 3.3 Unprecedented geophysical destruction Unforeseen consequences of climate change mitigation 3.2 Militarization of space Vulnerability to geomagnetic storms Massive incident of data fraud/theft 3.1 Prolonged infrastructure neglect Unforeseen negative consequences of regulation Ineffective illicit drug policies Impact if the risk were to occur Unforeseen consequences of nanotechnology Species overexploitation Rising rates of chronic disease Massive digital misinformation 3 Severe income disparity Global governance failure Entrenched organized crime Widespread illicit trade Failure of intellectual property regime 2.9 2.8 Proliferation of orbital debris 5 Economic 4 2.7 Environmental 3 Geopolitical 2 2.6 Societal 1 1 2 3 4 Technological 5 2.5 2.5 2.6 2.7 2.8 2.9 3 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 4 4.1 4.2 Likelihood to occur in the next ten years Source: World Economic Forum Global Risks 2013 5 Figure 3: Global Risks Map 2013ii Vulnerability to geomagnetic storms Critical systems failure Militarization of space Proliferation of orbital debris Prolonged infrastructure neglect Digital Wildfires in a Hyperconnected World Cyber attacks Massive digital misinformation Diffusion of weapons of mass destruction Massive incident of data fraud/theft Terrorism Rising religious fanaticism Failure of diplomatic conflict resolution Unilateral resource nationalization Major systemic financial failure Entrenched organized crime Widespread illicit trade Ineffective illicit drug policies Hard landing of an emerging economy Global governance failure Unforeseen negative consequences of regulation Pervasive entrenched corruption Failure of intellectual property regime Extreme volatility in energy and agriculture prices Species overexploitation Chronic labour market imbalances Land and waterway use mismanagement Mineral resource supply vulnerability Food shortage crises Water supply crises Backlash against globalization Severe income disparity Failure of climate change adaptation Unsustainable population growth Mismanaged urbanization Persistent extreme weather Unprecedented geophysical destruction Rising greenhouse gas emissions Chronic fiscal imbalances Recurring liquidity crises Unmanaged migration Mismanagement of population aging Rising rates of chronic disease Antibiotic resistant bacteria Unmanageable inflation or deflation Irremediable pollution Unforeseen consequences of climate change mitigation Testing Economic and Environmental Resilience Unforeseen consequences of new life science technologies Vulnerability to pandemics The Dangers of Hubris on Human Health Source: World Economic Forum ii 6 Please see figure 37 in Survey Findings for the complete global risks interconnection map. Global Risks 2013 Unforeseen consequences of nanotechnology Contents Section 1 8 Preface 9 Foreword 10 Executive Summary 13 14 Box 1: The Evolving Risk Landscape Introduction Section 2 16 Testing Economic and Environmental Resilience 21 Box 2: The Green Growth Action Alliance (G2A2) 23 Digital Wildfires in a Hyperconnected World 27 Box 3: Hyperconnected World 28 The Dangers of Hubris on Human Health 34 Box 4: Bringing Space Down to Earth Section 3 36 Special Report: Building National Resilience to Global Risks 42 Box 5: Supply Chain Risk Initiative 43 Box 6: Resilience Practices Exchange (RPE) 43 Box 7: One Year On Resilience Practices Section 4 45 Survey Findings 53 Box 8: The Global Risks 2013 Data Explorer Section 5 55 X Factors 60 Conclusion Section 6 61 Appendix 1 - The Survey 62 Appendix 2 - Likelihood and Impact 66 Appendix 3 - Resilience 74 Acknowledgements 78 Project Team Global Risks 2013 7 Section 1 Preface Section 2 Resilient Dynamism is the theme for this year’s World Economic Forum Annual Meeting in Davos-Klosters, and I am pleased to introduce the Global Risks 2013 report in the same spirit. Based on an extensive survey of over 1,000 experts worldwide, the report – now in its eighth edition – serves to orient and inform decision-makers as they seek to make sense of an increasingly complex and fast-changing world. I hope this report challenges, provokes and inspires you, and I invite you to engage – if you have not already done so – with the World Economic Forum’s Risk Response Network, which provides private and public sector leaders with a collaborative platform to build national resilience to global risks. Section 3 Section 4 As we strive to restore confidence and growth globally, leaders cannot continue with a “risk-off” mindset if our collective goal remains to seize transformational opportunities that can improve the state of the world. Dynamism in our hyperconnected world requires increasing our resilience to the many global risks that loom before us. Section 5 By their nature, global risks do not respect national borders, as highlighted in this report. And we now know that extreme weather events exacerbated by climate change will not limit their effects to countries that are major greenhouse gas emitters; false information posted on social networks can spread like wildfire to the other side of the globe in a matter of milliseconds; and genes that make bacteria resistant to our strongest antibiotics can hitch a ride with patients on an intercontinental flight. Section 6 I, therefore, invite you to read the case studies in this report of the three examples cited above to understand better the international and interdependent nature of such constellations of risks. I think you will agree that each one makes a compelling case for stronger cross-border collaboration among stakeholders from governments, business and civil society – a partnership with the purpose of building resilience to global risks. They also highlight the need for strengthening existing mechanisms to mitigate and manage risks, which today primarily exist at the national level. This means that while we can map and describe global risks, we cannot predict when and how they will manifest; therefore, building national resilience to global risks is of paramount importance. 8 Global Risks 2013 Klaus Schwab Founder and Executive Chairman World Economic Forum Section 1 Foreword Kaplan, R.S., and Mikes, A. Managing Risks: A New Framework. In Harvard Business Review, 2012. Global Risks 2013 9 Section 6 1 Lee Howell Managing Director Risk Response Network Section 5 The concept of resilience also influenced this year’s Global Risks Perception Survey, on which this report is built. The annual survey of experts worldwide added a new question asking respondents to rate their country’s resilience – or, precisely, its ability to adapt and recover – in the face of each of the 50 risks covered in the survey. More than 1,000 experts responded to our survey, making the dataset explored in this report more textured and robust than ever. Linked to this research effort is the launch of an online “Resilience Practices Exchange”, where leaders can learn and contribute to building resilience using the latest social enterprise technology. These new efforts will enable the World Economic Forum’s Risk Response Network (RRN) to become the foremost international platform to enable leaders to map, mitigate, monitor and enhance resilience to global risks. Therefore, I invite you to get in touch with the RRN and share your ideas and initiatives to assess and to improve national resilience to global risks. Section 4 First are “preventable” risks, such as breakdowns in processes and mistakes by employees. Second are “strategic” risks, which a company undertakes voluntarily, having weighed them against the potential rewards. Third are “external” risks, which this report calls “global risks”; they are complex and go beyond a company’s scope to manage and mitigate (i.e. they are exogenous in nature). This differentiation will, we hope, not only improve strategic planning and decision-making but also increase the utility of our report in private and public sector institutions. Our Special Report this year takes the first steps towards developing a national resilience measurement with regard to global risks. It explores the use of qualitative and quantitative indicators to assess overall national resilience to global risks by looking at five national-level subsystems (economic, environmental, governance, infrastructure and social) through the lens of five components: robustness, redundancy, resourcefulness, response and recovery. The aim is to develop a new diagnostic report to enable decisionmakers to track progress in building national resilience and possibly identify where further investments are needed. The interim study will be published this summer. Section 3 Resilience is the theme that runs through the eighth edition of this report. It seems an obvious one when contemplating the external nature of global risks because they are beyond any organization’s or nation’s capacity to manage or mitigate on their own. And yet global risks are often diminished, or even ignored, in current enterprise risk management. One reason for this is that global risks do not fit neatly into existing conceptual frameworks. Fortunately, this is changing. The Harvard Business Review recently published a concise and practical taxonomy that may also be used to consider global risks.1 There are three types of risks as categorized by Professors Kaplan and Mikes. We have introduced unique content and data online, including an interactive website through which you can explore the risks landscape and a one-year-on follow-up of the three risk cases presented in the 2012 report from a perspective of how to promote resilience. Section 2 Per the revamped methodology introduced in 2012, the 2013 report presents three in-depth “risk cases” exploring themes based on analysis of survey data, as well as detailed follow-up expert interviews and partner workshops. This eighth edition increased its geographic breadth and disciplinary depth by bringing on two new report partners from academia: the National University of Singapore (NUS) and the Oxford Martin School at the University of Oxford. We also entered into an exciting editorial partnership with Nature, a leading science journal, to push the boundaries of the imagination further with a revamped “X Factors” section of the report. Section 1 Executive Summary Section 2 Section 3 The World Economic Forum’s Global Risks 2013 report is developed from an annual survey of over 1,000 experts from industry, government, academia and civil society who were asked to review a landscape of 50 global risks. The global risk that respondents rated most likely to manifest over the next 10 years is severe income disparity, while the risk rated as having the highest impact if it were to manifest is major systemic financial failure. There are also two risks appearing in the top five of both impact and likelihood – chronic fiscal imbalances and water supply crisis (see Figure 4). Figure 4: Top Five Risks by Likelihood and Impact Likelihood Section 4 Very Unlikely Almost Certain Severe income disparity 4.14 Chronic fiscal imbalances 3.99 Rising greenhouse gas emissions 3.91 Water supply crises 3.85 Mismanagement of population ageing 3.83 Section 5 1 2 3 4 5 Average Likelihood Impact High Impact Low Impact Section 6 Major systemic financial failure 4.05 Water supply crises 3.99 Chronic fiscal imbalances 3.97 Food shortage crises 3.95 Diffusion of weapons of mass destruction 3.92 1 2 3 4 5 Average Impact Source: World Economic Forum Unforeseen consequences of life science technologies was the biggest mover among global risks when assessing likelihood, while unforeseen negative consequences of regulation moved the most on the impact scale when comparing the result with last year’s (see Figure 5). 10 Global Risks 2013 Section 1 Digital Wildfires in a Hyperconnected World Figure 5: Top Five Changes by Likelihood and Impact By Likelihood Very Unlikely Unforeseen consequences of new life science technologies 3.11 [44th] 2013 2012 2.68 [49th] 3.23 [38th] 2.80 [46th] 3.45 [23rd] Unsustainable population growth 3.05 [38th] 3.46 [21st] Hard landing of an emerging economy 3.07 [37th] 3.83 [5th] Mismanagement of population ageing 3.44 [18th] 1 2 3 4 5 Average Likelihood Score [Rank] Low Impact Unforeseen negative consequences of regulation The Dangers of Hubris on Human Health 3.18 [43rd] 2013 2012 High Impact 2.77 [48th] 3.40 [30th] Unilateral resource nationalization 3.02 [43rd] 3.73 [11th] Chronic labour market imbalances 3.38 [27th] 3.66 [14th] Mismanagement of population ageing 3.36 [28th] 1 2 3 4 5 Average Impact Score [Rank] Source: World Economic Forum Three Risk Cases Testing Economic and Environmental Resilience Special Report: National Resilience to Global Risks This year’s Special Report examines the difficult issue of how a country should prepare for a global risk that is seemingly beyond its control or influence. One possible approach rests with “systems thinking” and applying the concept of resilience to countries. The report introduces five components of resilience – robustness, redundancy, resourcefulness, response and recovery – that can be applied to five country subsystems: the economic, environmental, governance, infrastructure and social. The result is a diagnostic tool for decision-makers to assess and monitor national resilience to global risks. Global Risks 2013 11 Section 6 Continued stress on the global economic system is positioned to absorb the attention of leaders for the foreseeable future. Meanwhile, the Earth’s environmental system is simultaneously coming under increasing stress. Future simultaneous shocks to both systems could trigger the “perfect global storm”, with potentially insurmountable consequences. On the economic front, global resilience is being tested by bold monetary and austere fiscal policies. On the environmental front, the Earth’s resilience is being tested by rising global temperatures and extreme weather events that are likely to become more frequent and severe. A sudden and massive collapse on one front is certain to doom the other’s chance of developing an effective, long-term solution. Given the likelihood of future financial crises and natural catastrophes, are there ways to build resilience in our economic and environmental systems at the same time? Section 5 The report introduces three risk cases, based on an analysis of survey results, consultation with experts and further research. Each case represents an interesting constellation of global risks and explores their impact at the global and national levels. The three risk cases are: Health is a critical system that is constantly being challenged, be it by emerging pandemics or chronic illnesses. Scientific discoveries and emerging technologies allow us to face such challenges, but the medical successes of the past century may also be creating a false sense of security. Arguably, one of the most effective and common means to protect human life – the use of antibacterial and antimicrobial compounds (antibiotics) – may no longer be readily available in the near future. Every dose of antibiotics creates selective evolutionary pressures, as some bacteria survive to pass on the genetic mutations that enabled them to do so. Until now, new antibiotics have been developed to replace older, increasingly ineffective ones. However, human innovation may no longer be outpacing bacterial mutation. None of the new drugs currently in the development pipeline may be effective against certain new mutations of killer bacteria that could turn into a pandemic. Are there ways to stimulate the development of new antibiotics as well as align incentives to prevent their overuse, or are we in danger of returning to a pre-antibiotic era in which a scratch could be potentially fatal? Section 4 3.49 [27th] 3.15 [36th] Hard landing of an emerging economy Section 3 By Impact In 1938, thousands of Americans confused a radio adaptation of the H.G. Wells novel The War of the Worlds with an official news broadcast and panicked, in the belief that the United States had been invaded by Martians. Is it possible that the Internet could be the source of a comparable wave of panic, but with severe geopolitical consequences? Social media allows information to spread around the world at breakneck speed in an open system where norms and rules are starting to emerge but have not yet been defined. While the benefits of our hyperconnected communication systems are undisputed, they could potentially enable the viral spread of information that is either intentionally or unintentionally misleading or provocative. Imagine a real-world example of shouting “fire!” in a crowded theatre. In a virtual equivalent, damage can be done by rapid spread of misinformation even when correct information follows quickly. Are there ways for generators and consumers of social media to develop an ethos of responsibility and healthy scepticism to mitigate the risk of digital wildfires? Section 2 Unforeseen consequences of climate change mitigation Almost Certain Section 1 X Factors from Nature Section 2 Section 3 Developed in partnership with the editors of Nature, a leading science journal, the chapter on “X Factors” looks beyond the landscape of 50 global risks to alert decision-makers to five emerging game-changers: -- Runaway climate change: Is it possible that we have already passed a point of no return and that Earth’s atmosphere is tipping rapidly into an inhospitable state? -- Significant cognitive enhancement: Ethical dilemmas akin to doping in sports could start to extend into daily working life; an arms race in the neural “enhancement” of combat troops could also ensue. -- Rogue deployment of geoengineering: Technology is now being developed to manipulate the climate; a state or private individual could use it unilaterally. -- Costs of living longer: Medical advances are prolonging life, but long-term palliative care is expensive. Covering the costs associated with old age could be a struggle. -- Discovery of alien life: Proof of life’s existence elsewhere in the universe could have profound psychological implications for human belief systems. Section 4 The Global Risks report is the flagship research publication of the World Economic Forum’s Risk Response Network, which provides an independent platform for stakeholders to explore ways to collaborate on building resilience to global risks. Further information can be found at www.weforum.org/risk. Section 5 Section 6 12 Global Risks 2013 Section 1 Box 1: The Evolving Risk Landscape Section 2 How do the top risks as identified by the annual Global Risks Perception Survey change over time? Figure 6 shows how this list changed over the past seven years. The average ratings of the risks have changed slightly, as described in detail in Section 4 of the report, but the relative ranking of the risks according to their impact or their likelihood is less affected. Interestingly, the diffusion of weapons of mass destruction has moved into the top five risks in terms of impact.iii Figure 6: Top Five Global Risks in Terms of Impact and Likelihood, 2007-2013 Top 5 Global Risks in Terms of Likelihood 2007 2008 2009 2010 1st Breakdown of critical information infrastructure Asset price collapse Asset price collapse Asset price collapse 2nd Chronic disease in developed countries Middle East instability Slowing Chinese economy (<6%) Oil price shock Failed and failing states China economic hard landing Asset price collapse 2011 2012* 2013* Meteorological catastrophes Severe income disparity Severe income disparity Slowing Chinese economy (<6%) Hydrological catastrophes Chronic fiscal imbalances Chronic fiscal imbalances Chronic disease Chronic disease Corruption Rising greenhouse gas emissions Rising greenhouse gas emissions Oil and gas price spike Global governance gaps infrastructure Fiscal crises Biodiversity loss Cyber attacks Water supply crises Chronic disease, developed world Retrenchment from globalization (emerging) Global governance gaps Climatological catastrophes Water supply crises Mismanagement of population ageing 2012* 2013* 3rd 4th Section 4 5th Breakdown of critical information Section 3 Breakdown of critical information infrastructure Top 5 Global Risks in Terms of Impact 2008 2009 2010 Asset price collapse Asset price collapse Asset price collapse Asset price collapse 2nd Retrenchment from globalization Retrenchment from globalization (developed) Retrenchment from globalization (developed) 3rd Interstate and civil wars Slowing Chinese economy (<6%) Pandemics Oil price shock 1st 2011 Fiscal crises Major systemic financial failure Major systemic financial failure Retrenchment from globalization (developed) Climatological catastrophes Water supply crises Water supply crises Oil and gas price spike Oil price spikes Geopolitical conflict Food shortage crises Chronic fiscal imbalances Oil and gas price spike Chronic disease infrastructure Chronic disease Asset price collapse Chronic fiscal imbalances Food shortage crises Pandemics Fiscal crises Fiscal crises Extreme energy price volativity Extreme volativity in energy and agriculture prices Diffusion of weapons of mass destruction Section 5 2007 Breakdown of critical information infrastructure 5th Economic Environmental Geopolitical Societal Breakdown of critical information Section 6 4th Technological Source: World Economic Forum iii *The survey methodology changed significantly after the 2011 report. In contrast to the years 2007 to 2011, the list of 50 risks that was assessed by the survey did not change in 2012 and 2013. Global Risks 2013 13 Section 1 Introduction Section 2 Section 3 Section 4 The nature of global risks is constantly changing. Thirty years ago, chlorofluorocarbons (CFCs) were seen as a planetary risk, while threat from a massive cyber attack was treated by many as science fiction. In the same period, the proliferation of nuclear weapons occupied the minds of scientists and politicians, while the proliferation of orbital debris did not. We see a similar story with asbestos then and carbon nanotubes today, and the list goes on. Section 5 Section 6 With new information, the perceptions and realities of risks change, and often in unforeseen directions. Consider that in some circles the threat from greenhouse gas emissions made nuclear energy seem less hazardous than fossil fuels over the long run. Yet the nuclear catastrophe in Fukushima, Japan, not only changed public perceptions there but also energy policy, almost overnight, in some parts of Europe. The World Economic Forum is now in its eighth year of publishing the Global Risks report. The purpose of the current edition is twofold. First, it aims to show how experts from around the world, from different backgrounds, currently perceive the risks that the world is likely to face over the next decade. To capture these opinions, a survey was carried out, interviews were conducted with specialists in different fields, and a series of workshops and conference sessions were held with expert groups to interpret the research findings and to work out the three risk cases developed in the report. Second, with this report the World Economic Forum aims to continue to raise awareness about global risks, to stimulate thinking about how risks can be factored into strategy development, and to challenge global leaders to improve how they approach global risks. Annual Survey – Assessing Global Risks The Global Risks Perception Survey was conducted in September 2012. Over 1,000 experts responded to evaluate 50 global risks from five categories – economic, environmental, geopolitical, societal and technological. For each global risk, survey respondents were asked, “On a scale from 1 to 5, how likely is this risk to occur over the next 10 years?”, and “If it were to occur, how big would you rate the impact of this risk?” The aggregated responses to these two questions are depicted in the Global Risks Landscape scatterplot in Figure 2. The evaluation of the 50 risks also focused on their linkages, given their interdependent nature. Survey respondents were asked to nominate pairs of risks that they believe to be strongly connected. They were also asked to nominate a “Centre of Gravity” – the systemically most important risk for each of the five categories of global risks. Putting all paired connections together results in a network diagram presented in Figure 37 in Section 4 – the Survey Findings. The survey data was also analyzed to examine how the background of the respondents affects their perceptions. Are the views of people based in Europe similar to those in Asia? Do younger people perceive the world differently from older people? And how does specialist knowledge in a field affect how risks are perceived? These questions are explored in Section 4 of this report. 14 Global Risks 2013 Section 1 The Cases – Making Sense of Complex Systems Section 2 The 50 global risks in this report are interdependent and correlated with each other. The permutations of two, three, four or more risks are too many for the human mind to comprehend. Therefore, an analysis of the network of connections has been undertaken to highlight some interesting constellations of global risks seen in Figure 3. Section 3 In Section 2, these constellations of global risks are presented as three important cases for leaders: “Testing Economic and Environmental Resilience” on the challenges of responding to climate change, “Digital Wildfires in a Hyperconnected World” on misinformation spreading via the Internet, and “The Dangers of Hubris on Human Health” on the existential threat posed by antibiotic-resistant bacteria. Section 4 Each case was inspired by the findings from an initial network analysis and further developed through extensive research into current trends, potential causal effects, levels of awareness and possible solutions. Unlike traditional scenario methodologies, the risk cases do not attempt to develop a full range of all possible outcomes. They are instead an exercise in sensemaking as well as a collective attempt to develop a compelling narrative around risks that warrant urgent attention and action by global leaders. Readers are encouraged to refine these cases further and to develop their own scenarios based on the data presented.iv X Factors from Nature – Looking Even Further Ahead Section 5 The section on X Factors invites the reader to consider emerging concerns that are not yet on the radar of decision-makers. If the 50 global risks represent “known-knowns”, then these X factors could be considered as “known unknowns”. They were codeveloped with the editors of Nature and benefit from their contributors’ deep knowledge of cutting-edge scientific research that has not yet crossed over into mainstream discourse. Resilience – Preparing for Future Shocks iv v Section 6 This year’s Special Report examines the increasingly important issue of building national resilience to global risks. It introduces qualitative and quantitative indicators to assess overall national resilience to global risks by looking at five national-level subsystems (economic, environmental, governance, infrastructure and social) through the lens of five components: robustness, redundancy, resourcefulness, response and recovery. The aim is to develop a future diagnostic report to enable decision-makers to track progress in building national resilience and possibly identify where further investments are needed. The interim study will be published this summer, and we invite readers to review the proposed framework and to share ideas and suggestions with the Risk Response Network.v See also the World Economic Forum’s series of “What-If” interviews for more case studies on a variety of topics: http://forumblog.org/tag/what-if/. For further details please refer to http://www.weforum.org/risk or contact us at rrn@ weforum.org. Global Risks 2013 15 Section 1 Section 2 Testing Economic and Environmental Resilience Section 3 Section 4 Section 5 Economic and environmental systems are simultaneously under stress worldwide, and this is testing resilience at the global and national levels. Economic difficulties worldwide are continuing to make greater demands on political attention and financial resources. Meanwhile, the impact of climate change is more evident as temperature rises and more frequent extreme weather events loom on the horizon. The economic and environmental challenges require both structural changes and strategic investments, but are countries prepared to manage both fronts, conceivably at the same time? Five years after the financial crisis, macroeconomic worries continue to weigh heavily on leaders’ minds. This is confirmed by data from the World Economic Forum’s quarterly confidence indexvi as well as the Global Risks Perception Survey, in which respondents rated major systemic financial failure as the economic risk of greatest systemic importance for the next 10 years. The very same survey respondents also identified the failure of climate change adaptation and rising greenhouse gas emissions as among those global risks considered to be the most likely to materialize within a decade. Compared to last year’s survey, the failure to adapt to climate change replaced rising greenhouse gas emissions as the most systemically critical. This change in our data mirrors a wider shift in the conversation on the environment from the question of whether our climate is changing to the questions of “by how much” and “how quickly”. Figure 7: Testing Economic and Environmental Resilience Constellation Major systemic financial failure Failure of climate change adaptation Section 6 Global governance failure Food shortage crises Water supply crises Severe income disparity Persistent extreme weather Chronic labour market imbalances Rising greenhouse gas emissions Chronic fiscal imbalances The Environmental System Unmanageable inflation or deflation The Economic System Source: World Economic Forum 16 Global Risks 2013 vi The Global Confidence Index is an index developed by the World Economic Forum that represents confidence among decision-makers in three areas: global economy, global governance and global cooperation. For greater detail, please consult: http://www. weforum.org/ConfidenceIndex Section 1 The narrative emerging from the survey is clear: like a super storm, two major systems are on a collision course. The resulting interplay between stresses on the economic and environmental systems will present unprecedented challenges to global and national resilience. 50 100 150 Gross debt (% of GDP) 200 -5 0 5 10 15 20 Required adjustment (% GDP) Source: Adapted from IMF Fiscal Monitor, 2012 as cited in Global Economic Prospects: Managing Growth in a Volatile World. June, 2012. Washington DC: World Bank. The current eurozone instability will continue to shape global prospects in the coming years.5 The associated risk of systemic financial failure, although limited, cannot be completely discarded. Given the anti-austerity protests across the eurozone, the election of “rejectionist” governments could lead to further economic paralysis and bring the eurozone crisis to a head,6 potentially destabilizing the global financial system in which confidence is already waning.7 This persistent global economic fragility continues to divert our attention from longer-term solutions by limiting the availability of public resources and generating greater caution in use of scarce funds for strategic investment projects. There are other looming issues related to ongoing prescriptions to counter economic malaise. Will the massive quantitative easing undertaken by key central banks to stave off deflation inevitably lead to destabilizing hyper-inflation? Will structural economic reforms deliver the necessary employment gains over the long run? Section 5 Section 6 The global economic situation remains fragile. The International Monetary Fund projects slow growth in the advanced economies, an annual rate of between 1.3% and 2.6% between 2012 and 2017.2 Combined with fiscal fragility, this will continue to strain government spending. Given the current levels of government debts and deficits in these economies, “it will take years of concerted political and economic effort before debt to GDP levels of the United States, Japan and many Euro Area countries are brought down” to stabilize at lower levels.3 Also, the economic growth of emerging markets and developing economies is projected to be slower than at its peak in 2010.4 0 Section 4 Persistent Global Economic Fragility Germany United Kingdom France Belgium Iceland United States Ireland Portugal Italy Japan Greece Section 3 The fact remains that today’s massive socio-economic challenges demand immediate attention, yet availability of public resources is limited – especially to finance efforts to avert the long-term effects of climate change, which, in turn, could severely disrupt the global economy. We face a daunting negative feedback loop. The logic of risk management prescribes that countries should invest today to safeguard critical infrastructure and centres of economic activity against future climate-related losses that could be of much greater magnitude. And there is an even more compelling political logic to do this in order to generate new employment and to revive economic growth as soon as possible. But investment in strategic infrastructure is more easily said than done, despite the short- and long-term benefits.1 New approaches are needed that are based on a meeting of minds across varied professions, sectors and geographies; a capacity to act decisively is also needed, despite considerable uncertainty about what the best plan of action might be. Hesitating to act now will only add to the burdens of the next generation. Philippines Thailand Mexico Argentina Kenya Malaysia Morocco Pakistan Brazil India Jordan Section 2 Will countries be able to address complex challenges unfolding on very different time scales simultaneously? A cynic may argue that any future environmental loss could actually have a stimulative economic effect – this is the same rationale used to criticise GDP-driven growth policies, whereby the reconstruction following a massive earthquake can boost overall GDP over the long term. However, this view ignores two realities. First, more people reside and work in urban areas than ever before in human history – this concentration will continue and is likely to drive environment-related losses to even greater historic highs. Second, the existing debt levels of many major economies can be unsustainable. Given this fiscal constraint, we are witnessing the use of extraordinary monetary policies to stimulate global growth, which some argue are essentially experimental. Figure 8: Further Required Deficit Reductions for Fiscal Sustainability (2011) Global Risks 2013 17 Section 1 The Changing Debate on the Global Climate Section 2 Section 3 Mitigation efforts have made significant progress at country level in the past 15 years in areas such as emissions regulations and financial incentives – for example, the US$ 3.4 billion made available to match private sector investment funds in the US Smart Grid Investment Grant program.8 Nonetheless, in today’s increasingly multi-polar geopolitics, it has become harder to reach and effectively implement international agreements on climate change mitigation. Pledges made in the run-up to the 2009 Copenhagen climate change negotiations, which were intended to limit global warming to 2 degrees Celsius, now appear collectively insufficient to meet this target of 2 degrees.9 Recent scenario projections based on existing government policies and declared policy intentions predict that a long-term increase of more than 3.5 degrees Celsius is probable. The more pessimistic scenario assuming no change in government policies and measures beyond those adopted or enacted by mid-2011 talks of a conceivable increase of 6 degrees Celsius or more.10 Section 4 If the current mitigation commitments remain unmet, a global mean temperature increase of 4 degrees Celsius could occur as early as the 2060s. This would likely lead to negative impacts including an increase in the frequency of high-intensity tropical cyclones, inundation of coastal cities as sea levels rise, and increased drought severity in several regions. Together, the effects would not only mean significant economic losses but also mass displacement of populations, rising food insecurity and aggravated water scarcity11 (also see Figure 9). Recent climate and weather events, some of which are visualized in Figure 10, have reminded us of the economic and human cost of the kind of natural disasters that we know are likely to become more frequent and severe as climate continues to change. The estimated economic loss of the 2011 Thailand floods, for example, was US$ 30 billion,12 and of Hurricane Katrina US$ 125 billion; meanwhile, the 2003 European heat wave resulted in more than 35,000 fatalities13 and the Horn of Africa droughts in 2011 claimed tens of thousands of lives and threatened the livelihoods of 9.5 million people.14 More recently, Hurricane Sandy left a heavy bill, estimated today at over US$ 70 billion for New York and New Jersey alone.15 Such events remind us that many economies remain vulnerable to damages arising from climatic events today, let alone those of the future.16 While there is no consensus on how fast and how much our climate is changing, the growing realization that some degree of climate change is inevitable is reflected in a shifting of the debate to how to adapt. Advocating for greater attention to be paid to adaptation is controversial in some quarters as it is interpreted as a tacit admission that mitigation efforts are no longer worth pursuing. However, the less effective mitigation efforts are, the more pronounced adaptation challenges will become; therefore, mitigation and adaptation need to be addressed in concert while taking advantage of all possible synergies. Figure 9: Possible Impact of Global Warming on Different Sectors Temperature above preindustrial - IPCC scenario A1B Section 5 Year of impact: 2030 2050 1°C 2°C Weather Water 2080 3°C 4°C 5°C More intense storms, forest fires, droughts, flooding and heat waves Threat to local water supply as glaciers melt Section 6 Food Ecosystem Social Changes in water availability, threatening up to a billion people Falling crop yields in many developing regions Ecosystems extensively and irreversibly damaged Major cities around the world threatened by sea level rise Falling yields in many developed regions Many more species face extinction More than a billion people may have to migrate - increasing the risk of conflicts Source: Adapted from Shaping Climate-Resilient Development: A Framework for Decision-Making. 2009. Economics of Climate Adaptation Working Group. 18 Global Risks 2013 Section 1 Figure 10: 2011 Economic Losses Related to Selected Natural Catastrophes Section 2 >US$25,000m Section 3 US$5,000m - US$25,000m US$1,000m - US$5,000m US$250m - US$1,000m US$100m - US$250m US$50m - US$100m < US$50m Earthquake, Tsunami, Volcano Extreme Weather Flood Section 4 Storm, Hail Source: Adapted from sigma natural catastrophe data base of Swiss Reinsurance Company. A number of climate adaptation related initiatives and reports have been emerging.vii While poorer countries will need help from the international community to finance adaptation investments, adaptation efforts are by their nature local, with countries, companies and individuals being largely responsible for their own adaptation costs. vii For examples please see “Shaping Climate-Resilient Development: A Framework for Decision-Making” by the Economics of Climate Adaptation Working Group, “Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation” Special Report of the Intergovernmental Panel on Climate Change, and Private Sector Initiative of the UNFCCC’s Nairobi Work Programme featuring good practices and climate change adaptation activities undertaken by the private sector (some of which have been carried out in partnership with NGOs or the public sector) across different regions and sectors.39 Faced with uncertainty about the likely effectiveness and risk of unintended consequences of a proposed intervention, policy-makers can be paralyzed by a desire to wait for more detailed analyses and data regarding the precise timing, manifestation or impact of future climatic changes in their local environments. Greater support for scientific research, better computational power and data are needed to shed greater clarity into predicting future climatic developments, especially the climate and weather extremes. Global Risks 2013 19 Section 6 Some people affected by climate change may seek to recover costs from past emitters of greenhouse gases. Although the Alaskan village of Kivalina – which faces being “wiped out” by the changing climate – was unsuccessful in its attempts to file a US$ 400 million lawsuit against oil and coal companies,20,21 future plaintiffs may be more successful. Five decades ago, the US tobacco industry would not have suspected that in 1997 it would agree to pay US$ 368 billion in health-related damages.22 For some businesses, investing in climate change mitigation now could be as much about enterprise risk management as about mitigating a global risk. As the consensus that the climate change is becoming more evident grows, data across many disciplines (including forestry, water and land management, for example) remains limited, not readily available or communicated in a format that might not facilitate actionable decisions on climate adaptation. Yet, future climate risks may require human judgement today or in the coming years, while the full scientific data may not come until it is too late. Complex systems such as the climate are non-linear by nature – chain reactions through the system are unpredictable and not directly proportional to the size of the triggers. A limited amount of data and constraints on computational power have been strong impediments to bringing greater clarity into predicting future climatic developments at a local level.23,24 For instance, there have been inconclusive predictions regarding the likely impacts of global warming on rainfall patterns in Guyana: possibilities ranged from a 5% rainfall decline by 2030, lessening the risk of flooding, to a 10% rainfall increase, worsening this risk significantly.25 Section 5 While it is possible to make various different underlying assumptions in modelling the effects of climate change, it is clear that the economic costs are likely to be considerable. A report by Mercer,17 which considers the cumulative economic cost of changes to the physical environment, health and food security due to climate change, quotes a possible range of US$ 2 trillion to US$ 4 trillion by 2030 across different climate scenarios.18 The EU Climate Change Expert Group suggests that the costs of climate change impacts, increasing in magnitude with the rises in global temperature, may amount to 5% to 20% of GDP (or higher) in the long term.19 Decisive Action in a Climate of Uncertainty Section 1 Section 2 Section 3 While this will come, can leaders embrace the need to make a decision without the complete assurance that they are making the best decision? This is more easily said than done, especially when there are competing demands for attention and resources. For example, the 2008 financial crisis shows how urgent macroeconomic difficulties can divert attention from other significant global governance challenges, from climate change negotiations to the Millennium Development Goals. Yet the actions of the G20 during the crisis also demonstrate the potential for bold, coordinated international action. Exploring New Approaches with Climate-Smart Mindsets As global risks ultimately require a national response, much more attention must be given to how decisions are made in the face of such overwhelming economic and environmental challenges. Perception is typically regarded as a passive process, in which people view an objective reality. Yet perception is actually an active process of understanding, through which people construct their own version of reality.26 Research in cognitive psychology and decision-making suggests that people use “rules of thumb” to make judgements in the face of ambiguity and complexity.viii This approach usually serves well but can lead to predictably faulty judgements under some circumstances. Psychologists call such predictably faulty judgements cognitive biases,27 and these biases influence how we respond to the best information at our disposal and integrate it in decision-making structures. To reconcile the challenge of building environmental resilience amid economic stress, current policies and strategies may need to be re-evaluated. For instance, in several countries, government insurance schemes and building-permit policies continue to encourage further urbanization in coastal or high flood risk areas rather than preventing it.33 In doing so, they may be creating large pockets of vulnerability to climate risks. A 2007 OECD study analysing 136 port cities around the world concluded that the population exposed to coastal flooding could triple by the 2070s due to the combined effects of climate change and urbanization, among others.34 Section 4 Section 5 Section 6 Cognitive biases become important when addressing the slow-moving future threat of climate change in the context of an ongoing unstable economic outlook. Some examples are: -- We tend to place too much emphasis on recent personal experience when estimating the likelihood of a risk occurring. For example, experience in the United States shows that many more people buy flood insurance immediately after a major flood. On average, those people hold flood insurance for only two to four years before letting it lapse if they have not suffered a claim because they are likely to view insurance as a bad investment rather than seeing it as a form of protection.28 -- Through a process known as hyperbolic discounting, we tend to give disproportionately more weight to immediate costs and benefits than to delayed ones. Individuals, for instance, may often be reluctant to incur the upfront costs of measures such as investing in climate change adaptation measures when the benefits will not be felt for several years.29,30 -- We fail to take protective measures if the perceived likelihood of the risk in question is below our threshold level of concern – for example, discounting entirely the possibility of a natural catastrophe that has a low chance of occurring. This bias is exacerbated by a tendency to underestimate the likelihood of a negative event occurring due to misperceptions of the risk.31,32 The cumulative effect of such cognitive biases is that we may not pay due attention to, or act effectively on, risks that are perceived to be long-term and relatively uncertain. The impossibility of fully eradicating ambiguity, along with the relatively lengthy time scales involved, mean that cognitive biases are likely to remain significant hurdles to be acknowledged and overcome on the path towards effective action on climate change and related risks. viii 20 The phrase “rule of thumb” means a quick and easy way of making estimates, based on experience that will not be precisely accurate but will nonetheless be adequate for most everyday situations. Global Risks 2013 Acknowledging the effect of our cognitive biases may be the first step towards building resilience against a future perfect storm of economic and environmental challenges. Only then can we start weighing the various demands equally, in the near and the long term, on scarce public resources and dwindling risk-mitigation budgets. In light of the increased certainty that global temperatures will rise to some extent, a “climate-smart” mindset needs to permeate all levels of decision-making. “Climate-smart” is a term that originated in agriculture, to describe such agriculture that not only increases resilience in light of climate adaptation but also reduces greenhouse gas emissions.35 A climate-smart mindset incorporates climate change analysis into strategic and operational decision-making. It entails a search for synergies across climate change mitigation- and adaptation-related efforts where possible. Such a mindset needs to become an integral part of our urban planning, water- and food-security management, investment policy, and demographic policy development, among others. In 2006, during its term over the rotating European Union presidency, Finland introduced a policy innovation which encouraged ministers with other portfolios – from transport and urban planning, to agricultural and employment policies – to consider the effects of their decisions on the population’s health.36 Something similar may be needed to ensure that all ministers enact policies in their domains that are informed by a climate-smart mindset. The current debt crisis of several leading economies will make it more difficult to finance climate-smart activities, such as the Smart Grid Investment Grant. That said, the private sector has a critical role here as well. In the United States, around 80% of critical infrastructure is owned or operated by the private sector, not governments.37 It is likely that many of the preparations to weather the colliding economic and environmental storm systems will be found in private-sector initiatives to reinforce critical assets and shield them from potential future risks and liability. Given the pressure on public finances generally and their scarcity to address climate change-related challenges, new funding models will need to be found. Private funds can be unlocked through innovative public-private collaboration that ranges across disciplines as well as stakeholders. In order to enable scalable, effective partnerships, a variety of actors and professional disciplines will need to converge on mutually beneficial and economically sustainable solutions. This is no minor task since, in addition to the diversity of interests at stake, different professionals often have conflicting biases and have been trained to think in siloed ways. Yet such partnerships have started to emerge. Section 1 Questions for Stakeholders The World Economic Forum is serving as the secretariat for the G2A2. Global Risks 2013 21 Section 6 1. Highlight innovative models for public-private collaboration: The G2A2 will launch a report at the 2013 World Economic Forum Annual Meeting identifying existing sources of finance and pinpointing innovative ways for public policy to unlock private funds. 2. Stimulate private investment at country level: The G2A2 is working with the governments of Kenya, Vietnam and Mexico to incubate innovative financing models with the domestic and international private sector. 3. Provide new ideas and models to shape the policy agenda: The G2A2 has formed working groups on green free trade, end-user financing of renewable energy, institutional investors and energy efficiency. The energy efficiency working group is looking to pilot new financing structures for energy services companies; the green freetrade group has led calls to establish free-trade regulations for clean technologies such as solar. 4. Help to scale up and replicate successful approaches: To help governments, development banks and finance institutions to ensure rapid replication and to scale up successful models, the G2A2 will document case studies in the Green Investment Report and engage with policy platforms and investor networks, such as the G20 Development Working Group and Finance Track group on climate finance, the UNFCCC’s Momentum for Change Initiative and the International Development Finance Club. The G2A2 will also collaborate closely with the UN Sustainable Energy for All Initiative and the Global Investor Coalition on Climate Change. Section 5 -- How will we reconcile climate change mitigation and adaptation efforts with the desire for prosperity given current demographic trends? -- How can like-minded municipalities, companies and communities drive forward a new set of climate-smart approaches that avoid cognitive biases? -- How can we rethink cross-industry collaboration to find the right balance between competition and cooperation among companies in a resource-constrained and increasingly interconnected world? To address the current shortfall in green infrastructure investment, more than 50 leading companies from finance, infrastructure, energy and agriculture sectors joined with public finance institutions to launch the Green Growth Action Alliance (G2A2) at the 2012 G20 Summit in Mexico. Chaired by the then Mexican President Felipe Calderón, the G2A2 will pursue four strategic activities over a two-year timeframe: Section 4 As the world faces a squeeze in public funds at the same time as the effects of climate change are increasing, it is only through collaboration among governments (to further the public interest), businesses (to search for innovative products and solutions), legal experts (to mitigate fear of liability), science (to bring good quality supporting data and analyses) and the financial sector (to innovate and avoid future damaging costs) that the limits of environmental and economic resilience can be successfully navigated. As emerging economies grapple with how to grow their economies without worsening their environments, many are developing “green growth” strategies designed to attract investment in sustainable water, energy, transport and agricultural infrastructure. Up to US$1 trillion a year of private sector investment is needed, according to the 2012 B20 Green Growth Task Force. However, due to the limited track record of some technologies, combined with the perception of investment risk, private capital providers are often reluctant to invest in green growth. Section 3 Other examples of innovative partnerships include a company in China which has partnered with government, industry associations and international NGOs to enable a sector-wide replication of green prefabrication production, currently saving 360 hectares of forest and 314,000 tons of greenhouse gas emissions a year; and the Desertec Foundation for Clean Energy Generation, which assisted in founding an industrial initiative of 55 industrial and financial companies and institutions working to enable large-scale generation of renewable power from deserts to serve markets in North Africa, Middle East and Europe.38 Box 2: The Green Growth Action Alliance (G2A2) Section 2 In order to address the current shortfall in green infrastructure in a number of emerging economies, more than 50 leading companies from finance, infrastructure, energy and agriculture sectors joined public institutions to form the Green Growth Action Alliance (G2A2). As described in greater detail in Box 2, the aim of this initiative is to unlock greater sums of private investment for green infrastructure. Section 1 References Section 2 Section 3 Section 4 Section 5 Section 6 1. Strategic Infrastructure Steps to Prioritize and Deliver Infrastructure Effectively and Efficiently. September, 2012. Geneva: World Economic Forum in collaboration with PwC. 2. World Economic Outlook: Coping with High Debt and Sluggish Growth. October, 2012. Washington DC: International Monetary Fund. 3. Global Economic Prospects: Managing Growth in a Volatile World. June, 2012. Washington DC: World Bank. 4. World Economic Outlook: Coping with High Debt and Sluggish Growth. October, 2012. Washington DC: International Monetary Fund. 5. Global Economic Prospects: Managing Growth in a Volatile World. June, 2012. Washington DC: World Bank. 6. Eichengreen, B. “Europe’s Populists at the Gate”. Project Syndicate, A World of Ideas, http:// www.project-syndicate.org/commentary/the-political-risk-to-the-euro-by-barry-eichengreen, 2012. 7. Tonkin, S. “Global Experts Poll: Economic Confidence Plummets to Lowest Level in Five Quarters”. World Economic Forum, http://www.weforum.org/nr_gci5. 8. Smart Grid Investment Grant Program, Progress Report. July, 2012. U.S. Department of Energy, Electricity Delivery and Energy Reliability. 9. Too Late for Two Degrees? Law Carbon Economy Index 2012. November, 2012. PricewaterhouseCoopers LLP. 10. World Energy Outlook 2011. 2011. Paris: International Energy Agency. 11. Turn Down the Heat. Why 4 C Warmer World Must Be Avoided. A Report for the World Bank by the Potsdam Institute for Climate Impact Research and Climate Analytics. November, 2012. Washington DC: World Bank. 12. Natural Catastrophes and Man-Made Disasters in 2011: Historic Losses Surface from Record Earthquakes and Floods. November, 2012. Zurich: Swiss Reinsurance Company. http://direito.folha.uol.com.br/uploads/2/9/6/2/2962839/natural_catastrophes_and_man_ made_disasters_2011.pdf. 13. Shaping Climate-Resilient Development: A Framework for Decision-Making. 2009. Economics of Climate Adaptation Working Group. 14. Tavanti, M. “From Food Insecurity to Food Security: Understanding Human and Food Security Implications for Somalia and the Horn of Africa”. Somalia Strategy Review, http://www. somaliastrategyforum.org/journal/v1i1/tavanti_foodsecurity_v1i1.pdf, 2012. 15. “Hurricane Sandy’s Rising Costs.” The New York Times, http://www.nytimes.com/2012/11/28/ opinion/hurricane-sandys-rising-costs.html, 2012. 16. Shaping Climate-Resilient Development: A Framework for Decision-Making. 2009. Economics of Climate Adaptation Working Group. 17. Climate Change Scenarios–Implications for Strategic Asset Allocation. 2011. Mercer. 18. Ibid. 19. The 2°C Target. Background on Impacts, Emission Pathways, Mitigation Options and Costs. July, 2008. EU Climate Change Expert Group. 20. Lean, G. “Micronesia Lawsuit Highlights Climate Change Litigation”. The Telegraph, http://www. telegraph.co.uk/earth/environment/climatechange/8533367/Micronesia-lawsuit-highlightsclimate-change-litigation.html, 2011. 21. Saxe, D, James, M. “Kivalina Loses its Climate Change Nuisance Case Again”. http://envirolaw. com/kivalina-loses-climate-change-appeal/, 2012. 22. Gruber, J. “The Economics Of Tobacco Regulation”. Health Affairs, http://content.healthaffairs. org/content/21/2/146.full, 2011. 23. Based on comments from expert review. 24. Palmer, T. A CERN for Climate Change. In Physics World, 2011, 24:14-15. 25. Shaping Climate-Resilient Development: A Framework for Decision-Making. 2009. Economics of Climate Adaptation Working Group. 26. Heuer, R.J. Psychology of Intelligence Analysis. Center for the Study of Intelligence, Central Intelligence Agency, 1999. https://www.cia.gov/library/center-for-the-study-of-intelligence/ csi-publications/books-and-monographs/psychology-of-intelligence-analysis/PsychofIntelNew. pdf 27. Ibid. 28. Michel Kerjan, E., Lemoyne de Forges, S. and Kunreuther, H. Policy Tenure Under the US National Flood Insurance Program (NFIP). In Risk Analysis, 2011, 32(4):644-658. 29. Michel-Kerjan, E. Overcoming Decision Biases to Reduce Lossesfrom Natural Catastrophes. In E. Shafir (ed), Behavioural Foundations of Policy. 2012. Princeton: Princeton University Press 30. Laibson, D. Golden Eggs and Hyperbolic Discounting. In The Quarterly Journal of Economics, 1997, 112(2):443-478. 31. Based on comments from expert review. 32. Kunreuther H., Meyer, R. and Michel-Kerjan, E. Overcoming Decision Biases to Reduce Losses from Natural Catastrophes.Behavioural Foundations of Policy. In E. Shafir (ed), 2012. Princeton: Princeton University Press. 33. Based on comments from expert review. 34. Nicholls, R.J., Hanson, S. and Herweijer, C. et al. Ranking of the World’s Cities Most Exposed to Coastal Flooding Today and in the Future, Executive Summary. 2007. Organisation for Economic Co-operation and Development. 35. “Climate-Smart” Agriculture: Policies, Practices and Financing for Food Security, Adaptation and Mitigation. 2010. Rome: Food and Agriculture Organization of the United Nations. 36. Puska, P. Health in All Policies. In The European Journal of Public Health, 2007, 17(4):328. 37. Report of the Critical Infrastructure Task Force. January, 2006. Homeland Security Advisory Council, http://www.dhs.gov/xlibrary/assets/HSAC_CITF_Report_v2.pdf 38. Annex to the Message from the Friends of Rio+20. 2012. The Friends of Rio+20. http://www3. weforum.org/docs/WEF_FriendsRio20_Annex_2012.pdf 39. “Private Sector Initiative - Database of Actions on Adaptation”. United Nations Framework Convention on Climate Change, http://unfccc.int/adaptation/nairobi_work_programme/ private_sector_initiative/items/6547.php, 2012. 22 Global Risks 2013 Section 1 In 1938, when radio had become widespread, thousands of Americans confused an adaptation of the H.G. Wells novel War of the Worlds with a news broadcast and jammed police station phone lines in the panicked belief that the United States had been invaded by Martians. Section 5 The Internet remains an uncharted, fast-evolving territory. Current generations are able to communicate and share information instantaneously and at a scale larger than ever before. Social media increasingly allows information to spread around the world at breakneck speed. While the benefits of this are obvious and well documented, our hyperconnected world could also enable the rapid viral spread of information that is either intentionally or unintentionally misleading or provocative, with serious consequences. The chances of this happening are exponentially greater today than when the radio was introduced as a disruptive technology, despite our media sophistication. Radio was a communication channel of “one to many” while the Internet is that of “many to many”. Section 4 It is difficult to imagine a radio broadcast causing comparably widespread misunderstanding today. In part this is because broadcasters have learned to be more cautious and responsible, in part because the media is a regulated industry, and in part because listeners have learned to be more savvy and sceptical. Moreover, the news industry itself is undergoing a transformation as the Internet offers multiple options to confirm or refute a breaking news story. But the Internet, like radio in 1938, is a relatively young medium. The notion that a tweet, blog or video posting could drive a similar public panic today is not at all far-fetched. Section 3 The global risk of massive digital misinformation sits at the centre of a constellation of technological and geopolitical risks ranging from terrorism to cyber attacks and the failure of global governance. This risk case examines how hyperconnectivity could enable “digital wildfires” to wreak havoc in the real world. It considers the challenge presented by the misuse of an open and easily accessible system and the greater danger of misguided attempts to prevent such outcomes. Section 2 Digital Wildfires in a Hyperconnected World Figure 11: Digital Wildfires in a Hyperconnected World Constellation Section 6 Critical systems failure Cyber attacks Massive incident of data fraud/theft Massive digital misinformation Terrorism Rising religious fanaticism Failure of diplomatic conflict resolution Major Major systemic systemicfinancial financial failure failure Global governance failure Backlash against globalization Source: World Economic Forum Global Risks 2013 23 Section 1 Section 3 Section 4 Figure 12: The World of Social Media US Internet users who use social networks sites, by age, in percentage of each group 18-29 years 30-49 years 50-64 years 65+ years 80 67% 73% 83% 86% 58% 61% 76% 60 48% 25% 11% 7% 25% 16% 22% 4% 13% Apr 2009 0 16% 12% 7% 5% Nov 2008 20 47% 36% 36% Dec 2009 40 26% May 2010 100 May 2008 How might digital wildfires be prevented? Legal restrictions on online anonymity and freedom of speech are a possible route, but one which may also have undesirable consequences. And what if the source of a digital wildfire is a nation state or an international institution? Ultimately, generators and consumers of social media will need to evolve an ethos of responsibility and healthy scepticism similar to that which evolved among radio broadcasters and listeners since the infamous War of the Worlds broadcast in 1938. This risk case asks if explicitly recognizing the potential problem and drawing attention to possible solutions could facilitate and expedite the evolution of such an ethos. Figure 13: Users Timeline Sep 2005 Section 2 The Internet does have self-correcting mechanisms, as Wikipedia demonstrates. While anyone can upload false information, a community of Wikipedia volunteers usually finds and corrects errors speedily. The short-lived existence of false information on its site is generally unlikely to result in severe real-world consequences; however, it is conceivable that a false rumour spreading virally through social networks could have a devastating impact before being effectively corrected. It is just as conceivable that the offending content’s original author might not even be aware of its misuse or misrepresentation by others on the Internet, or that it was triggered by an error in translation from one language to another. We can think of such a scenario as an example of a digital wildfire. Source: Adapted from “Search Engine Journal”, http://www.searchenginejournal.com/ wp-content/uploads/2011/09/social-media-black.jpeg, 2012. Benefits and Risks of Social Media From cuneiform to the printing press, it has always been hard to predict the ways in which new communication technologies will shape society. The scale and speed of information creation and transfer in today’s hyperconnected world are, however, historically unparalleled. Facebook has reached more than 1 billion active users in less than a decade of existence, while Twitter has attracted over 500 million active users in seven years. Sina-Weibo, China’s dominant micro-blogging platform, passed 400 million active accounts in summer 2012.1 Every minute, 48 hours’ worth of content is uploaded to YouTube. The world of social media is multicultural and young. Figure 12 shows the preferences across the world for different social networking platforms, and Figure 13 illustrates the trends of social media use by age group in the United States. Section 5 Leading social media networks by country Russia VKontakte Odnoklassniki Facebook Section 6 USA Facebook Twitter Linkedin Dominating networks by country UK Facebook Twitter Linkedin China Qzone Sina Weibo Renren Egypt Facebook Twitter Facebook Qzone VKontakte Odnoklassniki Orkut Mixi Zing Cloob Draugiem Brasil Orkut Facebook Twitter India Facebook Orkut Twitter South Africa Facebook Twitter Linkedin Australia Facebook Twitter Linkedin No data Source: Adapted from “Search Engine Journal”, http://www.searchenginejournal.com/wp-content/uploads/2011/09/social-media-black.jpeg, 2012. 24 Global Risks 2013 Japan Mixi Twitter Facebook Section 1 These cases indicate one of the two situations in which digital wildfires are most dangerous: in situations of high tension, when false information or inaccurately presented imagery can cause damage before it is possible to propagate accurate information. The real-world equivalent is shouting “fire!” in a crowded theatre – even if it takes only a minute or two for realization to spread that there is no fire, in that time people may already have been crushed to death in a scramble for the exit. Executives interviewed by Forbes and Deloitte placed social media among the greatest risks that their corporations face.23 For example, after the BP oil spill in the Gulf of Mexico, a parody Twitter account quoting the chief executive Tony Hayward as saying such things as “Black sand beaches are very trendy in some places” attracted 12 times more followers than BP’s corporate Twitter account.24 While this example might have been intended to be humorous, it is possible for satire to be mistaken for fact. In October 2012, Iran’s official news agency ran a story that originated on the satirical website The Onion, claiming that opinion polls showed Mahmoud Ahmadinejad was more popular than Barack Obama among rural white Americans.25 Global Risks 2013 25 Section 6 As Hurricane Sandy battered New York in October 2012, an anonymous Twitter user tweeted that the New York Stock Exchange trading floor was flooded by three feet of water. Other Twitter users quickly corrected the false rumour, though not before it was reported on CNN.13 In Mexico, there have been cases of mothers needlessly keeping their children from school and shops closing due to false rumours of shootouts spreading through social networks.14 In the UK, the video imagery related to a low level tactical incident of the British Army in Basra, spread through Reuters agency feed, YouTube and Blinkx, led to a misleading impression of a significant military failure among the British public which was never fully eradicated.15 While it is certainly possible for a digital wildfire to start accidentally, it is also possible for misinformation to be deliberately propagated by those who stand to reap some kind of benefit. Some examples: -- In politics, the practice of creating the false impression of a grassroots movement reaching a group consensus on an issue is called “astroturfing”. During the 2009 Massachusetts special election for the US Senate, a network of fake Twitter accounts successfully spread links to a website smearing one of the candidates.19 -- Fake tweets have moved markets, offering the potential to profit from digital wildfires. A Twitter user impersonating the Russian Interior Minister Vladimir Kolokoltsev in July 2012 tweeted that Syria’s President Bashar al-Assad “has been killed or injured”, causing crude oil prices to rise by over US$ 1 before traders realized the news was false.20 -- Thirty thousand people of Assam origin fled the tech centre Bangalore in panic in 2012 after receiving text messages warning that they would be attacked in retaliation for communal violence in their home state.21,22 Section 5 When Digital Wildfires Are Most Dangerous “Astroturfing”, Satire, “Trolling” and Attribution Difficulties Section 4 These are very different cases – a humorous response from a disgruntled customer, a defamation of character and an affront to religious sensitivities. What unites them is that hyperconnectivity amplified their impacts to a degree that would have been unthinkable in a pre-Internet age, when only a small number of large organizations had the capacity to broadcast information widely. This new reality has some challenging implications. We should, therefore, not underestimate the risk of conflicting false rumours, circulating within two online bubbles of likeminded individuals, creating an explosive situation. The extensive use of Twitter by both sides during the November 2012 clashes between Israel and Hamas in Gaza18 points to the possibility of future situations in which competing versions of events are propagated in self-reinforcing loops among groups of people who are predisposed to believe one side or the other and do not share a common information source that might help to dissipate some of the self-amplified information loops. Section 3 However, some individuals and organizations have suffered losses due to the capacity for information to spread virally and globally through social media. Some examples: -- When a musician travelling on United Airlines had his claim for damages denied on a guitar that baggage handlers had allegedly broken, he wrote and performed a song – “United Breaks Guitars” – and uploaded it to YouTube, where it has been viewed more than 12 million times. As the video went viral, United Airlines stock dropped by about 10%, costing shareholders about US$ 180 million.8,9 -- In November 2012, the BBC broadcast an allegation that a senior politician had been involved in child abuse, which transpired to have been a case of mistaken identity on the part of the victim. Although the BBC did not name the politician, his identity was easily discovered on Twitter, where he was named in about 10,000 tweets or re-tweets.10 On top of pursuing legal action against all the people who spread this false information on Twitter, the injured politician settled on £185,000 in damages with the BBC.11 -- The existence on YouTube of a video entitled “Innocence of Muslims”, uploaded by a private individual in the United States, sparked riots across the Middle East. These riots are estimated to have claimed over 50 lives.12 The other dangerous situation is when information circulates within a bubble of likeminded people who may be resistant to attempts to correct it. In the case of the Sandy NYSE tweet, other Twitter users rapidly posted accurate information, and nobody had a vested interest in continuing to believe the original, false information.16 Cases in which false information feeds into an existing worldview, making it harder to dislodge, are far from unimaginable. This may be more of a problem with social networks where information is less publicly visible, for example, through friend networks on Facebook or more “opaque” social networks such as e-mail or text messaging.17 The spread of misinformation in such “trusted networks” can be especially difficult to detect and correct since recipients are more likely to trust any information originating from within the network. Section 2 This phenomenon has many transformative effects. Studies of Twitter and Facebook activity in Egypt and Tunisia leave no doubt about the role social media played in facilitating the Arab Spring.2,3 The social networking site Patientslikeme.com connects individuals with others who have the same conditions and is helping to expedite the development of new treatments. Analysis of Twitter messages and networks has successfully predicted election results,4 movie box office success5 and consumer reactions to specific brands, among other things.6,7 Section 1 Section 3 photos depicting sharks swimming in New Jersey streets and the Statue of Liberty with monstrous looming storm clouds. Social media analysts say this is not surprising, as visual content tends to spread further than text alone. In addition, the actual misinforming tweets posted by @ComfortablySmug and @CNNweather peaked at significantly fewer re-tweets compared to the correction posted by @BreakingNews, even though the corrected information was posted within an hour of the misinforming tweet.32 It is not always easy to trace the source of a digital wildfire. It would be possible for careful cyber attackers to cover their tracks, raising the possibility of an organization or country being falsely blamed for propagating inaccurate or provocative information. Depending on existing tensions, the consequences of the false attribution could be exponentially worse than if no attribution had been made. One can speculate that people may have been more willing to re-tweet the photos of sharks and the Statue of Liberty because they were harmless and surprising and, most important, had significant entertainment value. The entertainment value may also explain the lack of interest in circulating the correction tweets from @BreakingNews. People may have been less prepared to re-tweet information that could be tied to serious consequences, such as NYSE flooding, before verifying. This suggests that norms may be emerging, and also re-emphasizes the fact-checking responsibility of trusted sources of information such as CNN. Slips like this could one day be a litigation risk for media corporations. Towards a Global Digital Ethos Section 4 Around the world, governments are grappling with the question of how existing laws which limit freedom of speech, for reasons such as incitement of violence or panic, might also be applied to online activities. Such issues can be highly controversial: in the United Kingdom, courts initially convicted a man for making a joke on Twitter in which he threatened to blow up an airport in frustration at the cancellation of his flight – a conviction later overturned on appeal.27 Establishing reasonable limits to legal freedoms of online speech is difficult because social media is a recent phenomenon, and digital social norms are not yet well established. The question raises thorny issues of the extent to which it would be possible to impose limits on the ability to maintain online anonymity, without seriously compromising the usefulness of the Internet as a tool for whistle-blowers and political dissidents in repressive regimes. Section 5 Section 6 Even if the imposition of such limits were enforceable, what authority would we trust to do it? The World Conference on International Telecommunications in Dubai aiming to revise the 1988 treaty governing the International Telecommunications Union28 sparked controversy in December 2012 when critics argued that seemingly innocuous technical regulations could have unintended negative consequences. Rules “ostensibly designed to do everything from fight spam to ensure ‘quality of service’ of Internet traffic could be used by individual governments to either throttle back incoming communications or weed out specific content they want to block”.29 As some revised treaty provisions were believed to “give a U.N. stamp of approval to state censorship and regulation of the Internet and private networks”,30 the United States refused to sign the amended treaty; a decision seconded by Canada and several European countries.31 When the incentives behind installing “quality” checks are questionable, who can be trusted? And how do you create an established and recognized authority that can intervene or disrupt misinformation flows when they happen? There are also profound questions of education and incentives. Users of social media are typically much less knowledgeable than editors of traditional media outlets about laws relating to issues such as libel and defamation. Many also have less to lose than traditional media outlets from spreading information that has not been properly fact-checked. But there are signs that new norms may be emerging. Figure 14 plots misinformation and correction tweets during Hurricane Sandy in October 2012. The misinforming tweet @ ComfortablySmug’s about the NYSE floor flooding received substantially fewer re-tweets than the tweets that circulated fake 26 Global Risks 2013 Figure 14: Re-Tweets Over Time 2000 Shark swimming in Jersey Crazy clouds over Liberty @comfortablysmug - NYSE flooding 1500 Counts per hour Section 2 More worrying for businesses may be misinformation that circulates at a time when markets are already anticipating an important announcement. On 18 October 2012, NASDAQ halted trading on Google shares as a leaked earnings report (coupled with weak results it entailed) triggered a US$ 22 billion plunge in Google’s market capitalization.26 In this case, the information was from a credible source, but it demonstrates impacts that could also be achieved by unfortunately timed misinformation or rumours. @cnnweather - NYSE flooding @BreakingNews - fixing misinformation 1000 500 30 Oct 31 Oct Source: “#Sandy: Social Media Mapping”. Social Flow, http://blog.socialflow.com/ post/7120245759/sandy-social-media-mapping, 2012. In addition to seeking ways to inculcate an ethos of responsibility among social-media users, it will be necessary for consumers of social media to become more literate in assessing the reliability and bias of sources. Technical solutions could help here. Researchers and developers are working on programmes and browser extensions, such as LazyTruth,33 Truthy34 or TEASE35, that aim to help people assess the credibility of information and sources circulating online. It is possible to imagine the development of more broad and sophisticated automated flags for disputed information, which could become as ubiquitous as programmes that protect Internet users against spam and malware. Feedback ratings on eBay, which enable users to assess the reliability of vendors, offer a potential template for the development of such a service. Until now, most rating systems are limited to specific websites – users do not carry their rating with them as a record of credibility wherever they go online. It remains still to be seen if that would be a desirable or feasible model. Information disputed for ideological reasons or deliberate misattribution will continue to pose a number of challenges; however, a system could be developed that would trace information to its source and provide information on whether the source was considered by a broader community to be official. The system could also reveal how widely the source was trusted by a spectrum of other Internet users – all while protecting the identity of the source. It is not yet clear what a global digital ethos would look like, or how it could best be helped to develop. But given the risks posed by digital wildfires in our hyperconnected world, leadership is needed to pose these difficult questions and start the discussion. Section 1 References -- Controlling the spread of false information online, either through national laws or sophisticated technologies, raises sensitive questions on the limits to the freedom of speech – a human value that is not regarded or celebrated equally across different societies. How can constructive international discussions be started to define a global digital ethos without further polarizing societies on issues of civil liberties? -- What actions can be taken to promote a new and critical media- or information-literacy among the general public that raises individuals’ capacities to assess the credibility of information and its sources? -- Where should different groups of stakeholders look to verify the source of information online? How can different markers of trust and information quality be promulgated to facilitate greater user clarity? 1. “SINA Reports Third Quarter 2012 Financial Results”. SINA, http://phx.corporate-ir.net/phoenix. zhtml?c=121288&p=irol-newsArticle&ID=1759522&highlight=, 2012. 2. Howard, P.N., Duffy, A., Freelon, D. et al. “Opening Closed Regimes: What Was the Role of Social Media During the Arab Spring?” PITPI, http://pitpi.org/index.php/2011/09/11/ opening-closed-regimes-what-was-the-role-of-social-media-during-the-arab-spring/, 2011. 3. “Twitter, Facebook and YouTube’s Role in Arab Spring (Middle East uprisings) [UPDATED 10/12/12]”. Social Capital Blog, http://socialcapital.wordpress.com/2011/01/26/twitterfacebook-and-youtubes-role-in-tunisia-uprising/, 2012. 4. Tumasjan, A., Sprenger, T.O., Sandner, P.G. et al. “Predicting Elections with Twitter: What 140 Characters Reveal about Political Sentiment”. Proceedings of the Fourth International AAAI Conference on Weblogs and Social Media, http://www.aaai.org/ocs/index.php/ICWSM/ ICWSM10/paper/viewFile/1441/1852, 2010. 5. Asur, S., Huberman, B.A. “Predicting the Future with Social Media”. http://www.hpl.hp.com/ research/scl/papers/socialmedia/socialmedia.pdf, 2010. 6. Jansen, B.J., Zhang, M., Sobel, K.et al. Twitter Power: Tweets as Electronic Word of Mouth. In Journal of the American Society for Information Science and Technology, 2009, 60(11): 2169-2188. 7. Ratkiewicz, J., Conover, M.D., Meiss, M. et al. “Detecting and Tracking Political Abuse in Social Media”. Proceedings of the Fifth International AAAI Conference on Weblogs and Social Media, http://www.aaai.org/ocs/index.php/ICWSM/ICWSM11/paper/view/2850/3274, 2011. 8. Berthon, P.R., Pitt, L. F., Plangger, K. et al. Marketing Meets Web 2.0, Social Media, and Creative Consumers: Implications for International Marketing Strategy. In Business Horizons, 2012, 55(3): 261-271. 9. Davis, M.M., Spohrer, J.C., Maglio, P.P. Guest Editorial: How Technology is Changing the Design and Delivery of Services. In Operations Management Research, 2011, 4(1):1-5. 10. O’Carroll, L. “Lord McAlpine to Demand Charity Donations for False Twitter Allegations”. The Guardian, http://www.guardian.co.uk/media/2012/nov/20/lord-mcalpine-false-twitterallegations, 2012. 11. Sweney, M. “ITV to Pay Lord McAlpine £125,000 in Damages”. The Guardian, http://www. guardian.co.uk/media/2012/nov/22/itv-pay-lord-mcalpine-125000-damages, 2012. 12. “Egypt Newspaper Fights Cartoons with Cartoons”. CBS News, The Associated Press, http:// www.cbsnews.com/8301-202_162-57520830/egypt-newspaper-fights-cartoons-withcartoons/, 2012. 13. Keller, J. “How Truth and Lies Spread on Twitter”. Bloomberg Business Week, http://www. businessweek.com/articles/2012-10-31/how-truth-and-lies-spread-on-twitter, 2012. 14. Rodriguez, O.R. “Mexico Tweets Cause Massive Shootout Panic”. The Huffington Post, http:// www.huffingtonpost.com/2012/09/08/mexico-tweets-panic_n_1866941.html, 2012. 15. Gowing, N. “Skyful of Lies and Black Swans. The New Tyranny of Shifting Information Power in Crises”, University of Oxford, Reuters Institute for the Study of Journalism, http://reutersinstitute. politics.ox.ac.uk/fileadmin/documents/Publications/Skyful_of_Lies.pdf, 2009. 16. Herrman, J. “Twitter Is A Truth Machine”. BuzzFeed, http://www.buzzfeed.com/jwherrman/ twitter-is-a-truth-machine, 2012. 17. Keller, J. “How Truth and Lies Spread on Twitter”. Bloomberg Business Week, http://www. businessweek.com/articles/2012-10-31/how-truth-and-lies-spread-on-twitter, 2012. 18. Borger, J. “Israel and Hamas Deploy Twitter Feeds in Media War”. The Guardian, http://www. guardian.co.uk/world/2012/nov/15/israel-hamas-twitter-media-war, 2012. 19. Ratkiewicz, J., Conover, M.D., Meiss, M. et al. “Detecting and Tracking Political Abuse in Social Media”. Proceedings of the Fifth International AAAI Conference on Weblogs and Social Media, http://www.aaai.org/ocs/index.php/ICWSM/ICWSM11/paper/view/2850/3274, 2011. 20. Durden, T. “Fake Tweets About Syrian President Assad’s Death Cause All Too Real Spike In Crude And S&P”. ZeroHedge.com, http://www.zerohedge.com/news/supposedly-fake-tweetsabout-syrian-president-assads-death-cause-all-too-real-spike-crude-and-s, 2012. 21. “Fear Sparks Bangalore Exodus”. The Wall Street Journal, http://online.wsj.com/article/SB10000 872396390443324404577595733604592276.html, 2012. 22. Biswas, S. “Social Media and the India Exodus”. BBC World News, http://www.bbc.co.uk/news/ world-asia-india-19292572, 2012. 23. Moreno, K. “Social Media Risk Is Like Wildfire. Where’s the Fire Engine?” Forbes, http://www. forbes.com/sites/forbesinsights/2012/08/07/social-media-risk-is-like-wildfire-wheres-the-fireengine/, 2012. 24. Fournier, S., Avery, J. The Uninvited Brand. In Business Horizons, 2011, 54(3):193-207. 25. Reals, T. “Iran News Agency Picks Up “Onion” Story, Tells Iranians Rural Americans Prefer Ahmadinejad to Obama”. CBS News, http://www.cbsnews.com/8301-202_162-57522363/ iran-news-agency-picks-up-onion-story-tells-iranians-rural-americans-prefer-ahmadinejad-toobama/, 2012. 26. Efrati, A., “Google Hit by Weak Results, Shares Dive After Premature Report Shows Third-Quarter Profit Sliding 20%”. The Wall Street Journal, http://online.wsj.com/article/SB10000 872396390443684104578064671358259436.html, 2012. 27. Bowcott, O. “Twitter Joke Trial: Paul Chambers Wins High Court Appeal Against Conviction”. The Guardian, http://www.guardian.co.uk/law/2012/jul/27/twitter-joke-trial-high-court, 2012. 28. Waters, R., Thomas, D., Fontanella-Khan, J. “Fears Grow over Efforts to Govern the Web”. The Financial Times, http://www.ft.com/intl/cms/s/0/7ff2be2c-3971-11e2-8881-00144feabdc0. html#axzz2EwLdUWHr, 2012. 29. Ibid. 30. Nakashima, E. “U.S. Refuses to Back U.N. Treaty, Saying it Endorses Restricting the Internet”. The Washington Post, http://www.washingtonpost.com/world/national-security/us-refuses-toback-un-treaty-saying-it-endorses-restricting-the-internet/2012/12/13/ba497952-4548-11e28e70-e1993528222d_story.html, 2012. 31. Pfanner, E. “U.S. Rejects Telecommunications Treaty”. The New York Times, http://www. nytimes.com/2012/12/14/technology/14iht-treaty14.html?_r=0, 2012. 32. Lotan, G. “#Sandy: Social Media Mapping”. Social Flow, http://blog.socialflow.com/ post/7120245759/sandy-social-media-mapping#, 2012. 33. Streams, K. “LazyTruth Chrome Extension Fact Checks Chain Emails”. The Verge, http://www. theverge.com/2012/11/14/3646294/lazytruth-fact-check-chain-email, 2012. 34. “Truthy”. Indiana University, Bloomington, http://truthy.indiana.edu/, 2012. 35. “Tease: Trust Enabling Augmented-Reality Support for Information-Environments”. http://www. tease-project.info/, 2012. Shaping Culture and Governance in Digital Media Global Risks 2013 27 Section 6 The project is being led by media, entertainment and information industry partners from the publishing, social media, and advertising industries joined by regulatory bodies such as the Federal Communications Commission and the European Commission. Section 5 In a series of workshops held in Mexico City, Istanbul, Brussels, New York and New Delhi, and supported by a survey on Internet usage in 15 countries conducted in collaboration with comScore and Oxford University, the project aims to achieve the following over 2012 and 2013: 1. Develop an alternative framework to think about issues relating to digital media that start with intentions of stakeholders (e.g. reward innovation and make content accessible) rather than the actions taken (e.g. protect intellectual property) to arrive at a shared understanding and framework concerning issues such as freedom of expression, intellectual property and privacy in the digital universe. 2. Account for differences in regional values and cultures and how they are reflected in the digital world, which is borderless. 3. Explore the context and conditions needed for any government or business intervention to be effective and sustainable, showcasing some regulatory policies on intellectual property that may have seemed effective in the short term but too costly in the long term. 4. Highlight cases of collaborative efforts among stakeholders or leadership of a specific group of organizations that can prove most successful, especially relating to technological innovation. Section 4 Across the globe, the rules of digital content are being formed: laws and policies written, cultural norms emerging, industry coalitions forming. In this dynamic environment, the disparate expectations and interests of the primary stakeholder groups – government, industry, and citizens – are intertwined, and often at odds. Any government policy or business strategy will need to take into account numerous interlinked factors to achieve desired outcomes and avoid unintended consequences. Section 3 Box 3: Hyperconnected World Section 2 Questions for Stakeholders Section 1 Section 2 The Dangers of Hubris on Human Health Section 3 Section 4 Humanity has always been under constant threat from infectious disease. Globally, we are getting better at monitoring signs of a health-related crisis and alerting each other – there are far fewer deaths from pandemics today than a century ago. And modern medicine is consistently meeting new diseases with new treatements, as shown by the progress on HIV since the 1980s. But have such modern medical successes bred a sense of hubris – excessive confidence that science will always come to the rescue? Challenges to human health never cease to evolve. Vaccines and antibiotics have helped us to survive leading causes of death from bygone eras, but we face rising rates of chronic illnesses such as heart disease, cancers and diabetes. Although recent pandemics, such as SARS, avian flu and swine flu, have been contained, they also show how easily deadly viruses can mutate and hop from other species to us.1 For all our successes, we are never far from the edge of catastrophe, as new biological mutations will eventually overcome a prior human innovation. While viruses may capture more headlines, arguably the greatest risk of hubris to human health comes in the form of antibioticresistant bacteria. We live in a bacterial world where we will never be able to stay ahead of the mutation curve. A test of our resilience is how far behind the curve we allow ourselves to fall. Section 5 Our survey respondents connected this global risk to others including vulnerability to pandemics, failure of the international Intellectual Property (IP) regime, rising rates of chronic disease and unforeseen consequences of new life science technology. Like storm systems colliding in unpredictable ways, the unexpected interactions of these risks could overwhelm our health systems in the coming decade and unpredictably damage our social and economic systems. Section 6 Figure 15: The Dangers of Hubris on Human Health Constellation Failure of intellectual property regime Rising rates of chronic disease Antibiotic-resistant bacteria Unforeseen consequences of new life science technologies Vulnerability to pandemics Source: World Economic Forum 28 Global Risks 2013 Section 1 Dr Margaret Chan, Director-General, World Health Organization. March 20122 Section 4 While predicting the spread of bacteria is notoriously difficult and complicated by a general lack of good global data, troubling projections are emerging in regions where many efforts have been made to better monitor the situation. Figure 16 shows the most recent data for two resistant pathogens, as well as the trends between 2008 and 2011. A well-known antibioticresistant bacteria – meticillin-resistant Staphylococcus aureus, better known as MRSA – is stabilizing and possibly decreasing, but not as sharply as had previously been projected.5 For K. pneumoniae, there is a widespread increasing trend.ix A post-antibiotic era means, in effect, an end to modern medicine as we know it. Things as common as strep throat or a child’s scratched knee could once again kill. Section 3 Although several new compounds for fighting bacteria are in development, experts caution that we are decades behind in comparison with the historical rate at which we have discovered and developed new antibiotics. More worryingly, none of the drugs currently in the development pipeline would be effective against certain killer bacteria, which have newly emerging resistance to our strongest antibiotics (carbapenems) and fatality rates of up to 50%.3 As shown by the death of six patients – from 18 infected – at the US National Institutes of Health in 2011, antibiotic-resistant infections can kill, even at the world’s most advanced medical centres.4 As a consequence, experts are starting to take seriously a scenario in which all antibiotics are rendered ineffective for treating even common infections. Section 2 Many people take for granted that antibiotics will always be available when we need them, but soon this may no longer be the case. Every dose of antibiotics gives an advantage for those small numbers in a bacterial population that are resistant to the drug. The more a particular antibiotic is used, the more quickly bacteria resistant to that antibiotic will be selected and increase in numbers. Until now, leaders have been able to turn a blind eye to this problem, as new antibiotics have always emerged to replace older, increasingly ineffective ones. This is changing. Figure 16: Percentage of Bloodstream Infections Showing Multi-Drug Resistance, EU/EEA, 2011 and Trends for 2008-2011 B. Klebsiella pneumoniae, combined resistance to three classes of antibiotics (3rd generation cephalosporins, fluoroquinolones and aminoglycosides) Section 5 A. Staphylococcus aureus, resistance to meticillin (MRSA) Percentage Resistance < 1% 1 to < 5% 5 to < 10% 10 to < 25% Section 6 25 to < 50% ≥ 50% No data reported or less than 10 isolates Not included The symbols and indicate a significant increasing or decreasing trend for the period 2008-2011, respectively. These trends were calculated on laboratories that consistently reported during 2008-2011. Source: European Centre for Disease Prevention and Control, EARS-Net, 2012 ix Based on the latest data (published November 2012) from the European Centres for Disease Prevention and Control’s European Antimicrobial Resistance Surveillance Network (EARS-Net) interactive database. http://ecdc.europa.eu/en/activities/ surveillance/EARS-net/database/Pages/database.aspx Global Risks 2013 29 Section 1 The Costs of Antibiotic-Resistant Bacteria Section 2 The spread of antibiotic-resistant bacteria has implications for everyone. The impacts on human health are likely to be highest in poorer countries, as the spread of pathogens is facilitated by poor hygiene, polluted water supplies, overcrowding in urban areas, civil conflicts and concentrations of people who are immuno-compromised due to malnutrition or HIV.6 But even in the highest-income countries, few people go through life without needing antibiotics. Section 3 The numbers of lives now being lost due to antibiotic-resistant infections may seem small in comparison to heart disease and cancer – for example, currently just under 100,000 Americans, 80,000 Chinese and 25,000 Europeans a year die from hospitalacquired antibiotic-resistant infections.7,8,9 However, experts believe these figures from only a few years ago may be worse today. The Global Risks report covers a 10-year time horizon, over which timescale it is far from unrealistic to project a significant spread of antibiotic-resistant bacteria with high mortality rates.10 It is important to remember that antibiotics are not used only to treat infections. They also, by guarding against infection, make possible medical procedures such as heart surgery, organ transplantation, the survival of pre-term babies, and aggressive immune-modulating therapy for auto-immune diseases such as rheumatoid arthritis, as well as for cancers of the blood, bone marrow and lymph nodes. With demographic and lifestyle trends such as ageing populations, changes in diet and declining rates of physical activity, we can expect rising rates of chronic diseases which are currently treated through surgery that would be impossible without effective antibiotics. On top of destabilizing our health systems, there are profound cost implications for economic systems and for the stability of social systems. The annual cost to the US health care system of antibiotic-resistant infections is already estimated at between US$ 21 billion to US$ 34 billion.11 Elsewhere, losses to GDP have already been estimated at 0.4% to 1.6%.12 The consequences of a pandemic spread of antibiotic-resistant bacteria could also include shortages of food due to untreatable infections in livestock, and as leaders seek to slow the spread of pathogens, restrictions on trade in foodstuffs, and even on travel and migration.13 Figure 17 provides a global snapshot of the costs, impacts and burden of antibiotic-resistant bacteria across the globe. Section 4 Figure 17: Spread of Antibiotic-Resistance Bacteria (ARB)x Asia Europe Section 5 North America • EU: ARB costs society ~ €1.5 bn/yr55 & 600 million days of lost productivity.59 • Thailand: >140,000 ARB infections/yr and >30,000/yr patients die; 2 bn in productivity losses/yr.49 • Russia: ARB a major concern60 with 83.6% of families imprudently use antibiotics at home.61 • Japan: Extensive levels of ARB found in Tokyo’s urban watershed.50 • China: Extreme over-prescription of antibiotics51 and rapid growth rate of ARB.52. Middle East & North Africa • USA: ARB causes majority of 99,000 deaths/yr from infections acquired in hospitals.56 • USA: Health care costs of ARB are • Egypt: 38% of blood infections contracted by young cancer patients are from ARB.55 US$21-34 bn/yr.56 • Israel: ARB found fatal in ~ 50% cases when resistant to our strongest antibiotics.63 Section 6 South America • Peru, Bolivia: >51% of hospital infections caused by ARB.57 • Brazil: Rates of ARB are up >60%.58 • India: Within 4 years (02-06) ARB went from being resistant to 7, to 21 drugs.53 • Vietnam: Farming practices contributing to spread of ARB through environmental contamination.54 • Pakistan: 71% of infections in newborns are from ARB.55 Sub-Saharan Africa • Tanzania: Death rate of ARB infected children are double that of malaria.55 • Nigeria: Rapid spread of ARB that came to Africa from Asia.62 Antarctica • ARB found in Antarctic animals & water samples.64 x 30 For more specific and detailed information regarding the simplified key messages outlined in the figure, please consult the referenced papers in the chapter end notes. Global Risks 2013 Section 1 Why Antibiotics Are Overused Until recently, as older antibiotics have become less useful due to the spread of resistant bacteria, new antibiotics have come along to take their place. But the drug development pipeline for new antibiotics has been drying out. New antibiotics have come to market in recent years, but any sense of progress this provides is false. Our newest antibiotics are the result of scientific discoveries that happened decades ago. A timeline of dates of discovery of distinct classes of antibiotics (as opposed to dates of market introduction) illustrates that there have been no (as yet) successful discoveries of new classes of antibiotics since 1987 (Figure 18).26 There are several competing and overlapping explanations why. Section 5 In many medical systems, antibiotics are not prescription-only. They can be purchased over the counter in pharmacies or in local marketplaces, and inappropriate self-medication is furthering the spread of antibiotic-resistant bacteria. In India, for example, pharmacy sales of strong antibiotics which should be a last line of defence increased nearly sixfold from 2005 to 2010.17 Unfortunately, there is no easy answer to the question of how to prevent excess use of antibiotics without unfairly restricting Why the Development of New Antibiotics Has Slowed Section 4 Some medical systems incorporate perverse incentives for antibiotics to be overprescribed. In China, for example, drug sales form a significant part of hospitals’ income and, until 2010, physicians’ pay was linked to profits from the sale of prescription drugs. One study found that 98% of patients in a Beijing children’s hospital were given antibiotics for a common cold.15 Figures from 2009 suggest that 74% of all hospital admissions in China will receive antibiotics to treat their illness or as a preventive measure.16 Meanwhile, antibiotics are over-used around the world in livestock and fish farming (e.g. as growth promoters). Resistant bacteria can be transferred to humans through contact with livestock, through the food chain, and through wastewater from these operations, as well as wastewater from hospitals and pharmaceutical plants.20,21 One study found 45 kg of ciprofloxacin (an antibiotic commonly used to treat bladder and sinus infections) – the equivalent of 45,000 doses – leaking daily from factories into a nearby river.22,23 Environmental contamination like this has led to an antibiotic-resistant bacteria being detected as far afield as Antarctica.24,25 Section 3 Even in systems which restrict the use of antibiotics by making them available by prescription only, doctors can come under pressure from patients who mistakenly believe antibiotics kill viruses – for example, in a pan-European survey, more than 50% of French respondents expected an antibiotic for an influenzalike illness.14 Diagnostic methods that are inadequate to distinguish bacterial from viral infection or to specify the kind of bacterial infection, allied with fear of medical malpractice lawsuits, also mean that doctors tend to prescribe a cocktail of whatever antibiotics are available in the hope that one will be effective, especially in cases of severe infection. This imprecision promotes further spread of resistance in bacteria. Section 2 If we want to minimize the rate at which antibiotics become obsolete, we should use them as sparingly as possible. However, a combination of misaligned incentives and lack of information has led antibiotics to be used where they are not truly needed. access to antibiotics in cases of genuine need. A national task force in India recommended the end of over-the-counter sales of antibiotics, but India’s Health Minister responded with concern that such a move would effectively deny access to antibiotics to patients in rural areas where there are no physicians to prescribe the drug.18,19 Inadequate and unreliable access to a full range of antibiotics in low- to middle-income countries is also part of the problem. The spread of resistance in these areas is further facilitated by illicit trade in counterfeit drugs of substandard quality. Figure 18: The Antibiotic Discovery Void27 The discovery dates of distinct classes of antibiotics. No new classes have been discovered since 1987. 1980 1990 199 0 19 87 1970 Lip op ep tid es - 1960 Fo sfo my cin Mu -1 pir 96 oc 9 in -1 97 1 Ca rba p e Ox ne az ms o -1 Mo lidin 97 no one 6 ba cta s - 1 ms 978 -1 97 9 1950 Ba cit rac in (to pic P Te oly Gly al) tr m co -1 yx N acyc pe 94 ins itr lin ptid 3 o Ce | P fur es es Ple ph he an - 1 |N n s a u los ico - 1945 rom itro p ls 9 orin - 46 util im ida ins s - 194 zo (to 19 7 les pic 48 |S M a Cy l) tre ac clo 19 pto ro se 50 li d g rin ram es e| ins - 19 No - 1 52 vo Qu bio 95 ino 3 cin lon Rif -1 es am 95 |L yc 5 inc ins os -1 am 95 ide Trim 7 s| e Fu tho sid pr ic im ac - 1 id 96 -1 1 96 2 1940 2000 200 0 2010 201 0 Discovery Void Am ino gly co sid es | Pe nic illin s -1 92 Su 8 lfo na mid es -1 93 2 1930 Section 6 1920 Source: World Economic Forum, adapted from Silver, L.L. Challenges of Antibacterial Discovery. In Clinical Microbiology Reviews, 2011, 24:71-109. Global Risks 2013 31 Section 1 Section 2 Section 3 Firstly, drugs to treat chronic illnesses such as diabetes and hypertension increasingly offer a greater potential return on investment for pharmaceutical companies. Unlike with antibiotics, resistance is not an issue with these drugs. They have the potential to rapidly achieve wide market penetration, whereas any new antibiotic is likely to be kept as a last-resort treatment, which will be used only for a few weeks even in that setting, resulting in low sales for companies.28,xi To address market failure, incentives have been suggested to encourage pharmaceutical companies to develop more new antibiotics.35 For example, through advance purchase commitments, governments or philanthropists can promise to purchase a given amount of a new drug that meets stated criteria of effectiveness. This incentivizes private companies to develop new antibiotics, while enabling the sales and marketing of those new antibiotics to be restricted in the public interest.xii Interestingly, respondents to the Global Risks Perception Survey connected antibiotic-resistant bacteria to failure of the international intellectual property regime. This global risk is defined in the survey as “the loss of the international intellectual property regime as an effective system for stimulating innovation and investment” – that is, going beyond the mechanisms of protecting IP to encompass the idea that the ultimate purpose of the IP system is to stimulate worthwhile innovation. The connection highlights a global market failure to incentivize front-end investment in antibiotic development through the promise of longer-term commercial reward, a failure which also applies to drugs to fight malaria and vaccines for pandemic influenza.29 Public-private partnerships have also shown promise in incentivizing the development of new antibiotics. One example is part of the Innovative Medicines Initiative (IMI), a €2 billion initiative of the EU Commission and the European Federation of Pharmaceutical Industries and Associations, which earmarks funds for antibiotics discovery and development.36 The IMI acts as a neutral third party that supports collaborative research projects and builds networks between experts from industry and academia. Section 4 Secondly, regulatory burdens have also impeded development of new antibiotics.30 Many smaller pharmaceutical companies cannot afford the cost of meeting complex requirements for clinical trials, and these burdens risk compromising the development of many promising new agents.31 Thirdly, an increasing amount of effort has been invested in exploring the potential of new life science technologies such as genomics, nano-scale engineering and synthetic biology, without yet yielding new approaches in the treatment of bacterial disease. One unintended consequence of this has been to divert researchers’ attention from the traditional approach of discovering natural compounds to kill bacteria, which may be getting harder.32,33 Section 5 Hubris on health not only means taking for granted that the technologies we have will continue to work, but also assuming that bigger and better scientific breakthroughs are just around the corner. There is no guarantee that putative alternatives to antibiotics will be developed before existing antibiotics become ineffective. What Can Be Done? Section 6 Numerous reports, workshops and conferences have proposed policies and strategies to address the spread of antibioticresistant bacteria. The World Health Organization (WHO) launched a global strategy for containment of antimicrobial resistance in 2001.34 However, a hubristic assumption that the medical industry would continue to find solutions has contributed to decision-makers regarding the issue as a relatively low priority. The challenge is complicated by the fact that antibiotic-resistant bacteria do not respect borders, so there are limits on what can be done without strong international and multistakeholder collaboration. An effective response to the pandemic spread of antibiotic-resistant bacteria would involve tackling failures of both markets and global governance. 32 Global Risks 2013 There is also potential to use public or philanthropic funding to incentivize academic collaboration with pharmaceutical industry researchers, and more inter-company collaboration as well. Breakthroughs in antibiotic innovation will require pooling and sharing of knowledge among academia, private companies and government regulators.37 Companies and foundations like GlaxoSmithKline (GSK) and the Bill and Melinda Gates Foundation are pioneering an “open-lab” approach to research which refutes the idea that secrecy and patented monopolies are the bedrock of innovation. GSK has opened its Tres Cantos research facilities to outside academic, government and biotech scientists in order to collaborate on finding antibiotics, and the Bill and Melinda Gates Foundation has “organized a tuberculosis Drug Accelerator program that brings together research teams from Abbott Laboratories, AstraZeneca, Bayer, Eli Lilly, GlaxoSmithKline, Merck and Sanofi with scientists from four academic and government institutions”.38 International efforts would be required to address licensing and regulatory barriers to the development of new antibiotics, such as lack of clarity and stability within the regulatory framework and lack of harmonization in processes of clinical trials between countries.39 Similarly, international collaboration would be required to facilitate improvements in data gathering, to enable more accurate and continuous monitoring of the global spread of antibiotic-resistant bacteria.40 Experience from Europe over the past decade shows that if data on antibiotic use and resistance is publicly available, and national coordinated policies on prevention and control of antibiotic-resistant bacteria are implemented and enforced, significant reduction in antibiotic use can be achieved in human medicine.41 xi For the time being, priorities for R&D into new drugs are still guided by potential returns on investments and R&D of drugs that will make peak annual worldwide sales of several billion US dollars (e.g. for treating chronic diseases). These are preferred to new antibiotics that will make peak annual worldwide sales of US$ 500 million to US$ 1 billion, as exemplified in recent years by the sales of antibiotics like linezolid or daptomycin. These sales levels would have been considered acceptable 15 years ago when a “blockbuster” was defined as a drug making peak sales of US$ 1 billion or more annually. In 1997, the most-sold drug (overall) had sales of US$ 3.6 billion and 28 drugs had sales of US$ 1 billion or above (therefore considered a “blockbuster”). The most sold licensed antibiotic ranked ninth place with sales of US$ 1.5 billion. In 2011, the most sold drug had sales of US$ 10.7 billion, and 119 drugs had sales of US$ 1 billion or above. The most-sold licensed antibiotic ranked 28 with sales of US$ 1.4 billion. (Based on expert interviews) xii For an overview of mechanisms to incentivize pharmaceutical R&D see Morel, C.M. and E. Mossialos. Stocking the Antibiotic Pipeline. In BMJ, 2010, 340.48 Section 1 As new antibiotics become available, international collaboration will be required to limit their use to cases of need. This implies considering access to antibiotics as a development aid issue for low- to middle-income countries, and finding international mechanisms to promote collaboration on governance issues. There are opportunities to learn from each others’ experience in controlling antibiotic use through aligning financial incentives in the health system to tackle over-prescription, through educational interventions to tackle the problem of unnecessary self-medication, and through improving technologies to diagnose the existence and nature of bacterial infectionsxiv and antibiotic stewardship.44 Questions for Stakeholders Figure 19: Sales of Antibiotics for Food-Producing Animals43 300 Others* Pleuromutilins Section 4 Sales of antibiotics for food-producing animals, including horses, in milligrams of antibiotics per population correction unit (PCU, i.e. 1 kilogram of animal), 2010 -- How can the threat of antibiotic-resistant bacteria be addressed, considering that it crosses both national and species borders? How can we build visibility and political momentum to the levels currently surrounding climate change and pandemics? -- How do we re-establish antibiotic discovery, research and development given the higher return on investment on R&D of drugs for chronic diseases? What incentives are feasible? What can facilitate the work of academia and small and medium enterprises on antibiotics? -- How do we preserve current antibiotics until new agents are available? How can we align incentives to tackle overuse of antibiotics in farming of livestock and fish? What incentives work best in health financing systems? How can the international organizations be supported to take on a global leadership role to preserve the utility of current antibiotics? Section 3 The late Nobel Laureate Elinor Ostrom has compared the issue of antibiotic-resistant bacteria to that of climate change, “in the sense that both phenomena involve non-renewable global resources, both are caused by human activity and are intrinsically linked to our behaviour. The problem can only be addressed through international cooperation”.65 A cause for optimism is that, unlike with climate change, we know what actions are required. The challenge is to create the will and mechanisms to take them.45 Section 2 More efforts, however, will be needed to slow the use of antibiotics in agriculture, aquaculture and animal husbandry. Research is needed to understand how Nordic countries have made significant progress – part of the answer may be small herd sizes – and to assess what works in awareness-raising campaigns, such as the Pew Charitable Trusts Campaign on Human Health and Industrial Farming.xiii Figure 19 shows that the amounts of antibiotics used to raise animals for food-production is still high, even in highly regulated markets like Europe.42 Polymyxins 250 Aminoglycosides Fluoroquinolones Lincosamides Macrolides Trimethoprim Section 5 milligrams/PCU 200 Sulfonamides 150 Penicillins Tetracyclines 100 50 Section 6 Austria Belgium Czech Republic Denmark Estonia Finland France Hungary Iceland Ireland Latvia Lithuania Netherlands Norway Portugal Slovenia Spain Sweden United Kingdom 0 Source: Adapted from Sales of Veterinary Antimicrobial Agents in 19 EU/EEA Countries in 2010. 2012. European Medicines Agency. xiii xiv Like campaigns such as ReAct-Action on Antibiotic Resistance, Antibiotic Action, and the World Alliance against Antibiotic Resistance (WAAR), the Pew Campaign on Human Health and Industrial Farming is working to preserve the effectiveness of antibiotics by raising awareness and shaping international policies in all sectors. Their websites are rich in content and information resources. Molecular diagnostic technology available today can diagnose bacterial infections and the sensitivity of the bacteria to various antibiotics in a very cost-effective fashion. These technologies need to be scaled to allow for more efficient and appropriate treatment and antibiotic usage in health systems in high-, middle- and low-income economies. Global Risks 2013 33 Section 1 Box 4: Bringing Space Down to Earth Section 2 Section 3 Damage to space-based infrastructure is one of the more esoteric global risks on which our experts are surveyed annually. Members of the World Economic Forum’s Global Agenda Council on Space Security believe that lack of broad awareness of the importance of satellites explains why this risk consistently ranks at the bottom of the global risk landscape. Few people appreciate how much we depend on satellites to support our most critical infrastructure and to live modern and mobile lives: -- The daily operations of telephony and Internet networks, financial markets, the banking industry, data centres and energy networks all rely on precise timing information conveyed by satellite. -- The €300 billion global TV industry would not be possible without satellites.46 Nor would accurate weather predictions, estimated to equal €60 billion in socio-economic benefits a year in the EU alone.47 -- Rescuers in emergency situations depend on satellites for communication, when mobile networks are overloaded. Peacekeeping and military missions also rely on secure satellite communications. Section 4 Satellites are at risk of three main “black swan” events which are captured in our global risk landscape: being targeted in a conflict between states; a strong geomagnetic storm; and collisions with space debris. These low-likelihood but high-impact risks are, however, not those that keep satellite operators awake at night. They worry far more about near-term risks on Earth. As society becomes increasingly dependent on invisible signals from space, the unforeseen long-term consequences of shortsighted management of the spectrum – the term for radio waves which satellites use to communicate – threaten essential satellite services. The desire to share scarce spectrum resources to deliver new-age digital services is taking regulators by storm, while invisible yet crucial services are squeezed into silence. Section 5 Section 6 These global risks are not only physical risks to satellites but also are risks which would greatly weaken our ability to respond and prevent some of the most likely and high-impact global risks in the landscape. -- Rising greenhouse gas emissions and Climate Change Adaptation: Satellite imaging, data and communications can be used to provide early warning systems for extreme weather events and to monitor floods, desertification, and rising sea levels and temperatures in real time. -- Food and water crises: Satellite imagery allows food supplies to be tracked and the availability and quality of arable land and potable water resources to be assessed, as well as the locations and density of the populations that rely on them. Satellite communications allow effective and secure food distribution, as well as tracking for the personal safety of aid workers who distribute it. -- Severe income disparity: Connecting the world via satellite broadband has fundamental and far-reaching effects on individual lives, whether by enabling universal primary education in the most remote areas, bringing healthcare and telemedicine to those who might otherwise die because their homes are too far away from healthcare facilities, or making critical solutions such as micro-finance possible in areas where no other communications infrastructure exists. -- Critical Systems Failure: With virtually every network infrastructure using satellite for its timing reference – whether telephony, Internet, financial markets or banking, from data centres to energy networks – risks to satellite infrastructure could result in a global communications meltdown. 34 Global Risks 2013 -- Land and waterway use mismanagement: Governments have started to use satellite images in near real-time to monitor activities such as forest clearing in the Amazon rainforest and to identify illegal logging. -- Diffusion of weapons of mass destruction and Failure of diplomatic conflict resolution: Satellites play a critical role in the control of weapons of mass destruction by monitoring disarmament agreements. They can provide irreplaceable means for improving transparency and measures for building confidence. Through their ability to see and speak to all corners of the world, land, air and sea, satellites are enablers that strengthen our resilience to a wide range of global risks. Broader awareness of this fact is needed to ensure that our critical space-based infrastructure is managed sustainably and that we do not underestimate the potential impacts if these critical systems fail. Figure 20: Looking Deeper into Sea Ice Source: “ESA satellites looking deeper into sea ice”. European Space Agency (ESA), http:// spaceinimages.esa.int/Images/2012/10/ESA_satellites_looking_deeper_into_sea_ice, 2012 Section 1 References 40. “Burden of Antibiotic Resistance”. Action on Antibiotic Resistance (ReAct), http://www. reactgroup.org/uploads/publications/react-publications/ReAct-facts-burden-of-antibioticresistance-May-2012.pdf, 2012. Crimmins, E.M. & Beltrán-Sánchez,H. Mortality and Morbidity Trends: Is There Compression of Morbidity? In The Journals of Gerontology Series B: Psychological Sciences and Social Sciences, 2011, 66B :75-86. 2. Chan, M. “Antimicrobial Resistance in the European Union and the World”. World Health Organization, http://www.who.int/dg/speeches/2012/amr_20120314/en/index.html, 2012. 42. Sales of Veterinary Antimicrobial Agents in 19 EU/EEA Countries in 2010. 2012. European Medicines Agency. 3. Borer, A., Lisa Saidel-Odes, M. D., Riesenberg, K., et al. Attributable Mortality Rate for Carbapenem-resistant Klebsiella Pneumoniae Bacteremia. In Infection Control and Hospital Epidemiology, 2009, 30:972-6. 43. Ibid. 44. Infectious Diseases Society of America (IDSA). Combating Antimicrobial Resistance: Policy Recommendations to Save Lives. In Clinical Infectious Diseases, 2011, 52(Suppl 5): S397-S428. 4. Snitkin, E. S., Zelazny, A. M., Thomas, P. J., et al. Tracking a Hospital Outbreak of CarbapenemResistant Klebsiella Pneumoniae with Whole-Genome Sequencing. In Science Translational Medicine, 2012, 4:148ra116-148ra116. 45. Chan, M. “Antimicrobial Resistance in the European Union and the World”. World Health Organization, http://www.who.int/dg/speeches/2012/amr_20120314/en/index.html, 2012. 5. de Kraker, M. E., Davey, P. G., & Grundmann, H. Mortality and Hospital Stay Associated with Resistant Staphylococcus aureus and Escherichia coli Bacteremia: Estimating the Burden of Antibiotic Resistance in Europe. In PLoS Medecine, 2011, 8:e1001104. 46. The Case for EPS/METOP Second Generation: Cost Benefit Analysis. March, 2012. EUMETSAT. (pg32) 47. 6. Laxminarayan, R. & Heymann, D.L. Challenges of Drug Resistance in the Developing World. In BMJ: British Medical Journal, 2012, 344. Acker, O., Pötscher, F. and Lefort, T. Why Satellites Matter: The Relevance of Commercial Satellites in the 21st Century – A Perspective 2012-2020, 2012. Booz & Company. 48. 7. Spellberg, B., Blaser, M., Guidos, R. J., et al. Combating Antimicrobial Resistance: Policy Recommendations to Save Lives. In Clinical Infectious Diseases: an Official Publication of the Infectious Diseases Society of America, 2011, 52:S397-428. Morel, C.M. & Mossialos, E. Stocking the Antibiotic Pipeline. In BMJ: British Medical Journal, 2010, 340. 49. 8. Wei, D. “Abuse of Antibiotics 80,000 Deaths Each Year”. China Youth Daily, http://zqb.cyol.com/ content/2009-01/12/content_2504156.htm, 2009. Prakongsai, P., Dhammalikitkul, V., Sampradit, N. et al. “Prevention and Control of Antimicrobial Resistance in Thailand”. Presentation at side event on antimicrobial resistance, the 65th World Health Assembly, 2012. 50. 9. “Burden of Antibiotic Resistance”. Action on Antibiotic Resistance (ReAct), http://www. reactgroup.org/uploads/publications/react-publications/ReAct-facts-burden-of-antibioticresistance-May-2012.pdf, 2012. Ham, Y.-S., Kobori, H., Kang, J.-H. et al. Distribution of Antibiotic Resistance in Urban Watershed in Japan. In Environmental Pollution, 2012, 162(0):98-103. 51. 10. Ibid. Li, Y., Xu, J., Wang, F. et al. Overprescribing in China, Driven by Financial Incentives, Results in Very High Use of Antibiotics, Injections, and Corticosteroids. In Health Affairs (Millwood), 2012, 31(5):1075-82. 11. Spellberg, B., Blaser, M., Guidos, R. J., et al. Combating Antimicrobial Resistance: Policy Recommendations to Save Lives. In Clinical Infectious Diseases: an Official Publication of the Infectious Diseases Society of America, 2011, 52:S397-428. 52. Zhang, R., Eggleston, K., Rotimi, V. et al., Antibiotic Resistance as a Global Threat: Evidence from China, Kuwait and the United States. In Globalization and Health, 2006, 2(1):6. 53. 12. Smith, R. D., Yago, M., Millar, M., et al. Assessing the Macroeconomic Impact of a Healthcare Problem: The Application of Computable General Equilibrium Analysis to Antimicrobial Resistance. In Journal of Health Economics, 2005, 24:1055-75. Bhattacharya, D., Sugunan, AP, Bhattacharjee, H. et al. Antimicrobial Resistance in Shigella-Rapid Increase & Widening of Spectrum in Andaman Islands, India. In The Indian Journal of Medical Research, 2012, 135(3):365. 54. 13. Crimmins, E.M. & Beltrán-Sánchez, H. Mortality and Morbidity Trends: Is There Compression of Morbidity? In The Journals of Gerontology Series B: Psychological Sciences and Social Sciences, 2011, 66B:75-86. Hoa, P.T.P., Managaki, S., Nakada, N. et al. Antibiotic Contamination and Occurrence of Antibiotic-Resistant Bacteria in Aquatic Environments of Northern Vietnam. In Science of the Total Environment, 2011, 409(15):2894-2901. 55. 14. Carlet, J., Jarlier, V., Harbarth, S., et al. Ready for a World Without Antibiotics? The Pensieres Antibiotic Resistance Call to Action. In Antimicrobial Resistance and Infection Control, 2012, 1:11. “Burden of Antibiotic Resistance”. Action on Antibiotic Resistance (ReAct), http://www. reactgroup.org/uploads/publications/react-publications/ReAct-facts-burden-of-antibioticresistance-May-2012.pdf, 2012. 15. Yezli, S. & Li, H. Antibiotic Resistance amongst Healthcare-associated Pathogens in China. In International Journal of Antimicrobial Agents, 2012, 40:389-397. 56. Spellberg, B., Blaser, M., Guidos, R. J., et al. Combating Antimicrobial Resistance: Policy Recommendations to Save Lives. In Clinical Infectious Diseases: an Official Publication of the Infectious Diseases Society of America, 2011, 52:S397-428. 16. Wei, D. “Abuse of Antibiotics 80,000 Deaths Each Year”. China Youth Daily, http://zqb.cyol.com/ content/2009-01/12/content_2504156.htm, 2009. 57. “Antimicrobial Resistance” Fact Sheet 194. World Health Organization, http://www.who.int/ mediacentre/factsheets/fs194/en/, 2012. 17. Westly, E. India Moves to Tackle Antibiotic Resistance. In Nature, 2012, 489:192. 58. 18. Crimmins, E.M. & Beltrán-Sánchez, H. Mortality and Morbidity Trends: Is There Compression of Morbidity? In The Journals of Gerontology Series B: Psychological Sciences and Social Sciences, 2011, 66B:75-86. Rossi, F. The Challenges of Antimicrobial Resistance in Brazil. In Clinical Infectious Diseases, 2011, 52(9):1138-1143. 59. White, A.R. Effective Antibacterials: at What Cost? The Economics of Antibacterial Resistance and its Control. In Journal of Antimicrobial Chemotherapy, 2011, 66(9):1948-53. 19. Westly, E. India Moves to Tackle Antibiotic Resistance. In Nature, 2012, 489:192. 60. 20. Crimmins, E.M. & Beltrán-Sánchez, H. Mortality and Morbidity Trends: Is There Compression of Morbidity? In The Journals of Gerontology Series B: Psychological Sciences and Social Sciences, 2011, 66B:75-86. Frigo, N., Unemo, M., Kubanova, A. et al. P1-S1.42 Russian Gonococcal Antimicrobial Susceptibility Programme (RU-GASP) - Resistance Levels in 2010 and Trends during 2005–2010. In Sexually Transmitted Infections, 2011, 87(Suppl 1):A116-A117. 61. 21. Carlet, J., Jarlier, V., Harbarth, S., et al. Ready for a World Without Antibiotics? The Pensieres Antibiotic Resistance Call to Action. In Antimicrobial Resistance and Infection Control, 2012, 1:11. Stratchounski, L.S., Andreeva, I. V., Ratchina, S. A.et al. The Inventory of Antibiotics in Russian Home Medicine Cabinets. In Clinical Infectious Diseases, 2003, 37(4):498-505. 62. 22. Laxminarayan, R. & Heymann, D.L. Challenges of Drug Resistance in the Developing World. In BMJ: British Medical Journal, 2012, 344. Ogbolu, D.O., Daini, O.A., Ogunledun, A. et al. High Levels of Multidrug Resistance in Clinical Isolates of Gram-Negative Pathogens from Nigeria. In International Journal of Antimicrobial Agents, 2011, 37(1): 62-66. 23. Joakim Larsson, D.G. & Fick, J. Transparency throughout the Production Chain—a Way to Reduce Pollution from the Manufacturing of Pharmaceuticals? In Regulatory Toxicology and Pharmacology, 2009, 53:161-163. 63. Borer, A., Saidel - Odes, L., Riesenberg, K., et al. Attributable Mortality Rate for Carbapenemresistant Klebsiella Pneumoniae Bacteremia. In Infection Control and Hospital Epidemiology, 2009, 30:972-6. 24. Sjölund, M., Bonnedahl, J., Hernandez, J., et al. Dissemination of Multidrug-Resistant Bacteria into the Arctic. In Emerging Infectious Diseases, 2008, 14:70-2. 64. Hernández, J., Stedt, J., Bonnedahl, J., et al. Human-associated Extended-spectrum Beta-lactamase in the Antarctic. In Applied and Environmental Microbiology, 2012, 78:2056-8. 25. Hernández, J., Stedt, J., Bonnedahl, J., et al. Human-associated Extended-spectrum Beta-lactamase in the Antarctic. In Applied and Environmental Microbiology, 2012, 78:2056-8. 65. Cars, O., A. Hedin, and A. Heddini, The Global Need for Effective Antibiotics-Moving towards Concerted Action. Drug Resist Updat, 2011, 14(2):p. 68-9. 26. Silver, L.L. Challenges of Antibacterial Discovery. In Clinical Microbiology Reviews, 2011, 24:71-109. 27. Ibid. 28. Carlet, J., Jarlier, V., Harbarth, S., et al. Ready for a World Without Antibiotics? The Pensieres Antibiotic Resistance Call to Action. In Antimicrobial Resistance and Infection Control, 2012, 1:11. 29. Chan, M. “Strengthening Multilateral Cooperation on Intellectual Property and Public Health”. World Health Organization, http://www.who.int/dg/speeches/2009/intellectual_ property_20090714/en/index.html, 2009. 30. Appelbaum, P.C. 2012 and Beyond: Potential for the Start of a Second Pre-antibiotic Era? In Journal of Antimicrobial Chemotherapy, 2012, 67:2062-8. 31. Piddock, L.J.V. The Crisis of No New Antibiotics—What is the Way Forward? In The Lancet Infectious Diseases, 2012, 12:249-253. 32. Ibid. 33. Silver, L.L. Challenges of Antibacterial Discovery. In Clinical Microbiology Reviews, 2011, 24:71-109. 34. “WHO Global Strategy for Containment of Antimicrobial Resistance”. World Health Organization, http://www.who.int/drugresistance/WHO_Global_Strategy.htm/en/index.html, 2001. 35. Piddock, L.J.V. The Crisis of No New Antibiotics—What is the Way Forward? In The Lancet Infectious Diseases, 2012, 12:249-253. 36. Chan, M. “Antimicrobial Resistance in the European Union and the World”. World Health Organization, http://www.who.int/dg/speeches/2012/amr_20120314/en/index.html, 2012. 37. Crimmins, E.M. & Beltrán-Sánchez, H. Mortality and Morbidity Trends: Is There Compression of Morbidity? In The Journals of Gerontology Series B: Psychological Sciences and Social Sciences, 2011, 66B:75-86. 38. Nathan, C.F. “Let’s Gang Up on Killer Bugs”. The New York Times, http://www.nytimes. com/2012/12/10/opinion/teaming-up-to-make-new-antibiotics.html, 2012. 39. Piddock, L.J.V. The Crisis of No New Antibiotics—What is the Way Forward? In The Lancet Infectious Diseases, 2012, 12:249-253. Section 4 41. Section 3 Imai, M., Watanabe, T., Hatta, M., et al. Experimental Adaptation of an Influenza H5 HA Confers Respiratory Droplet Transmission to a Reassortant H5 HA/H1N1 Virus in Ferrets. In Nature, 2012, 486:420-428. Section 2 1. Section 5 Section 6 Global Risks 2013 35 Section 1 Section 2 Special Report: Building National Resilience to Global Risks Section 3 Section 4 As global risks can be expressed in many countries at the same Global risks would meet with global time, they can spread through countries that share borders, responses in an ideal world, but the reality is have similar fundamentals or depend on the same critical This special report is a pioneering effort to construct a that countries and their communities are on systems. diagnostic framework that applies the concept of “resilience” to the frontline when it comes to systemic assess national preparedness for global risks. shocks and catastrophic events. In an The proposed resilience framework would function as the “MRI” for national decision-makers to reveal underlying weaknesses in global increasingly interdependent and readiness that may not be apparent via more traditional risk hyperconnected world, one nation’s failure to risk assessment methods. It is a prototype featuring potential qualitative address a global risk can have a ripple effect and quantitative indicators produced by the World Economic Forum and by other research institutions. The aim is to refine and improve on others. Resilience to global risks – this framework by soliciting feedback from readers of this Special Report and then to introduce an interim finding that provides more incorporating the ability to withstand, adapt detail on national resilience to global risks during summer 2013. and recover from shocks – is, therefore, becoming more critical. This special report is Types of Risk organized around two axioms: xv Section 5 - Global risks are expressed at the national level. - No country alone can prevent their occurrence. Section 6 To assess and evaluate a nation’s resilience to global risks requires defining such risks in their most appropriate organizational context. Although this report does not differentiate between the views of a public or private sector organization, it does underscore the importance of understanding the qualitative distinctions among the types of risks that organizations face.1 Harvard Business School Professors Robert Kaplan and Annette Mikes distinguish three types of risks: 1. Preventable Risks, such as breakdowns in processes and human error 2. Strategic Risks, which are undertaken voluntarily after weighing them against the potential rewards 3. External Risks, which are beyond one’s capacity to influence or control In the case of business, Kaplan and Mikes suggest that the first two types can be approached through traditional risk management methods, focusing mostly on organizational culture and strict compliance with regulatory, industry or institutional directives. Given the exogenous nature of external risks, cultivating resilience is the preferred approach for this last type of risk.2 Another way of categorizing risk is to ask two questions: How predictable is its likelihood and potential impact, and how much do we know about how to deal with it? If we can predict it and we know a lot about it, we can come up with specific strategies to anticipate the risk, mitigate its effects and minimize losses. As Figure 21 shows, resilience is most important for risks that are difficult to predict and/or where there is little knowledge on how to handle such risks.3 xv 36 Global Risks 2013 In this report, qualitative data refers to perception surveys. Section 1 Emphasize resilience High over anticipatory strategies Low Strengthen resilience Use anticipatory strategies Emphasize resilience over anticipatory strategies Small Large Amount of knowledge of a risk and effective measures to deal with it Source: Adapted from Comfort, L. K., Boin, A., & Demchak, C. C. The Rise of Resilience, in Designing Resilience: Preparing for extreme events. Pittsburg: University of Pittsburgh Press, 2010. This diagnostic tool is intended to measure the resilience of a country to global risks by treating it as a system composed of subsystems.xxi Several methods already exist to measure the resilience of such subsystems, mostly as they relate to the economy or ecosystem.xxii But what makes an economic system resilient is different from what makes an ecological system resilient (not only are the threats and risks different, but so are the interconnections with other systems). The aim of this report, therefore, is to present a prototype framework to measure a country’s overall resilience via a five-part initial framework, depicted in Figure 23. This framework considers the country as comprised of fivexxiii core subsystems:xxiv 1. Economic subsystem: includes aspects such as the macroeconomic environment, goods and services market, financial market, labour market, sustainability and productivity.10 2. Environmental subsystem: includes aspects such as natural resources, urbanization and the ecological system. 3. Governance subsystem: includes aspects such as institutions, government, leadership, policies and the rule of law. 4. Infrastructure subsystem: includes aspects such as critical infrastructure (namely communications, energy, transport, water and health).11 5. Social subsystem: includes aspects such as human capital, health, the community and the individual. xvi xvii Figure 22: Resilient Systems xviii xix Resilience is... xx xxi …Bouncing back faster after stress, enduring greater stresses, and being disturbed less by a given amount of stress… …Maintaining system function in the event of a disturbance… …The ability to withstand, recover from, and reorganize in response to crises... For an Object For a System For an Adaptive System Source: Adapted from Martin-Breen, P. & Anderies, J.M. “Resilience: A Literature Review”. Rockefeller Foundation, http://www.rockefellerfoundation.org/news/publications/resilienceliterature-review, 2011. xxii xxiii xxiv “Stress” can imply either chronic difficulty or an acute crisis. Systemic means “relating to a system,” especially as opposed to a particular part. This refers to the ability of a system to continue to meet its core functions. The current definition of resilience is a working definition. “Systems thinking” in this context focuses on the design of systems, the flexibility and adaptability of systems to be redesigned and their ability to redesign themselves organically in the face of a crisis. Many indices and studies break their topic, issue or subject into systems (terminology differs and words such as categories, dimensions, environments or spheres have been used interchangeably). For example: Sustainability, resilience and resource efficiency study by the Environment and Development Division, UNESCAP; the Global Political Risk Index by Eurasia Group; the Failed States Index by The Fund of Peace; Understanding community resilience and program factors that strengthen them by the International Federation of Red Cross and Red Crescent Societies; the Sustainability Index by Zurich Cantonal Bank; Wealth of Nations Triangle Index by Money Matters Institute; and World Competitiveness Scoreboard by the International Institute for Management Development. Risk Management Index by Inter-American Development Bank assesses risk management performance; Prevalent Vulnerability Index by Inter-American Development Bank estimates countries’ predominant vulnerability conditions through three broad categories: (i) exposure and susceptibility; (ii) socio-economic fragility inequality; (iii) lack of social resilience; Economic Resilience Index by Commonwealth Secretariat/University of Malta measures countries’ resilience through four key indicators (i) macroeconomic stability; (ii) microeconomic market efficiency; (iii) governance; (iv) social development; Composite Vulnerability Index by Commonwealth Secretariat measures the vulnerability of countries through three key components (i) lack of expert diversification; (ii) export dependence; (iii) impact on natural disasters; and Environmental Sustainability Index by Yale University/ Columbia University measures the ability of countries to protect the environment through five core components: (i) environmental systems; (ii) environmental stresses; (iii) human vulnerability to environmental stresses; (iv) social and institutional capacity; (v) global stewardship. Many aspects of competitiveness are taken into account in the five core subsystems. During 2013, workshops and expert calls will be conducted to define, verify and validate the five core subsystems in this framework. Global Risks 2013 37 Section 6 The working definition of a resilient country for this report is, therefore, one that has the capability to 1) adapt to changing contexts, 2) withstand sudden shocks and 3) recover to a desired equilibrium, either the previous one or a new one, while preserving the continuity of its operations.xix The three elements in this definition encompass both recoverability (the capacity for speedy recovery after a crisis) and adaptability (timely adaptation in response to a changing environment). National Resilience: Five Subsystems and Five Components Section 5 In the wake of unprecedented disasters in recent years, “resilience” has become a popular buzzword across a wide range of disciplines, with each discipline attributing its own working definition to the term. A definition that has long been used in engineering4 is that resilience is the capacity for “bouncing back faster after stress, enduring greater stresses, and being disturbed less by a given amount of stress”.xvi This definition is commonly applied to objects, such as bridges or skyscrapers. However, most global risks are systemic in nature,xvii and a system – unlike an object – may show resilience not by returning exactly to its previous state, but instead by finding different ways to carry out essential functions; that is, by adapting.5 For a system, an additional definition of resilience is “maintaining system functionxviii in the event of disturbance” (see Figure 22). What makes a system resilient?xx Unlike an object, such as the aforementioned bridge, systems are too complex for mathematical calculations to predict the stresses that might arise.8 Systems thinking provide a foundation to assess resilience through considering such components as the system’s robustness, redundancy, resourcefulness, response and/or recovery, all of which are defined in the following section.9 Section 4 Resilience: A Working Definition Resilience applies to different entities, ranging from communities to countries, but the critical point is to avoid examining any of them in isolation.6 We need to think of a country as a system that is comprised of smaller systems and a part of larger systems. A country’s resilience is affected by the resilience of those smaller and larger systems.7 Section 3 The majority of the 50 global risks, viewed with a 10 year time horizon, that feature annually in the World Economic Forum’s Global Risks report fall under this categorization of risks. The 50 include risks which could manifest either suddenly or through gradual shifts. Although they are known risks, mapped and monitored by the Forum’s Risk Response Network, there are varying degrees of uncertainty regarding how and when they might manifest, especially in this interconnected world, and regarding what primary and secondary consequences they would have for countries. Systems Thinking Section 2 Predictability of Risk Figure 21: Resilience is Most Applicable to Unpredictable Risks with Little Knowledge About Effective Measures Section 1 Figure 23: National Resilience Beta Framework Macro System Section 3 Components of Resilience Section 2 Subsystems Resilience Characteristics China economic Resilience hard landing Performance Country Economic Environmental Governance Infrastructure Social Robustness Robustness Robustness Robustness Robustness Redundancy Redundancy Redundancy Redundancy Redundancy Resourcefulness Resourcefulness Resourcefulness Resourcefulness Resourcefulness Response Response Response Response Response Recovery Recovery Recovery Recovery Recovery Source: World Economic Forum Section 4 As depicted in Figure 23, each of the five subsystems is assessed further using five components of resilience: 1) robustness, 2) redundancy, 3) resourcefulness, 4) response and 5) recovery.xxv These five components can be categorized further into two types: resilience characteristics (robustness, redundancy and resourcefulness) and resilience performance (response and recovery). The measurement of these components presents a significant research challenge, as there are many attributes underpinning each of them, and these attributes are overlapping and complementary (Appendix 3 identifies potential qualitative and quantitative indicatorsxxvi). Section 5 This report has adopted one approach from the World Economic Forum’s annual Global Competitiveness Report (GCR), which measures the microeconomic and macroeconomic foundations of national competitiveness.xxvii Similar to the concept of national resilience, the measurement of national competitiveness uses data from both international sources as well as from the Forum’s annual Executive Opinion Survey (EOS) to capture concepts that require a more qualitative assessment, or for which internationally comparable statistical data are not readily available. For the purposes of this inaugural effort, we started the analysis by using data from EOS to assess components of national resilience.xxviii Section 6 Since 2011, the Global Competitiveness Report has included a prototype Sustainability-Adjusted Global Competitiveness Index (GCI).xxix This not only measures the propensity to prosper and grow but also integrates the idea of “quality growth”, taking into account environmental stewardship and social sustainability. The quality of growth is an important aspect for resilience, and this will be addressed as we develop the framework further. xxv xxvi xxvii xxviii xxix 38 During 2013, workshops and expert calls will be conducted to define, verify and validate the five components of resilience in this framework. Indicators proposed are examples of currently available indices and indicators. Since 2005, the World Economic Forum has based its competitiveness analysis on the Global Competitiveness Index (GCI), a comprehensive tool that measures the microeconomic and macroeconomic foundations of national competitiveness (defined as the set of institutions, policies and factors that determine the level of productivity of a country). The GCR aims to provide insight and stimulate discussion among all stakeholders on the best strategies and policies to help countries to overcome the obstacles to improving competitiveness. The Global Competitiveness Report observed that the more competitive an economy is, the more able it is to weather an economic crisis. For more information, please see http://www.weforum.org/sustainablecompetitiveness. Global Risks 2013 Resilience Characteristics (Robustness, Redundancy and Resourcefulness) The following three components of resilience are used to describe a country’s state of resilience. These components should be designed into a system and, as such, will enable assessments of a country’s inherent resilience capabilities.12 Relevant perception data and potential hard data for the three resilience characteristics are available in Appendix 3. A. Robustness Robustness incorporates the concept of reliability and refers to the ability to absorb and withstand disturbances and crises.13 The assumptions underlying this component of resilience are that: 1) if fail-safes and firewalls are designed into a nation’s critical networks,xxx and 2) if that nation’s decision-making chains of command become more modular in response to changing circumstances, then potential damage to one part of a country is less likely to spread far and wide. Example of Attributes -- Monitoring system health: Regularly monitoring and assessing the quality of the subsystem ensures its reliability. -- Modularity: Mechanisms designed to prevent unexpected shocks in one part of a system from spreading to other parts of a system can localize their impact, as happened with the contagion from investment banking to retail banking during the 2007-2008 financial crisis. -- Adaptive decision-making models: Networked managerial structures can allow an organization to become more or less centralized depending on circumstances, such as when branch offices of the Japanese retailer Lawson’s continued operating through the serious disruptions of the Great East Japan Earthquake in 2011.14 These measures can include having in place the right investment and incentive structures to overcome competing interests. xxx Critical networks are not limited to ICT but included critical social, political, ecological and economic networks. Section 1 These two components of resilience describe how a system performs in the event of crises. Response and recovery are dependent on risk, event and time. These components will provide us with the ability to compare systems and feed the measurements and results to calibrate the resilience characteristics. As we are dealing with global risks, the ability to adapt the framework is also very important. As an example of the overlapping and complementary nature of these attributes, inclusive participation is listed as a key attribute of response, but it is also vital in other areas such as recovery and resourcefulness. Also inherent in all resilience characteristics, though referenced above only in the attribute of adaptive decision-making models, are investment and incentive structures and design requirements to overcome collective action problems and competing interests. There are many individual stakeholders who would benefit from greater shared resilience but currently lack either the incentive or feel too pressed for time and resources to take the necessary actions. xxxi xxxii Brittle or unchangeable systems are not likely to recover well, but those that are more flexible and willing or able to adapt to new realities are more likely to recover better. Examples of types and applications of horizon scanning activities have been suggested by Amanatidou, E., Butter, M., Carabias, V., et al. On Concepts and Methods in Horizon Scanning: Lessons from Initiating Policy Dialogues on Emerging Issues. In Science and Public Policy, 2012, 39:208-221. Global Risks 2013 39 Section 6 Resilience Performance (Response and Recovery) Example of Attributes -- Active “horizon scanning”: Critical to this attribute are multistakeholder processes tasked with uncovering gaps in existing knowledge and commissioning research to fill those gaps.24, xxxii -- Responsive regulatory feedback mechanisms: Systems to translate new information from horizon-scanning activities into action – for example, defining “automatic policy adjustments triggers” – can clarify circumstances in which policies must be reassessed.25 Section 5 Example of Attributes -- Capacity for self-organization18: This includes factors such as the extent of social and human capital, the relationship between social networks and state, and the existence of institutions that enable face-to-face networking. These factors are critical in circumstances such as failures of government institutions when communities need to self-organize and continue to deliver essential public services. -- Creativity and innovation: In countries and industries, the ability to innovate is linked to the availability of spare resources and the rigidity of boundaries between disciplines, organizations and social groups.19 E. Recovery Recovery means the ability to regain a degree of normality after a crisis or event, including the ability of a system to be flexible and adaptable and to evolve to deal with the new or changed circumstances after the manifestation of a risk.23,xxxi This component of resilience assesses the nation’s capacities and strategies for feeding information into public policies and business strategies, and the ability for decision-makers to take action to adapt to changing circumstances. Section 4 C. Resourcefulness Resourcefulness means the ability to adapt to crises, respond flexibly and – when possible – transform a negative impact into a positive.16 For a system to be adaptive means that it has inherent flexibility, which is crucial to enabling the ability to influence of resilience.17 The assumption underlying this component of resilience is that if industries and communities can build trust within their networks and are able to selforganize, then they are more likely to spontaneously react and discover solutions to resolve unanticipated challenges when larger country-level institutions and governance systems are challenged or fail. Example of Attributes -- Communication: Effective communication and trust in the information conveyed increase the likelihood that, in the event of a crisis, stakeholders are able to disseminate and share information quickly, and to ensure cooperation and quick response from the audience. -- Inclusive participation: Inclusive participation among public sector, private sector and civil society stakeholders can build a shared understanding of the issues underpinning global risks in local contexts, reduce the possibility of important interdependencies being overlooked,21 and strengthen trust among participants.22 Section 3 Examples of Attributes -- Redundancy of critical infrastructure: Designing replication of modules which are not strictly necessary to maintaining core function day to day, but are necessary to maintaining core function in the event of crises. -- Diversity of solutions and strategy: Promoting diversity of mechanisms for a given function. Balancing diversity with efficiency and redundancy will enable communities and countries to cope and adapt better than those that have none. D. Response Response means the ability to mobilize quickly in the face of crises.20 This component of resilience assesses whether a nation has good methods for gathering relevant information from all parts of society and communicating the relevant data and information to others, as well as the ability for decisionmakers to recognize emerging issues quickly. Section 2 B. Redundancy Redundancy involves having excess capacity and back-up systems, which enable the maintenance of core functionality in the event of disturbances.15 This component assumes that a country will be less likely to experience a collapse in the wake of stresses or failures of some of its infrastructure, if the design of that country’s critical infrastructure and institutions incorporates a diversity of overlapping methods, policies, strategies or services to accomplish objects and fulfil purposes. Section 1 Qualitative Assessment of National Resilience Section 2 As a first step towards developing the diagnostic framework, we have begun to explore perception survey data in assessing resilience. This year, the World Economic Forum introduced questions about resilience into two of its global surveys: 1) the Global Risks Perception Survey (GRPS) measured the perceptions of the Forum’s expert network about their nation’sxxxiii resilience to global risks; and 2) the Executive Opinion Survey (EOS) introduced a question to assess a government’s effectiveness in managing risks in 2012.26 Section 3 The qualitative assessment will be coupled with a quantitative one that includes statistical data by country.xxxiv This will result in a rating that combines perception data and objective data (i.e. qualitative and quantitative data), and that enables an analysis of patterns among resilience, risk management, competitiveness and sustainability (see Appendix 3 for examples). Our working hypothesis is that if leaders wish to assess the potential support for improving their country’s resilience, then perception surveys are a good place to start. Figure 24: Resilience Question may be a Potential Variable for Recovery Component of Resilience Country Economic Section 4 Section 5 This question enables us to understand respondents’ perceptions of the ability of a country to adapt and/or recover from the impact of global risks. In the survey, respondents assess this ability against all five categories of global risks: economic, environmental, geopolitical, societal and technological. Assuming, economic global risks will highly impact the country’s economic subsystem, and environmental global risks will highly impact the country’s environmental subsystem (see Figure 24).xxxvi This section focuses on analyzing how these country subsystems are expected to recover after a crisis caused by economic and environmental global risks. Section 6 Data collected from the current GRPS gave us sufficient responses for the analysis of 10 countries: Brazil, China, Germany, India, Italy, Japan, Switzerland, Russia, the United Kingdom and the United States.27,xxxvii Figure 25 illustrates these countries’ ability to recover from and adapt to economic and environmental risks respectively. Infrastructure Social Robustness Robustness Robustness Robustness Redundancy Redundancy Redundancy Redundancy Redundancy Resourcefulness Resourcefulness Resourcefulness Resourcefulness Resourcefulness Response Response Response Response Response Recovery Recovery Recovery Recovery Recovery Source: World Economic Forum Figure 25: Countries’ Ability to Adapt and Recover from Economic and Environmental Risksxxxviii Brazil Germany xxxv (*Your country refers to the country you selected in the respondent’s information page.) Governance Robustness Global Risks Perception Survey (GRPS): Resilience Question Over 1,000 respondents to the GRPS were asked, per risk and regarding their country of expertise: “If this risk materialized in your country* of expertise, what is the ability of the country to adapt and/or recover from the impact?” Environmental India Italy Japan People’s Republic of China Russian Federation Switzerland United Kingdom USA 1 1.5 2 2.5 3 3.5 4 4.5 Country Recovery/Adaptation Economic Risks Environmental Risks Margin of Error (95% confidence) Source: World Economic Forum Switzerland was perceived as having the highest ability to adapt and/or recover from economic and environmental global risks; both Italy and India were rated relatively low. Japan was seen to have a comparable ability to Switzerland to adapt and recover from environmental risks, but lower in terms of economic risks. This may be a reflection of frustration about Japan’s economic position and the risk of recession. The question from the GRPS is one indicator for the response component of the proposed resilience framework. It represents the way respondents perceive their country’s ability to adapt to and/or recover from certain types of global risks. In building a framework for National Resilience, further analysis will provide insights into areas needing greater investment and resources to build resilience. xxxiii xxxiv xxxv xxxvi xxxvii 40 Country is the country of expertise. Statistical data may be obtained from open-source databases and other indices. See Appendix 3 for more potential qualitative and quantitative indicators identified. The Global Risks Perception Survey is a major input into the annual Global Risks Report. See Appendix 1. Further work will try to identify how one type of risk can affect multiple or all of the country’s subsystems, not just the subsystems from which the risk originally manifested itself. These countries had a calculated margin of error smaller than 0.5 units. Please see Appendix 3 for more details on sample size and margin of errors for these and other countries. Global Risks 2013 xxxviii The error bars in the figure indicate the margin of error for each country per category (at a 95% confidence level). Section 1 Executive Opinion Survey: Risk Management Effectiveness Question Figure 27: Government’s Risk Management Effectiveness and the Country’s Overall Competitiveness Score Over 14,000 respondents to the Executive Opinion Survey (EOS)xxxix were asked: South America Government’s risk management effectiveness Germany United Kingdom North America 4.8 Asia 4.6 Switzerland United States China 4.4 India 4.2 Italy Brazil 4 3.8 Japan Russian Federation 3.6 3.4 3.4 3.6 3.8 4 4.2 4.4 4.6 4.8 5 5.2 5.4 5.6 5.8 Section 3 Research28 has linked the ability to respond effectively and efficiently during a crisis with good risk management, which cuts across all five subsystems. The question above from the EOS collected perceptions from business managers about their government’s risk-management effectiveness. Therefore, for the purpose of this analysis, we focus on the governance subsystem and response component of resilience, as illustrated in Figure 26. Europe 5 Section 2 “How would you assess your national government’s overall risk management effectiveness of monitoring, preparing for, responding to and mitigating against major global risks (e.g. financial crisis, natural disasters, climate change, pandemics, etc.)? (1 = Not effective in managing major global risks; 7 = Effective in managing major global risks)” 5.2 6 Global Competitiveness Index Score Source: World Economic Forum Figure 26: Government’s Risk Management Effectiveness may be a Potential Variable for the Response Component of the Governance Subsystem. Country Environmental Governance Infrastructure Social Robustness Robustness Robustness Robustness Redundancy Redundancy Redundancy Redundancy Redundancy Resourcefulness Resourcefulness Resourcefulness Resourcefulness Resourcefulness Response Response Response Response Response Recovery Recovery Recovery Recovery Recovery Source: World Economic Forum The most related questions seem to be intuitively what one might expect. Of the seven indicators, the most highly correlated question is that on leadership, i.e. a politician’s ability to govern. This corroborates the message about leadership in risk management at the country level of the Global Risks 2012 report special feature on The Great East Japan Earthquake. It also underscores the recommendation from the Global Risks 2007 report to establish the role of National Risk Officers.xlii Other interesting relationships highlighted above were with business-government relations and government provision of services for improved business performance. These relationships require further analysis but they may indicate the ability to share information effectively to improve monitoring and risk preparedness. By assessing government wastefulness, reform-process efficiency and corruption, we may be able to deduce that effective risk management practices are likely to be transparent and adaptive. The analysis in this subsection is an initial indication for how we intend to proceed with building the National Resilience Rating. It is also a step towards understanding how questions from the GRPS and the EOS may identify indicators for the different components of resilience, which will be further complemented with quantitative data in the interim report in summer 2013. xli xxxix xl The Executive Opinion Survey is carried out among CEOs and top executives and is a major input into the annual Global Competitiveness Report and the Global Competitiveness Index, and Sustainable Competitiveness work. http://www.weforum.org/ globalcompetitiveness These countries had sufficient sample sizes. xlii Analysis has shown that there are strong relationships between most of the questions (other than the risk management question) in the Executive Opinion Survey. A Country Risk Officer – analogous to Chief Risk Officers in the corporate world – would be the focal point for managing a portfolio of risk across disparate interests, setting national prioritization of risk and allowing governments to engage in the forward action needed to begin managing global risks rather than merely coping with them. Global Risks 2013 41 Section 6 Figure 27 demonstrates that there may be a link between a government’s risk management effectiveness and that country’s overall competitiveness. As observed, a country with high risk-management effectiveness appears to have scored highly in competitiveness, and a country with low riskmanagement effectiveness appears to have scored low in competitiveness (except Japan). From further analysis of the EOS question on the 10 countries from the Global Risks Survey,xl we can see that governments in Germany, Switzerland and the United Kingdom are perceived by business leaders to have comparatively high risk-management effectiveness. While India and Italy scored relatively lower on the GRPS output, Russia was seen as having the least effective risk management based on the EOS responses. In addition, although in Figure 25 Japan was seen to have greater ability to recover from environmental risks, its government’s risk-management effectiveness was rated poorly in comparison to other countries’. Politicians’ ability to govern Business-government relations Reform implementation efficiency Public trust of politicians Wastefulness of government spending Measures to combat corruption and bribery Government provision of services for improved business performance Section 5 Robustness -------- Section 4 Economic Additional analysis revealed other potential indicators that may be linked to risk management, which will require further scrutiny. Correlation analysis showed there were moderate relationships between the government’s risk management effectiveness and the following seven indicators from the EOS (Further details are available in Appendix 3).xli Section 1 Next Steps Towards a National Resilience Rating Section 2 As early as 2007, the Global Risks report suggested the creation of the role of Country Risk Officer. The national resilience rating proposed in this Special Report would enable such officers and other decision-makers to benchmark and track a nation’s level of resilience, understand the balance that needs to be struck between resilience and other goals, and identify areas that may require further investment. Section 3 For example, the national resilience rating will also help decisionmakers to think about resilience in supply chains.xliii According to the World Economic Forum’s Dynamic Resilience in Supply Chain project, this is rising to the top of the political and executive agendas in the wake of recent major disruptions, but there remains a reluctance to invest in resilience due to lack of good data (see Box 5). There is also a lack of knowledge about practical actions that leaders can take to build resilience. To tackle this shortfall, the Risk Response Network has built its Resilience Practices Exchange (RPE)xliv using the latest social network technology, which will build and share knowledge about effective practices online (see Box 6). Section 4 More broadly, the Risk Response Network’s goal is to build a common discussion framework in the global community, nurturing a culture of risk and resilience awareness across stakeholder groups. We invite readers of this Special Report to contact us at http://www.weforum.org/globalrisks2013 or at rrn@weforum.org with suggestions on how to approach measuring national resilience. Box 5: Supply Chain Risk Initiative Launched by the World Economic Forum in May 2011, the Supply Chain Risk Initiative (SCRI) addresses the need for a better risk-based approach for safeguarding global supply chains and published the report “New Models for Addressing Supply Chain and Transport Risk” in 2012. US Secretary of Homeland Security Janet Napolitano also joined the call for increased global dialogue by launching at the Annual Meeting 2012 in Davos-Klosters the first US Strategy for Global Supply Chain Security. Phase I of the work brought agreement on priorities and recommendations for action: 1. Improve international and interagency compatibility of resilience standards and programmes 2. More explicitly assess supply chain and transport risks as part of procurement, management and governance processes 3. Develop trusted networks of suppliers, customers, competitors and government focused on risk management 4. Improve network risk visibility, through two-way information sharing and collaborative development of standardized risk assessment and quantification tools 5. Improve pre- and post-event communication on systemic disruptions and balance security and facilitation to bring a more balanced public discussion Phase IIxlv of the Supply Chain Risk Initiative entailed regional workshop across Asia, Europe and North America which brought together supply chain and risk experts from across government and industry to: Section 5 -- Deepen collective understanding of the risk and threat landscape -- Work towards a blueprint for a resilient global supply chain -- Improve transparency across supply chains. Section 6 Addressing the vulnerabilities identified in Phase I (e.g. reliance on oil and weak information flow), Phase II focused on shared efforts to build resilience. Resilience has been the core focus as risk assessment goes hand in hand with resilience it has implications to the strategy of governments and organizations. The Forum identified measures such as improving information sharing between governments and businesses, harmonizing legislative standards and building a common risk assessment framework for building resilient supply chains. Development of risk assessment framework is critical to improve supply chains adaptability to build resilience. The core components are data and information sharing for improved visibility along the supply chain. xliii xliv 42 The World Economic Forum’s findings in “Dynamic Resilience in Supply Chains” provide multiple working definitions, which include concepts related to the ability to reorganize and deliver core function continually, to bounce back from large scale disruptions, and to build capacity through collective and simultaneous efforts. For more details, please refer to the box on the Resilience Practices Exchange. Global Risks 2013 xlv The initiative’s Phase II report, “Dynamic Resilience in Supply Chains”, is scheduled for a launch at the January 2013 Annual Meeting in Davos-Klosters. To learn more about the initiative please visit http://www.weforum.org/supplychain. Section 1 Box 6: Resilience Practices Exchange (RPE) Box 7: One Year On Resilience Practices The Resilience Practices Exchange (RPE) is an initiative of the World Economic Forum to share insights and ideas that improve national and organizational resilience to global risks. Figure 28: Resilience Practices Exchange Process Contribute Practices Discuss Evaluate Practices Innovate Source: World Economic Forum The RPE is a secure platform currently accessible only by members of the Forum’s Risk Response Network and Network of Global Agenda Councils. The RPE may be accessed through a secure and trusted online platform of the World Economic Forum.xlvi For the full case responses, please refer to the following webpage, http://www.weforum.org/globalrisks2013/ followup2012. Section 6 Examples of Resilience Building Practices -- The G20 establishing the cross-border Financial Stability Board (FSB): A regulatory body to coordinate financial services regulators and international standard-setting bodies across borders and organizations. -- The Indonesian government response to the 2004 Tsunami in Aceh Province, Indonesia: After the 2004 Indian Ocean tsunami and earthquake, the Government of Indonesia set up a pragmatic and region-based agency to effectively lead the relief efforts in the province of Aceh. -- Governmental cyber risk information-sharing partnerships: Governments are setting up agencies to share information with international partners, including overseas governments, agencies and businesses to provide an international, informed response to cyber risks. Please contact resilience.exchange@weforum.org for further information. xlvi Section 5 The aim is to develop a process that takes a suggested practice through a community discussion phase and then on to a process of evaluation and innovation to improve that practice. This is limited not only to the online exchange but can also involve in-person meetings, virtual meetings, workshops and other forms of engagement with the Forum’s Risk Response Network. Section 4 Explore Section 3 Exchange World Economic Forum’s Risk Response Network, in collaboration with PwC, has revisited the three cases in the Global Risks 2012 report – Seeds of Dystopia, How Safe are Our Safeguards? and The Dark Side of Connectivity – to analyse practices to improve resilience against the risks highlighted in each case, available on our interactive website. -- Seeds of Dystopia (with further collaboration from Eurasia Group): As fiscal, ageing and employment trends combine to threaten the emergence of a new class of fragile states, the private sector, civil society, local and national governments, as well as multilateral organizations need to work in concert to create a modern and sustainable social contract. The resilience practices highlighted here are engaging multiple stakeholders in solutions based on holistic insights; continuous monitoring of trends to enable assumptions to be revisited; promoting open and inclusive attitudes towards immigrants; and embracing innovative financing models. -- How Safe are Our Safeguards? Jurisdictional safeguards against cross-border risks can quickly become outdated in an interdependent and rapidly changing environment. Practices that improve resilience can be found by looking for common threads in two very different areas – financial system stability and pandemic influenza. The resilience-enhancing practices highlighted are: revisiting underlying assumptions related to safeguards in place; introducing forward-looking elements such as stress testing and scenario planning into safeguard development; leveraging incentives; and promoting cross-border collaboration among governments and other organisations. -- The Dark Side of Connectivity: In an increasingly hyperconnected world, the impacts of our successes and mistakes are significantly magnified. Resilience of cyberspace could be strengthened by treating cyber security as a board-level issue within organisations; establishing mechanisms for governments and private companies to share information in a trusted space, and for governments to collaborate in emergency cyber-attack situations; and designing devices and systems that incorporate as much protection as possible against inevitable human error. Section 2 By providing an online, interactive repository of ideas, the RPE aims to improve resilience to global risks within organizations, industries and countries, as well as across economic, environmental, geopolitical, societal and technological areas. A digital platform enables a diverse community of experts to contribute, discuss and explore various existing practices as a basis for further exchange, evaluation and innovation (Figure 28). Practices to Improve Resilience from the 2012 Risk Cases For more information, please see http://rpe.weforum.org. Global Risks 2013 43 Section 1 References Section 2 Section 3 Section 4 Kaplan, R.S. & Mikes, A. Managing Risks: A New Framework. In Harvard Business Review, 2012. 2. Ibid. 3. Comfort, L. K., Boin, A., & Demchak, C. C. The Rise of Resilience, in Designing Resilience: Preparing for Extreme Events. Pittsburg: University of Pittsburgh Press, 2010. 4. Ibid. Martin-Breen, P. & Anderies, J.M. “Resilience: A Literature Review”. Rockefeller Foundation, http://www.rockefellerfoundation.org/news/publications/resilience-literature-review, 2011; and Longstaff, P.H. “Security, Resilience, and Communication in Unpredictable Environments Such as Terrorism, Natural Disasters, and Complex Technology”. Harvard University Center for Information Policy Research, http://pirp.harvard.edu/pubs_pdf/longsta/longsta-p05-3.pdf, 2005. 5. Berkes, F. Understanding Uncertainty and Reducing Vulnerability: Lessons from Resilience Thinking. In Natural Hazards, 2007, 41:283-295. 6. Fiksel, J. Sustainability and Resilience: Toward a Systems Approach. In Sustainability: Science, Practice and Policy, 2006, 22:14-21. 7. Holling, C.S. Understanding the Complexity of Economic, Ecological, and Social Systems. In Ecosystems, 2001, 4:390-405; and Walker, B., Holling, C. S., Carpenter, S. R., & Kinzig, A. Resilience, Adaptability and Transformability in Social-ecological Systems. In Ecology and Society, 2004, 9. 8. Holling, C.S. From Complex Regions to Complex Worlds. In Ecology and Society, 2004, 9; Holland, J.H. Studying Complex Adaptive Systems. In Journal of Systems Science & Complexity, 2005, 19:1-8; and Folke, C. Resilience: The Emergence of a Perspective for Social-ecological Systems Analyses. In Global Environmental Change, 2006, 16:253-267. 9. Bruneau, M., Chang, S. E., Eguchi, R. T., et al. A Framework to Quantitatively Assess and Enhance the Seismic Resilience of Communities. In Earthquake Spectra, 2003, 19:733; and Bruneau M. Seismic Resilience of Communities-conceptualization and Operationalization. In International Workshop on Performance-based Seismic-Design, 2004. 10. The Global Competitiveness Report 2011-2012. 2011. Geneva: World Economic Forum. 11. OECD Studies in Risk Management: Innovation in Country Risk Management. 2009. Paris: Organisation for Economic Co-operation and Development. 12. Berkes, F. Understanding Uncertainty and Reducing Vulnerability: Lessons from Resilience Thinking. In Natural Hazards, 2007, 41:283-295. 13. Bruneau, M., Chang, S. E., Eguchi, R. T., et al. A Framework to Quantitatively Assess and Enhance the Seismic Resilience of Communities. In Earthquake Spectra, 2003, 19:733. 14. Global Risks 2012. 2012. Geneva: World Economic Forum. 15. Bruneau, M., Chang, S. E., Eguchi, R. T., et al. A Framework to Quantitatively Assess and Enhance the Seismic Resilience of Communities. In Earthquake Spectra, 2003, 19:733. 16. Ibid. 17. Walker, B. H., Abel, N., Anderies, J. M., & Ryan, P. Resilience, Adaptability, and Transformability in the Goulburn-broken Catchment, Australia. In Ecology and Society, 2009, 14:12. 18. Berkes, F. Understanding Uncertainty and Reducing Vulnerability: Lessons from Resilience Thinking. In Natural Hazards, 2007, 41:283-295. 19. Swanson, D., Barg, S., Tyler, S., et al. Seven Guidelines for Policy-Making in an Uncertain World. In Creating Adaptive Policies: a Guide for Policy-Making in an Uncertain World, Swanson D. and Bhadwal S., (eds). 2009, Sage: London. 20. Bruneau, M., Chang, S. E., Eguchi, R. T., et al. A Framework to Quantitatively Assess and Enhance the Seismic Resilience of Communities. In Earthquake Spectra, 2003, 19:733. 21. Ozdemir, V. and Knoppers, B.M. From Government to Anticipatory Governance: Responding to the Challenges of Innovation and Emerging Technologies. In Governance for Health, Kickbusch, I. and Gleicher, D. (eds). (In Press), Springer: New York. 22. Swanson, D., Barg, S., Tyler, S., et al. Seven Guidelines for Policy-Making in an Uncertain World. In Creating Adaptive Policies: a Guide for Policy-Making in an Uncertain World, Swanson D. and Bhadwal S., (eds). 2009, Sage: London; Kickbusch, I. & Gleicher, D. “Governance for Health in the 21st Century”. World Health Organization, http://www.euro.who.int/__data/assets/pdf_ file/0010/148951/RC61_InfDoc6.pdf, 2012; and Klijn, E.-H. Trust in Governance Networks: Looking for Conditions for Innovative Solutions and Outcomes. In The New Public Governance? Emerging Perspectives on the Theory and Practice of Public Governance, S.P. Osborne (ed). 2009, Routledge: London. 23. Bruneau, M., Chang, S. E., Eguchi, R. T., et al. A Framework to Quantitatively Assess and Enhance the Seismic Resilience of Communities. In Earthquake Spectra, 2003, 19:733. 24. Amanatidou, E., Butter, M., Carabias, V., et al. On Concepts and Methods in Horizon Scanning: Lessons from Initiating Policy Dialogues on Emerging Issues. In Science and Public Policy, 2012, 39:208-221. 25. Swanson, D., Barg, S., Tyler, S., et al. Seven Guidelines for Policy-Making in an Uncertain World. In Creating Adaptive Policies: a Guide for Policy-Making in an Uncertain World, Swanson D. and Bhadwal S., (eds). 2009, Sage: London. 26. The Global Competitiveness Report 2011-2012. 2011. Geneva: World Economic Forum. 27. Malleret, T. & Cleary, S. Resilience to Risk. Cape Town: Human and Rousseau, 2006. 28. Ibid. “Preemptive Risk Management Strategies: Advance Recovery and the Development of Resilient Organisations and Societies”. In Integrative Risk Management: Advanced Disaster Recovery Risk Dialogue Series, Swiss Reinsurance Company Ltd, http://www.hks.harvard.edu/ var/ezp_site/storage/fckeditor/file/pdfs/centers-programs/programs/crisis-leadership/ Risk_Dialogue_Ch%202.pdf, 2010; and Kunreuther, H. & Useem, M. Learning from Catastrophes: Strategies for Reaction and Response. New Jersey: Pearson Education, Inc, 2010. Section 5 1. Section 6 44 Global Risks 2013 Section 1 Survey Findings Section 2 The Risk Landscape Section 3 For each of the 50 global risks, respondents were asked to assess, on a scale from 1 to 5, the likelihood of the risks occurring over the next 10 years and the impact if the risk were to occur. Figure 29 indicates the average values of these two measures for each of the 50 global risks in their respective categories (see also Figure 2 the Global Risks Landscape scatterplot, showing them in one combined graph). Almost all dots on the scatterplots are above and to the right of the midpoints (at 3 or more) of the 1 to 5 axes, suggesting that the majority of the 50 global risks were rated, on average, as having high likelihood and impact. Section 5 Nonetheless, there is some interesting variation in the dots’ placement on the landscape. Some economic risks, such as major systemic financial failure, chronic fiscal imbalances and severe income disparity are far out towards the top-right hand corner, with impact and likelihood scores around 4 (on a scale from 1 to 5, which is high for an average ranking). Some of the technological risks are closer to the middle of the axes, with impact and likelihood scores 3 or less. Section 4 In this section, the results from the annual Global Risks Perception Survey are presented in detail. They collate the views of more than 1,000 experts from the World Economic Forum’s communities. Respondents are aged between 19 and 79, come from different types of organizations, different fields of specialist knowledge, and from over 100 countries.xlvii As was observed in previous editions of the Global Risks report, there appears to be a strong relationship between the likelihood and impact. The dots seem to line up loosely around the 45-degree line and there are no dots in the bottom-right or top-left corners of the plot. Survey respondents seem to be associating high-likelihood events with high impacts. Still it is interesting to observe how for some risks, particularly technological risks such as critical systems failure, the answers are more distributed than for others – chronic fiscal imbalances are a good example. It appears that there is less agreement among experts over the former and stronger consensus over the latter. xlvii See Appendix 1 for a more detailed description of the sample. Global Risks 2013 45 Section 6 This finding holds up even when looking at individual responses for each of the risks, and not only average numbers. The colourful tiles in Figure 30 show how the responses are distributed across the scatterplot for each of the 50 risks. While there were some responses that were off the 45-degree line, the combinations of impact and likelihood that got the most votes from survey respondents – as indicated by the dark-coloured tiles – seem to be near that diagonal in almost all of the 50 diagrams. Section 1 Figure 29: Global Risks Landscape by Categories and their Descriptions Economic 1 Chronic fiscal imbalances Failure to redress excessive government debt obligations. 2 Chronic labour market imbalances A sustained high level of underemployment and unemployment that is structural rather than cyclical in nature. 3 Extreme volatility in energy and agriculture prices Severe price fluctuations make critical commodities unaffordable, slow growth, provoke public protest and increase geopolitical tension. 4 Hard landing of an emerging economy The abrupt slowdown of a critical emerging economy. 5 Major systemic financial failure A financial institution or currency regime of systemic importance collapses with implications throughout the global financial system. 6 Prolonged infrastructure neglect Chronic failure to adequately invest in, upgrade and secure infrastructure networks. 7 Recurring liquidity crises Recurring shortages of financial resources from banks and capital markets. 8 Severe income disparity Widening gaps between the richest and poorest citizens. 9 Unforeseen negative consequences of regulation Regulations which do not achieve the desired effect, and instead negatively impact industry structures, capital ﬂows and market competition. 10 Unmanageable inflation or deflation Failure to redress extreme rise or fall in the value of money relative to prices and wages. 1 Antibiotic-resistant bacteria Growing resistance of deadly bacteria to known antibiotics. 2 Failure of climate change adaptation Governments and business fail to enforce or enact effective measures to protect populations and transition businesses impacted by climate change. 3 Irremediable pollution Air, water or land permanently contaminated to a degree that threatens ecosystems, social stability, health outcomes and economic development. 4 Land and waterway use mismanagement Deforestation, waterway diversion, mineral extraction and other environment modifying projects with devastating impacts on ecosystems and associated industries. 5 Mismanaged urbanization Poorly planned cities, urban sprawl and associated infrastructure that amplify drivers of environmental degradation and cope ineffectively with rural exodus. 6 Persistent extreme weather Increasing damage linked to greater concentration of property in risk zones, urbanization or increased frequency of extreme weather events. 7 Rising greenhouse gas emissions Governments, businesses and consumers fail to reduce greenhouse gas emissions and expand carbon sinks. 8 Species overexploitation Threat of irreversible biodiversity loss through species extinction or ecosystem collapse. 9 Unprecedented geophysical destruction Existing precautions and preparedness measures fail in the face of geophysical disasters of unparalleled magnitude such as earthquakes, volcanic activity, landslides or tsunamis. 10 Vulnerability to geomagnetic storms Critical communication and navigation systems disabled by effects from colossal solar flares. 1 Critical fragile states A weak state of high economic and geopolitical importance that faces strong likelihood of collapse. 7 2 Diffusion of weapons of mass destruction The availability of nuclear, chemical, biological and radiological technologies and materials leads to crises. 7 3 Entrenched organized crime Highly organized and very agile global networks committing criminal offences. 4 Failure of diplomatic conflict resolution The escalation of international disputes into armed conflicts. 5 Global governance failure Weak or inadequate global institutions, agreements or networks, combined with competing national and political interests, impede attempts to cooperate on addressing global risks. 6 Militarization of space Targeting of commercial, civil and military space assets and related ground systems that can precipitate or escalate an armed conflict. 7 Pervasive entrenched corruption The widespread and deep-rooted abuse of entrusted power for private gain. 8 Terrorism Individuals or a non-state group successfully inflict large-scale human or material damage. 9 Unilateral resource nationalization Unilateral moves by states to ban exports of key commodities, stockpile reserves and expropriate natural resources. 10 Widespread illicit trade Unchecked spread of illegal trafficking of goods and people throughout the global economy. Economic 5 4 Section 2 5 4 Economic 10 Impact if the risk Impact were toifImpact occur the riskif were the risk to were occurto occur 5 3 9 10 3.5 3 3 8 2 67 4 Section 3 6 9 2.5 1 4 6 9 2.5 3 3.5 Likelihood to occur in the next ten years 4 2.5 4 3 3.5 Environmental Likelihood to occur in the next ten years Environmental 2.5 4 2.5 3 3.5 Likelihood to occur in the next ten years Section 4 2 4 7 2 7 4 Environmental 3 3.5 Impact if the risk Impact were toifImpact occur the riskif were the risk to were occurto occur 4 3.5 9 10 3 4 1 6 8 4 5 5 8 9 3 10 7 5 Section 5 8 9 2 6 4 1 3.5 3 2.5 6 1 3 10 2.5 3 3.5 3 2.5 Likelihood to occur in the next ten years 2.5 3 8 8 2 4 7 10 4 3.5 1 2 3 7 3.5 3 2.5 1 3 4 3.5 4 Geopolitical Likelihood to occur in the next ten years Geopolitical 2.5 4 2.5 3 3.5 2 Likelihood to occur in the next ten years 4 4 5 4 1 4 3.5 10 1 Impact if the risk Impact were toifImpact occur the riskif were the risk to were occurto occur 3.5 2 6 3 4 8 10 3 1 10 2.5 85 10 3 6 3.5 3 5 4 8 10 7 3 6 2.5 3 3.5 10 3 2.5 Likelihood to occur in the next ten years 2.5 3 4 3.5 4 SocietalLikelihood to occur in the next ten years Societal 2.5 4 2.5 3 3.5 Likelihood to occur in the next ten years 4 8 Societal 46 3.5 r Section 6 2 Geopolitical 4 9 Global Risks 2013 8 1 9 7 5 10 2 10 26 4 6 4 10 4 10 3 2.5 2.5 3 3.5 Likelihood to occur in the next ten years 4 Societal 2.5 2.5 3 3.5 Likelihood to occur in the next ten years 4 4 10 Societal 2 7 4 5 3 3 2.5 2.5 3 3.5 Likelihood to occur in the next ten years 4 Technological 2.5 2.5 3 3.5 Likelihood to occur in the next ten years 4 9 3 10 9 Inadequate or unreliable access to appropriate quantities and quality of food and nutrition. 3 Ineffective illicit drug policies Continued support for policies that do not abate illegal drug use but do embolden criminal organizations, stigmatize drug users and exhaust public resources. 4 Mismanagement of population ageing Failure to address both the rising costs and social challenges associated with population ageing. 5 Rising rates of chronic disease Increasing burden of illness and long-term costs of treatment threaten recent societal gains in life expectancy and quality. 6 Rising religious fanaticism Uncompromising sectarian views that polarize societies and exacerbate regional tensions. 7 Unmanaged migration Mass migration driven by resource scarcity, environmental degradation and lack of opportunity, security or social stability. 8 Unsustainable population growth Unsustainably low or high population growth rates and sizes, creating intense and rising pressure on resources, public institutions and social stability. 9 Vulnerability to pandemics Inadequate disease surveillance systems, failed international coordination and the lack of vaccine production capacity. 10 Water supply crises Decline in the quality and quantity of fresh water combine with increased competition among resource-intensive systems, such as food and energy production. 1 Critical systems failure Single-point system vulnerabilities trigger cascading failure of critical information infrastructure and networks. 2 Cyber attacks State-sponsored, state-affiliated, criminal or terrorist cyber attacks. 3 Failure of intellectual property regime The loss of the international intellectual property regime as an effective system for stimulating innovation and investment. 4 Massive digital misinformation Deliberately provocative, misleading or incomplete information disseminates rapidly and extensively with dangerous consequences. 5 Massive incident of data fraud/theft Criminal or wrongful exploitation of private data on an unprecedented scale. 6 Mineral resource supply vulnerability Growing dependence of industries on minerals that are not widely sourced with long extraction-to-market time lag for new sources. 7 Proliferation of orbital debris Rapidly accumulating debris in high-traffic geocentric orbits jeopardizes critical satellite infrastructure. 8 Unforeseen consequences of climate change mitigation Attempts at geoengineering or renewable energy development result in new complex challenges. 9 Unforeseen consequences of nanotechnology The manipulation of matter on an atomic and molecular level raises concerns on nanomaterial toxicity. 10 Unforeseen consequences of new life science technologies Advances in genetics and synthetic biology produce unintended consequences, mishaps or are used as weapons. 5 2 6 8 4 5 3 7 3 2.5 3.5 Likelihood to occur in the next ten years 4 2.5 2.5 3 3.5 Likelihood to occur in the next ten years 4 Section 5 Impact if the risk Impact were to if the occur risk were to occur 8 4 7 3 2.5 2 6 1 3.5 3 Food shortage crises Section 4 1 10 2 4 Technological 4 3.5 Resistance to further increased cross-border mobility of labour, goods and capital. 3 7 1 6 2 5 8 9 3.5 3 4 10 Backlash against globalization Section 3 Impact if the risk Impact were to if the occur risk were to occur 1 6 1 Section 2 8 9 4 3.5 Section 1 Impact if the risk Impact were to if 6 NB: The scatter plots show the average value, across all responses, of the likelihood and impact of the 50 global risks, as measured on the horizontal and vertical axes, respectively. Section 6 Source: World Economic Forum Global Risks 2013 47 Section 1 Figure 30: Distribution of Survey Responses Environmental Geopolitical Chronic fiscal imbalances Chronic labour market imbalances Antibiotic-resistant Failure of bacteria climate change adaptation Critical fragile states Backlash against Diffusion of weapons of mass globalization destruction 5 5 5 5 5 5 4 4 4 4 4 4 3 3 3 3 3 2 2 2 1 1 1 Impact Section 2 Economic Likelihood 3 4 1 5 2 3 4 5 1 2 3 4 5 1 2 3 4 Societal Technological Food shortage crises Critical systems failure Cyber attacks 5 5 5 5 4 4 4 4 3 3 3 3 3 2 2 2 2 2 2 1 1 1 1 1 5 1 2 3 4 1 5 2 3 4 1 5 2 3 4 5 1 2 3 4 5 1 1 2 3 4 5 1 2 3 4 Section 3 Extreme volatility in energy and agriculture prices Hard landing of an emerging economy Irremediable pollution Land and waterway use mismanagement Entrenched organized crime Failure of diplomatic conflict resolution Ineffective illicit drug policies Mismanagement of population ageing Failure of intellectual property regime Massive digital misinformation 5 5 5 5 5 5 5 5 5 5 4 4 4 4 4 4 4 4 4 4 3 3 3 3 3 3 3 3 3 3 2 2 2 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 1 5 2 3 4 5 1 2 3 4 5 1 1 2 3 4 5 1 2 3 4 Major systemic financial failure Prolonged infrastructure neglect Mismanaged urbanization Persistent extreme weather Global governance failure Militarization of space Rising rates of chronic disease Rising religious fanaticism Massive incident of data fraud/theft Mineral resource supply vulnerability 5 5 5 5 5 5 5 5 5 5 4 4 4 4 4 4 4 4 4 4 3 3 3 3 3 3 3 3 3 3 2 2 2 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 1 5 2 3 4 1 5 2 3 4 5 1 2 3 4 5 5 5 1 1 2 3 4 5 1 2 3 4 5 Section 4 Recurring liquidity crises Severe income disparity Rising greenhouse Species gas emissions overexploitation Pervasive entrenched corruption Terrorism Unmanaged migration Unsustainable population growth Proliferation of orbital debris Unforeseen consequences of climate change mitigation 5 5 5 5 5 5 5 5 5 5 4 4 4 4 4 4 4 4 4 4 3 3 3 3 3 3 3 3 3 3 2 2 2 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 1 5 2 3 4 5 1 2 3 4 5 1 1 2 3 4 1 5 2 3 4 5 Section 5 Unforeseen negative consequences of regulation Unmanageable inflation or deflation Unprecedented geophysical destruction Vulnerability to geomagnetic storms Unilateral resource nationalization Widespread illicit trade Vulnerability to pandemics Water supply crises Unforeseen Unforeseen consequences of consequences new life science of nanotechnology technologies 5 5 5 5 5 5 5 5 5 5 4 4 4 4 4 4 4 4 4 4 3 3 3 3 3 3 3 3 3 3 2 2 2 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 1 2 3 4 5 1 2 3 4 5 NB: These diagrams show how individual survey responses are distributed across the different possible combinations of likelihood and impact scores, as measured, respectively, on the horizontal and vertical axes of the graphs. The darker the colour of the tile, the more often that particular combination was chosen by the experts who took the survey. Source: World Economic Forum Compared with Last Year Section 6 While there is some movement of individual dots, compared with last year’s scatter plot, the general distribution of the risks on the risk landscape is, perhaps unsurprisingly, similar (see Figure 1). What is surprising, though, is that respondents this year see risks as more likely and as having a higher impact than respondents to the previous year’s survey. The average likelihood score is 0.15 units higher (on a scale from 1 to 5), and the average impact score is 0.13 units higher. Part of the increase in impact (about a quarter of the difference) can be explained by the fact that the average age of the survey sample has decreased, and as shown below, younger people tend to give higher answers when it comes to assessing a risk’s impact. Nonetheless, even controlling for age and other different characteristics of the sample, the fact remains that the perceived likelihood and impact of many of the risks have increased. 48 Global Risks 2013 Particularly interesting cases which had big increases in both likelihood and impact scores are: -- the technological risks: unforeseen consequences of new life science technologies and unforeseen consequences of climate change mitigation; -- the economic risks: unforeseen negative consequences of regulation, hard landing of an emerging economy and chronic labour market imbalances; -- the two sides of global demographic imbalances: unsustainable population growth and mismanagement of population ageing; and -- the geopolitical risk: unilateral resource nationalization. Only very few risks had their average scores decrease from last year. On the likelihood scale, these include recurring liquidity crises, vulnerability to geomagnetic storms and proliferation of orbital debris. The only risk where there was a statistically significant decrease in terms of its impact was food shortage crises. Section 1 By Organization Survey respondents were asked to provide some information about their background: their age, their gender, where they live, for what kind of organization they work, and their subject-area expertise. Using this demographic data the risks landscape was cut up in different ways to see how different groups with specific characteristics perceive global risks. Similarly, it is possible to look at how the perceptions of people who work at different types of organizations differ. This year, the differences are less pronounced than last year. One striking observation, though, is that for many risks, people working for NGOs tend to assign higher scores than their peers from other organizations. In particular, people from NGOs see many risks as more likely than respondents from the government sector, and they rate impacts more highly than those in the business world (see Appendix 2 for more results). Figure 32: Comparison between Organizational Affiliations Academia Business 4 4 The scatterplot for Latin America demonstrates that respondents based in that region tend to assign a higher impact to risks. For instance, they see the impact of ineffective illicit drug policies as significantly higher than survey takers from other regions. It is also interesting that average responses from respondents based in Asia are clustered more densely together. 3.5 3.5 3 3 Figure 31: Comparison between Regions of Residence 4.5 4.5 4 4 3.5 3.5 3 3 Impact 4.5 Impact 4.5 Likelihood 3 3.5 4 4.5 Likelihood Government 4.5 4 4 3.5 3.5 Likelihood 3 3.5 4 4.5 Likelihood 4 4.5 Likelihood 3 3.5 4 4.5 3 3.5 4 4.5 3 3.5 4 4.5 Other 4.5 4.5 4 4 3.5 3.5 3 3 Middle East/North Africa 4.5 4.5 4 4 3.5 3.5 Impact Latin America 3.5 Impact 3 3 NGO Impact Likelihood 4.5 Section 5 Impact 3 4 Impact 4.5 3.5 International Organization Impact Europe 3 Section 4 Asia Section 3 Figure 31, for instance, shows how respondents based in North America tend to rate many risks as having a higher likelihood than respondents in other regions. The dots are markedly further to the right in the scatter plot, and for a large number of risks the differences with other regions are statistically significant. These include chronic fiscal imbalances, prolonged infrastructure neglect, rising greenhouse gas emissions, diffusion of weapons of mass destruction and cyber attacks (see Appendix 2 for detailed results). Likelihood 3.5 4 4.5 Likelihood Source: World Economic Forum Impact Impact 3 3 Section 6 3 Likelihood 3 3.5 4 4.5 Likelihood North America 3 3.5 4 4.5 4 4.5 Sub-Saharan Africa 4.5 4 4 3.5 3.5 3 3 Impact Impact 4.5 Likelihood 3 3.5 4 4.5 Likelihood 3 3.5 Section 2 By Region of Residence Source: World Economic Forum Global Risks 2013 49 Section 1 By Age The difference in perception between genders is very pronounced, with women tending to rate both the likelihood and impact of most risks higher than men. On average, the likelihood rating is 0.11 units higher for women than for men, while the difference between the impact scores is 0.21 units.xlviii Figure 34 shows that respondents aged 40 or younger tend to rate most risks as higher in impact than those over 40. There is no risk where the older group’s impact scores are significantly higher. For most individual risks, this difference was statistically significant at the 5% level. There is only one risk, backlash against globalization, which men rated as more likely than women. Section 3 The overall finding that men are generally less worried about risks than women is in line with what has been observed in other surveys about perceptions of other kinds of risk.1 The literature is not in agreement as to the reasons for this result. Some believe that women are generally more risk-averse than men, while others argue the two genders perceive risks similarly but worry about different risks, so it matters which risks surveys ask about. Either explanation would have important implications for risk managers and policy-makers wanting to use expert perceptions to identify and assess global risks, and to make the most informed decisions. Figure 33: Comparison between Genders 4.5 4 4 3.5 3 3 Economic 3.5 4 4.5 Likelihood Geopolitical 3 3.5 4 4.5 Societal 4.5 4.5 4.5 4 4 3.5 3.5 3 3 Likelihood 4 3 3 Impact 3 3.5 4 4.5 3.5 4 4.5 Likelihood 3 3.5 4 4.5 4.5 4 4 3.5 3.5 3 3 Male respondents 3 3.5 4 4.5 3.5 4 4.5 Societal 4.5 Impact Technological 4.5 Likelihood Impact Likelihood Likelihood 3 3.5 4 4.5 Likelihood 3 Female respondents Technological 4 4.5 Respondents > 40 yrs 3.5 Respondents ≤ 40 yrs 4 3 3.5 Likelihood 3 3.5 4 4.5 Source: World Economic Forum xlviii Controlling for other characteristics of the sample, the respective differences would be 0.087 and 0.18 units. 3 Impact Impact Section 6 Impact 3.5 3 Geopolitical 4 3.5 Environmental 4.5 Impact Section 5 3 It is interesting that high-level decision-makers tend to be drawn mostly from the group – older males – that the breakdowns by age and gender indicate is least inclined to worry about global risks. Figure 34: Comparison between Age Groups Impact 3.5 Likelihood In contrast to the differences between the genders, the psychometric literature is less clear on the effect of age on risk perceptions. Some studies find that younger people generally worry less about risks.2 However, most of these look at adolescents and personal risks such as driving, drinking and smoking. It is not surprising that this finding does not carry over to perceptions of global risks among experts in their third or fourth decade of life. On the other hand, studies that look at age differences in general, not only at teenagers, support the finding from the present survey that younger people generally perceive risks as higher.3 Environmental 4.5 Impact Section 4 Economic For many risks, the younger experts also chose higher likelihood scores. But there are a few exceptions, where respondents over 40 rated risks as more likely to occur in the next 10 years than the respondents under 40: prolonged infrastructure neglect, failure of climate change adaptation, rising greenhouse gas emissions and diffusion of weapons of mass destruction. Impact Section 2 By Gender Likelihood 3 3.5 Source: World Economic Forum 50 Global Risks 2013 4 4.5 Section 1 These findings raise interesting questions. Are economists more informed about economic issues than others, or are there ideological differences at play? Are the technological specialists more knowledgeable here, or does their excitement about new technologies dampen their risk perceptions? And where experts are more worried, does that mean that we should listen to them more, or do they just feel more strongly about their issue without knowing enough about other threats? 3.5 3.5 3 3 Impact Impact 4 Likelihood 3 3.5 4 4.5 Likelihood 3 3.5 4 4.5 3.5 4 4.5 Societal Geopolitical 4.5 4 4 3.5 3.5 3 3 Impact 4.5 Likelihood 3 3.5 4 4.5 Likelihood 3 Section 4 On the other side of the equation, experts in economic issues worry less about the impact and likelihood of severe income disparity than non-experts. Similarly, technological experts worry less than non-experts about the likelihood and impact of unforeseen consequences of nanotechnology. 4 Section 3 Also there are a number of societal risks where specialists are more alarmed than other respondents, such as rising rates of chronic diseases, unsustainable population growth or unmanaged migration. In the economic category, this pattern holds only for chronic fiscal imbalances. For most other risks in this category, as well as in the geopolitical and in the technological domains, there are few statistically significant differences. Environmental 4.5 Impact The differences between environmental experts and their peers from other fields are striking – they assign higher impact and likelihood scores to all 10 risks in the environmental category, with most of these differences being statistically significant at the 5% level (see Appendix 2). Economic 4.5 Section 2 Finally, it is possible to look at how subject expertise affects risk perceptions. Respondents were asked to identify in which of the five categories (which group the 50 risks) they consider themselves experts. While there is no generalization that can be made about all risks, there are some interesting cases where experts are more worried about risks. Figure 35: Comparison between Experts Technological 4.5 Experts in category Non-experts in category 4 3.5 3 Likelihood 3 3.5 4 Section 5 Impact By Subject-matter Expertise 4.5 Source: World Economic Forum Section 6 Global Risks 2013 51 Section 1 ------ Centres of Gravity Section 2 For each of the five categories, survey-takers were asked to pick a “Centre of Gravity” – the one risk that they thought is the systemically most important one in that group. Due to their influence on other risks, these are the risks to which leaders and policy-makers should pay particularly close attention. Figure 36 shows how the answers to this question are distributed among the different options. The top selected risks for Centres of Gravity this year are: major systemic financial failure (economic) failure of climate change adaptation (environmental) global governance failure (geopolitical) water supply crises (societal) critical systems failure (technological) Three of the centres of gravity have changed from last year’s report, in the economic, environmental and societal categories. Figure 36: Centres of Gravity by Category Economic risks Section 3 Major systemic financial failure Environmental risks 2013 Failure of climate change adaptation 22.7 % 26.4 % 2012 Severe income disparity 20.8 % 19.9 % Chronic fiscal imbalances 3.5 % Section 4 5.0 % Hard landing of an emerging economy 2.2 % 3.2 % 1.7 % 4.1 % Section 5 10 20 8.9 % 6.2 % 13.6 % 3.9 % 3.4 % 3.5 % Rising rates of chronic disease 4.9 % 5.1 % 2.1 % 3.2 % 2.9 % Unmanaged migration 1.5 % 1.3 % 8.3 % 1.9 % Ineffective illicit drug policies 0.6 % 10 20 0.4 % 0 30 40.1 % 14.1 % 13.8 % Section 6 12.0 % 10.6 % 9.5 % 4.7 % 3.8 % 1.6 % 0.8 % 7.8 % 4.9 % 6.8 % 8.1 % 3.4 % 3.0 % 1.0 % 0.6 % 0.8 % Proliferation of orbital debris 0.6 % 0 9.8 % 7.2 % Unforeseen consequences of nanotechnology 1.7 % Militarization of space 12.8 % 8.7 % Failure of intellectual property regime 2.6 % Widespread illicit trade 4.1 % Massive incident of data fraud or theft 1.9 % Entrenched organized crime 18.1 % 15.1 % Unforeseen consequences of new life science technologies 5.3 % Unilateral resource nationalization 10 Percent of responses 44.8 % Massive digital misinformation 14.7 % Diffusion of weapons of mass destruction 20 30 21.7 % Mineral resource supply vulnerability 11.7 % Critical fragile states 20 20.9 % Unforeseen consequences of climate change mitigation 8.5 % Terrorism 2013 2012 Critical systems failure Cyber attacks 12.8 % Failure of diplomatic conflict resolution 10 Percent of responses Technological risks 29.2 % 2013 2012 Pervasive entrenched corruption Global Risks 2013 13.9 % 9.1 % Percent of responses Global governance failure 52 11.9 % Vulnerability to pandemics 3.8 % Geopolitical risks Source: World Economic Forum 12.3 % 10.9 % Backlash against globalization 5.8 % 0 30 Percent of responses 9.4 % Mismanagement of population ageing 13.2 % Vulnerability to geomagnetic storms 23.9 % 14.9 % Rising religious fanaticism 9.3 % Species overexploitation 2.8 % 0 9.5 % 7.0 % Unprecedented geophysical destruction 4.2 % 2.6 % 17.1 % Food shortage crises 9.0 % Antibiotic-resistant bacteria 4.4 % Unmanageable inflation or deflation Prolonged infrastructure neglect Unforeseen negative consequences of requlations 14.9 % Irremediable pollution 1.7 % Recurring liquidity crises 31.6 % Land and waterway use mismanagement 6.8 % Chronic labour market imbalances 13.0 % Unsustainable population growth 17.2 % Persistent extreme weather 10.3 % 7.6 % 22.4 % 2013 2012 Water supply crises 22.0 % Mismanaged urbanization 32.0 % Extreme volatility in energy and agriculture prices 26.2 % 2013 2012 Rising greenhouse gas emissions 18.1 % Societal risks 30 40 0.4 % 0 10 Percent of responses 20 30 40 Section 1 Figure 37: The Risk Interconnection Map 2013 Vulnerability to geomagnetic storms Critical systems failure Militarization of space Proliferation of orbital debris Prolonged infrastructure neglect Cyber attacks Section 2 Massive digital misinformation Diffusion of weapons of mass destruction Massive incident of data fraud/theft Terrorism Rising religious fanaticism Critical fragile states Failure of diplomatic conflict resolution Unilateral resource nationalization Major systemic financial failure Entrenched organized crime Widespread illicit trade Failure of climate change adaptation Global governance failure Unforeseen negative consequences of regulation Pervasive entrenched corruption Extreme volatility in energy and agriculture prices Food shortage crises Water supply crises Backlash against globalization Severe income disparity Species overexploitation Chronic labour market imbalances Unsustainable population growth Chronic fiscal imbalances Recurring liquidity crises Persistent extreme weather Unprecedented geophysical destruction Mismanaged urbanization Rising greenhouse gas emissions Unmanaged migration Mismanagement of population ageing Rising rates of chronic disease Mineral resource supply vulnerability Land and waterway use mismanagement Failure of intellectual property regime Section 3 Ineffective illicit drug policies Hard landing of an emerging economy Unforeseen consequences of climate change mitigation Irremediable pollution Section 4 Unmanageable inflation or deflation Antibiotic resistant bacteria Unforeseen consequences of new life science technologies Vulnerability to pandemics Unforeseen consequences of nanotechnology Source: World Economic Forum Interconnections Figure 39: Top 10 Most Connected Risks Finally, the survey asked respondents to choose pairs of risks which they think are strongly interconnected.xlix They were asked to pick a minimum of three and maximum of ten such connections. 529 different connections were identified by survey respondents out of the theoretical maximum of 1,225 combinations possible. The top selected combinations are shown in Figure 38. Severe income disparity 41 Critical fragile states 40 Food shortage crises 33 Mismanaged urbanization 33 Pervasive entrenched corruption 32 Extreme volativity in energy & agriculture prices 30 Failure of climate change adaptation 30 Unsustainable population growth 30 Chronic fiscal imbalances 29 0 10 20 30 40 Section 6 It is also interesting to see which are the most connected risks (see Figure 39) and where the five centres of gravity are located in the network (see Figure 40). 44 Section 5 Putting together all chosen paired connections from all respondents leads to the network diagram presented in Figure 37 – the Risk Interconnection Map. The diagram is constructed so that more connected risks are closer to the centre, while weakly connected risks are further out. The strength of the line depends on how many people had selected that particular combination. Global governance failure 50 Number of connections Source: World Economic Forum Figure 38: Top Five Most Selected Connections Box 8: The Global Risks 2013 Data Explorer Rising religious fanaticism and Terrorism 90 Severe income disparity and Backlash against globalization 79 Global governance failure and Major systemic financial failure 72 Extreme volativity in energy & agriculture prices and Food shortage crises 68 Global governance failure and Failure of climate change adaptation 59 0 20 40 60 80 100 Number of responses Readers are invited to visit the Data Explorer on the accompanying website to the Global Risks 2013 report. There it is possible to interact with the Global Risks Landscape, the Global Interconnection Map, and the data from the two new survey questions on national resilience. The data explorer is also an entry point to other relevant Forum reports, videos, and blog posts – including the “What-If? Interview” seriesl by the Risk Response Network – and many other types of resources around each of the 50 global risks covered in this report. Source: World Economic Forum xlix When two risks are connected, it simply means that respondents believe that there is some sort of correlation between the two. Causal direction cannot be deduced. Visit the Global Risks Data Explorer: http://www.weforum.org/ globalrisks2013/dataexplorer. Global Risks 2013 53 Section 1 Figure 40: Centres of Gravity and their Connections Vulnerability to geomagnetic storms Critical systems failure Prolonged infrastructure neglect Prolonged infrastructure neglect Cyber attacks Massive digital misinformation Massive digital misinformation Section 2 Massive incident of data fraud/theft Terrorism Terrorism Rising religious fanaticism Critical fragile states Critical fragile states Major systemic financial failure Entrenched organized crime Failure of intellectual property regime Pervasive entrenched corruption Failure of climate change adaptation Mineral resource supply vulnerability Land and waterway use mismanagement Global governance failure Global governance Global governance failurefailure Unforeseen negative consequences of regulation Failure of diplomatic conflict resolution Unilateral resource nationalization Failure of diplomatic conflict resolution Major systemic financial failure Extreme volatility in energy and agriculture prices Extreme volatility in energy and agriculture prices Food shortage crises Backlash against globalization Unprecedented geophysical destruction Unsustainable population growth Severe income disparity Backlash against globalization Water supply crises Species overexploitation Persistent extreme weather Unsustainable population growth Mismanaged urbanization Rising greenhouse gas emissions Unmanaged migration Chronic fiscal imbalances Section 3 Unmanageable inflation or deflation Unforeseen consequences of new life science technologies Unforeseen consequences of climate change mitigation Mismanaged urbanization Irremediable pollution Antibiotic resistant bacteria Critical systems failure Prolonged infrastructure neglect Prolonged infrastructure neglect Cyber attacks Massive digital misinformation Diffusion of weapons of mass destruction Massive incident of data fraud/theft Terrorism Critical fragile states Rising religious fanaticism Critical fragile states Failure of diplomatic conflict resolution Major systemic financial failure Section 4 Hard landing of an emerging economy Entrenched organized crime Failure of climate change adaptation Global governance failure Failure of intellectual Extreme volatility in energy and agriculture prices property regime Food shortage crises Unforeseen negative consequences of regulation Pervasive entrenched corruption Backlash against globalization Severe income disparity Failure of diplomatic conflict resolution Unilateral resource nationalization Major systemic financial failure Entrenched organized crime Pervasive entrenched corruption Failure of climate change adaptation Global governance failure Extreme volatility in energy and agriculture prices Mineral resource supply vulnerability Land and waterway use mismanagement Food shortage crises Water supply crises Severe income disparity Persistent extreme weather Chronic labour market imbalances Unsustainable population growth Chronic fiscal imbalances Recurring liquidity crises Mismanaged urbanization Unsustainable population growth Rising greenhouse gas emissions Unmanaged migration Irremediable pollution Unmanaged migration Irremediable pollution Rising rates of chronic disease Vulnerability to pandemics Unforeseen consequences of nanotechnology Section 5 Critical systems failure Prolonged infrastructure neglect Cyber attacks Massive digital misinformation Diffusion of weapons of mass destruction Massive incident of data fraud/theft Terrorism Rising religious fanaticism Critical fragile states Major systemic financial failure Widespread Hard landing of an emerging illicit trade economy Entrenched organized crime Unforeseen negative consequences of regulation Pervasive entrenched corruption Failure of diplomatic conflict resolution Unilateral resource nationalization Global governance failure Failure of intellectual property regime Extreme volatility in energy and agriculture prices Section 6 Severe income disparity Backlash against globalization Chronic labour market imbalances Species overexploitation Chronic fiscal imbalances Mineral resource supply vulnerability Food shortage crises Water supply crises Persistent Unprecedented geophysical extreme destruction weather Mismanaged urbanization Rising greenhouse gas emissions Unmanaged migration Unforeseen consequences Irremediable l pollution of climate change mitigation Unsustainable population growth Recurring liquidity crises Mismanagement of population ageing Rising rates of chronic disease Failure of climate change adaptation Land and waterway use mismanagement Unmanageable inflation or deflation Unforeseen consequences of new life science technologies Source: World Economic Forum 1. Finucane, M. L., Slovic, P., Mertz, C. K., & Flynn, J. Gender, Race, and Perceived Risk: the ’White Male’ Effect. In Health, Risk and Society, 2000, 2:159-172; Gustafson, P.E. Gender Differences in Risk Perception: Theoretical and Methodological Perspectives. In Risk Analysis, 1998, 18:805-811; and Harris, C. R., Jenkins, M., & Glaser, D. Gender Differences in Risk Assessment: Why do Women Take Fewer Risks than Men. In Judgment and Decision Making, 2006, 1:48-63. 2. Deery, H.A. Hazard and Risk Perception among Young Novice Drivers. In Journal of Safety Research, 1999, 30:225-236; and Jonah, B.A., & Dawson, N.E. Youth and Risk: Age Differences in Risky Driving, Risk Perception, and Risk Utility. In Alcohol, Drugs & Driving, 1987, 3:13-29. 3. Savage, I. Demographic Influences on Risk Perceptions. In Risk Analysis, 1993, 13:413-420. l 54 The “What If?” series seeks to generate new insights around risks that global experts from academia, business, government and civil society believe to be underappreciated. By exploring hypothetical scenarios in detail, leaders are able to uncover complex interconnectivity between systems and issues and by exploring global risks as scenarios, experts have the space to surface sensitive issues. The What-If series is a platform for leaders to assess their resilience against such risks and even seize opportunities they may present. Global Risks 2013 Rising greenhouse gas emissions Mismanaged urbanization Unforeseen consequences of climate change mitigation Section 1 X Factors Section 2 The threat of climate change is well known. But have we passed the point of no return? What if we have already triggered a runaway chain reaction that is in the process of rapidly tipping Earth’s atmosphere into an inhospitable state? The natural greenhouse effect is a prerequisite for life on our planet. Without it, Earth’s global average surface temperature would be far below zero. But our planet’s climate is a volatile beast. Small fluctuations in the Earth’s orbit around the sun can exert a major influence on our climate. So can the varying concentration in Earth’s atmosphere of heat-trapping molecules such as carbon dioxide, to which we have been adding through greenhouse gas emissions. Section 4 How pronounced and how fast the warming will be (and how it will affect rainfall and storminess where you live) is hard to say as even the most sophisticated computer models cannot capture all the factors involved in a system as complex as the Earth. But it could be more dramatic and difficult to adapt to than most scientists predict, because of the natural ‘feedbacks’ in the system, linked to processes in the oceans1 and on land2. They have the potential of amplifying climate change to a point of fundamentally disrupting the global system. The much-debated questions are where these tipping points lie, how soon they might be reached, whether they can be predicted – and what will happen when they are crossed.3 Section 5 In a world of many uncertainties we are constantly on the search to identify “X factors” – emerging concerns of possible future importance and with unknown consequences. Looking forward and identifying emerging issues will help us to anticipate future challenges and adopt a more proactive approach, rather than being caught by surprise and forced into a fully reactive mode. Runaway Climate Change Section 3 In this section, developed in collaboration with Nature, a leading science journal, the Risk Response Network asks readers to look beyond our high-risk concerns of the moment to consider a set of five X factors and reflect on what countries or companies should be doing to anticipate them. Section 6 X factors are serious issues, grounded in the latest scientific findings, but somewhat remote from what are generally seen as more immediate concerns such as failed states, extreme weather events, famine, macroeconomic instability or armed conflict. They capture broad and vaguely understood issues that could be hatching grounds for potential future risks (or opportunities). Global Risks 2013 55 Section 1 Section 2 The perhaps best-known positive feedback mechanism is the so-called ice-albedo feedback. In a warmer world there will be less snow and sea ice. Their melting reveals the darker land and water surfaces below, which absorb more solar heat. More absorption then causes yet more melting and warming, and so forth, in a self-reinforcing feedback loop. The unprecedented thawing of 97% of Greenland’s surface ice in July 2012, for example, has led to a darkening of Greenland’s ice cap, meaning it will begin to absorb higher levels of solar energy and melt faster still. Section 3 Melting of the complete Arctic summer sea ice – the Arctic is expected to be seasonally ice-free by around 2040 – could probably be reversed on human timescales if greenhouse gases are reduced and temperature drops. But if the several kilometrethick ice sheets that cover Greenland and Antarctica dwindle, they may not so easily reappear in a cooler world. New ice would have to form at low elevations, where temperatures are higher. Permafrost melting, land use and vegetation changes, and the effects of changing cloud cover provide for other major feedback mechanisms. Some scientists suspect that by 2040 up to 63 billion extra tonnes of carbon – and up to 380 billion tonnes by 2100 – might be released by the thaw and degradation of permafrost soil alone.4 Section 4 Finally, there is the potentially huge feedback effect of water vapour, a natural greenhouse gas in itself. A warmer atmosphere can hold more water. As the average air temperature soars in response to our burning of fossil fuels, evaporation and atmospheric concentration of water vapour will increase, further intensifying the greenhouse effect. On Venus, this probably caused a runaway greenhouse effect, which boiled away the oceans that may have existed in the planet’s early history. Section 5 Luckily, man-made climate warming has virtually no chance of producing a runaway greenhouse effect analogous to Venus. Even so, scientists with the Intergovernmental Panel on Climate Change (IPCC) reckon that the water vapour feedback on Earth could be strong enough to double the greenhouse effect due to the added carbon dioxide alone. While climate change debates of the past decade centred around whether or not mankind could be responsible at all for altering a system as great at Earth’s climate, we may be rapidly moving into forced discussions on how best to strengthen mankind’s resilience and adaptive capacity to cope as Earth’s climate auto-pilot mercilessly hurtles us toward a new and unknown equilibrium. Section 6 Significant Cognitive Enhancement Once the preserve of science fiction, superhuman abilities are fast approaching the horizon of plausibility. Will it be ethically accepted for the world to divide into the cognitively-enhanced and unenhanced? What might be the military implications? Scientists are working hard to develop the medicines and therapies needed to heal the brain of mental illnesses such as Alzheimers and schizophrenia. Although progress has been slow, it is conceivable that in the not-too-distant future, researchers will identify compounds that improve on existing cognitive pharmaceutical enhancers (e.g. Ritalin, modafinil). Although they will be prescribed for significant neurological disease, effective new compounds which appear to enhance intelligence or cognition are sure to be used off-label by healthy people looking for an edge at work or school. 56 Global Risks 2013 Enhancement could come from hardware as well as drugs. A handful of studies in people show that electrical stimulation – either directly via implanted electrodes or through the scalp with transcranial magnetic stimulation (TMS) – can boost memory. Cochlear implants are already standard treatment for the deaf, and motor implants for controlling neural prosthetics and devices are developing fast and seem likely to become available more widely in coming years. Retinal implants for the blind are a bit further behind, but the field is booming and it seems likely that they will be worked out soon. The best interfaces still rely on invasive brain electrodes (noninvasive techniques do work, but are slow and inefficient), which is the major barrier to these being adopted by healthy people. But it seems conceivable that within 10 years we will either have a new method for recording brain activity or the noninvasive signals will be decoded more efficiently. Direct brain interfaces of devices and sensors within our lifetimes is not out of the question, opening a new realm of enhanced neurobiology for those who can afford it. This will pose ethical issues in many walks of life akin to those which surround “doping” in the world of professional sports. Will we accept the idea that significant cognitive enhancement should be available to purchase on the open market? Or will there be, as there now is with performance enhancers in competitive sports, a push for legislation to maintain a more level playing field? There is, in addition, a significant risk of cognitive enhancement going very wrong. Cognitive enhancement pharmaceuticals work by targeting particular neurotransmitter systems, and therefore will most likely have wide-ranging action. There is a significant possibility of unintended effects on other systems – for example, drugs to enhance learning might lead to a greater willingness to take risks; drugs to enhance working memory might lead to increased impulsive behavior. Recent research suggests that, in addition to boosting memory, TMS could be used to manipulate a person’s beliefs of right versus wrong or to suspend moral judgement altogether. It could also be used to “erase” memory and deliberately cause permanent brain damage without the use of invasive procedure or blunt force trauma. Section 1 Such advancements could have profound impacts in 20 to 50 years on societal norms affecting how we approach issues incuding education and training, disparity between groups in society, informed consent and exploitation, and international laws on warfare. Rogue Deployment of Geoengineering The problem is that the only way to truly test solar radiation management is at scale. This potentially conflates large-scale research with deployment, thereby giving rogue nations political cover under the guise of science. Much research has gone into whether a programme could be targeted at the Arctic, for instance, where the impacts of global warming are being felt the most, but some researchers suggest that the impacts could quickly migrate from the Arctic to other regions. Many say that a true test of solar radiation management would have to be global. Due to such complexities, most of the science to date has been conducted via computer modelling, although scientists are looking for ways to test these ideas with local experiments. But overall, despite calls for more coordinated government science programmes, the funding landscape for this kind of science remains spotty. Section 5 Most research has focused on sulphur injection via aircraft. Recent studies suggest that a small fleet of aircraft could inject a million tonnes of sulphur compounds into the stratosphere – enough to offset roughly half of the global warming experienced to date – for US$1-2 billion annually.li In theory, the technology would be tantamount to a planetary thermostat, giving humans direct control over global temperature. The direct impact of dimming the sun would be felt within weeks to months. But this has led some geoengineering analysts to begin thinking about a corollary scenario, in which a country or small group of countries precipitates an international crisis by moving ahead with deployment or large-scale research independent of the global community. The global climate could, in effect, be hijacked by a rogue country or even a wealthy individual, with unpredictable costs to agriculture, infrastructure and global stability. Section 4 Geoengineering can refer to many things, but it is most often associated with a scientific field that has come to be known as “solar radiation management”. The basic idea is that small particles could be injected high into the stratosphere to block some of the incoming solar energy and reflect it back into space, much as severe volcanic eruptions have done in the past. In stark contrast to decades of technological evolution and political disputes about overhauling energy infrastructure to reduce greenhouse emissions, solar radiation management would act quickly and would be cheap to implement – though side-effects may make it a very expensive option. Nobody envisions deployment of solar radiation management anytime soon, given the difficulties in resolving a suite of governance issues (evidenced by the fact that even the relatively simple SPICElii experiment in the UK foundered in the midst of controversy).6 Beginning with Britain’s Royal Society, many academic and policy bodies have called for cautious research as well as broader conversation about the implications of such technologies. The individual hoped to net lucrative carbon credits, but his actions may have been in violation of two international agreements.7 Observers are concerned that this may be a sign of what is to come.8 The most detailed cost and engineering analysis was commissioned by David Keith, currently at Harvard University, and conducted by Aurora Flight Sciences. That analysis, formally completed in July 2011, suggests that a small fleet of aircraft could inject a million tonnes of sulphur into the stratosphere – enough to offset roughly half of the global warming experienced to date – for US$ 1-2 billion annually. lii Stratospheric Particle Injection for Climate Engineering (SPICE) is a UK government-funded geoengineering research project that aims to assess the feasibility of injecting particles into the stratosphere from a tethered balloon for the purposes of solar radiation management. Global Risks 2013 57 Section 6 This leaves a gap for unregulated experimentation by “rogue” parties. For example, an island state threatened with rising sea levels may decide they have nothing to lose, or a well funded individual with good intentions may take matters into their own hands. There are signs that this is already starting to occur. In July 2012 an American businessman sparked controversy when he dumped around 100 tonnes of iron sulphate into the Pacific Ocean off the west coast of Canada in a scheme to spawn an artificial plankton bloom. The plankton absorb carbon dioxide and may then sink to the ocean bed, removing the carbon – another type of geoengineering, known as ocean fertilisation. Satellite images confirm that his actions succeeded in produce an artificial plankton bloom as large as 10,000 square kilometres. li Section 3 In response to growing concerns about climate change, scientists are exploring ways in which they could, with international agreement, manipulate the earth’s climate. But what if this technology were to be hijacked by a rogue state or individual? However, a long series of ethical, legal and scientific questions quickly arises about countless knock-on effects that might be much more difficult to assess. The problem is that incoming solar radiation drives the entire climate system, so reducing sunlight would fundamentally alter the way energy and water moves around the planet. Almost any change in weather and climate patterns is likely to create winners and losers, but determining causation and quantifying impacts on any given region or country would be a massive challenge. Section 2 Both the intended and unintended effects of such new technologies would open whole new categories of potential “dual-use” dilemmas. (Dual-use describes technologies which can be used for good as well as for substantial harm.) It is not difficult to see how such drugs could find applications in armed forces and law enforcement contexts, or conversely by criminal organizations and terrorist groups. They could spark an arms race in the neural “enhancement” of combat troops.5 Section 1 Costs of Living Longer Section 2 We are getting better at keeping people alive for longer. Are we setting up a future society struggling to cope with a mass of arthritic, demented and, above all, expensive, elderly who are in need of long term care and palliative solutions? The blessings of 20th-century medicine look set to explode with the deciphering of the genome and attendant advances. It is hoped that big inroads against common banes such as heart disease, cancer and stroke, may be in the offing. Consider the impact on society of a growing number of elderly infirm who are protected from the most common causes of death today, but with an ever deteriorating quality of life as other ailments that do not kill, but seriously disable, start to dominate. Section 3 Current trends are already setting the stage for such a future scenario in the West. Already, the demographics of the Baby Boom are working against us: conservative estimates say that the number of Americans afflicted with Alzheimer’s disease will at least double, to 11 million, by mid-century.9 Similar rises are projected for many countries, with the global population of the demented expected to double every 20 years until it exceeds 115 million in 2050.10 A key driver will be increasing elderly populations and potentially declining fertility rates in low and middle income countries. Section 4 The looming expense of caring for these masses is mind boggling, especially in high-income countries. The UK, for instance, spends nearly as much each year caring for the demented (£23 billion) as it does on stroke (£5 billion), heart disease (£8 billion) and cancer (£12 billion) combined.11 And the numbers afflicted with all of these maladies are only going to grow. Section 5 Consider Medicare, the US health programme for the elderly. Assuming no policy changes – for instance, no increase in the age of eligibility – the programme’s outlays are expected to exceed its taxpayer-funded income by more than US $24 trillon over the next 75 years.12,liii The spending trend is not limited to government support, either. In the US, the cumulative total of public and private consumption by the elderly has ballooned in the last half century. The burden is accentuated in rapidly-aging countries like Germany, where the ratio of effective producers per consumer is projected to decline nearly 25% by 2030.13 Section 6 liii 58 See page 46 and 47 under “financial statements” at http://www.gao.gov/financial/ fy2011/11stmt.pdf. Add total liabilities for Medicare parts A, B and D together to get US$ 24.5 trillion. (3,252 billion + 18,854 billion + 7,466 billion) Global Risks 2013 Life expectancy has increased steadily in every decade since 1840, but these gains do not necessarily portend better health in later life.14 Thus, a new wave of disabled seniors may be on the way. The proportion of Americans aged 50 to 64 who reported needing help with personal care activities – things like getting into and out of bed, and climbing ten steps – increased significantly in the decade ending in 2007. Arthritis was the top cause, and diabetes played a prominent and growing role.15 Are there fixes that can avert the coming storm? There are well-known but difficult-to-implement preventive measures that could help us live both longer and better quality of lives: paramount among them is exercise, with its near-universal benefits for our physiologies and for warding off pathology.16 Obvious ways to mitigate cost implications would include raising the eligibility ages for the programmes that support the elderly from the public purse – retirement income, social support services or reduced-cost health care – and raising the retirement age, requiring older adults to be productive economically for longer. One recent analysis, using a “delayed aging” model, found that hundreds of billions of dollars in increased costs to the US Medicare and Social Security programmes could be entirely offset by raising the eligibility ages for Medicare and Social Security by a few years (from 65 to 68, and from 67 to 68).17 However, raising eligibility ages for public services is not a panacea, in part because financial costs are not the only challenge. The impacts of aging populations will be felt throughout society, from changing best practices in urban planning to impacting social norms around care-giving. More research is needed to turn chronic conditions to acute conditions (i.e. by developing curative treatments), and find solutions that increase the capacity of all citizens to manage chronic conditions and to create wealth at the same time. Discovery of Alien Life Given the pace of space exploration, it is increasingly conceivable that we may discover the existence of alien life or other planets that could support human life. What would be the effects on science funding flows and humanity’s self-image?It was only in 1995 that we first found evidence that other stars also have planets orbiting them. Now thousands of “exoplanets” revolving around distant stars have been detected. NASA’s Kepler mission to identify Earth-sized planets located in the “Goldilocks Zone” (not too hot, nor too cold) of Sun-like stars, has only been operating for 3 years and has already turned up thousands of candidates, including one the size of Earth. The fact that Kepler has found so many planet candidates in such a tiny fraction of the sky suggests there are countless Earth-like planets orbiting sun-like stars in our galaxy. In 10 years’ time we may have evidence not only that Earth is not unique, but that life exists elsewhere in the universe. Suppose the astronomers who study exoplanets one day find chemical signs of life – for example, a spectrum showing the presence of oxygen, a highly reactive element that would quickly disappear from Earth’s atmosphere if it were not being replenished by plants. Money might well start flowing for new telescopes to study these living worlds in detail, both from the ground and from space. New funding and new brain power might be attracted to the challenges of human space flight and the technologies necessary for humanity, or its A.I. emissaries, to survive an inter-stellar crossing. Section 1 Schmittner, A. & Galbraith, E.D. Glacial Greenhouse-gas Fluctuations Controlled by Ocean Circulation Changes. In Nature, 2008, 456:373-6. 2. Arneth, A., Harrison, S. P., Zaehle, S., et al. Terrestrial Biogeochemical Feedbacks in the Climate System. In Nature Geoscience, 2010, 3:525-532. 3. Lenton, T. M., Held, H., Kriegler, E., et al. Tipping Elements in the Earth’s Climate System. In Proceedings of the National Academy of Sciences, 2008, 105:1786-93. 4. Schuur, E.A. & Abbott, B. Climate Change: High Risk of Permafrost Thaw. In Nature, 2011, 480:32-3. 5. Tennison, M.N. & Moreno, J.D. Neuroscience, Ethics, and National Security: The State of the Art. In PLoS Biology, 2012, 10:e1001289. 6. Cressey, D. Cancelled Project Spurs Debate over Geoengineering Patents. In Nature, 2012, 485:429. 7. “Decision Adopted by the Conference of the Parties to the Convention On Biological Diversity at its Tenth Meeting: X/33 Biodiversity and climate change”. UNEP, Convention on Biological Diversity, http://www.cbd.int/climate/doc/cop-10-dec-33-en.pdf, 2010; and Lukacs, M. World’s Biggest Geoengineering Experiment ‘Violates’ UN Rules. In The Guardian, 2012. 8. Macnaghten, P. & Owen, R. Environmental Science: Good Governance for Geoengineering. In Nature, 2011, 479:293. 9. “Recommendations of the Public Members of the Advisory Council on Alzheimer’s Research, Care, and Services”. U.S. Department of Health and Human Services, Advisory Council on Alzheimer’s Research, http://aspe.hhs.gov/daltcp/napa/AdvCounRec.pdf, 2012. 10. Dementia: A Public Health Priority. 2012. Geneva: World Health Organization; 11. Ibid.; and Luengo-Fernandez, R., Leal, J. & Gray, A.M. UK Research Expenditure on Dementia, Heart Disease, Stroke and Cancer: Are Levels of Spending Related to Disease Burden? In European Journal of Neurology, 2012, 19:149-54. 12. “Financial Statements of the United States Government for the Years Ended September 30, 2011, and 2010”. Financial Management Services, http://www.fms.treas.gov/fr/11frusg/11stmt. pdf, 2011. 13. Lee, R. & Mason, M. “Population Aging and the Welfare State in Europe”. Global Trends 2030, http://gt2030.com/2012/08/01/population-aging-and-the-welfare-state-in-europe/, 2012. 14. Crimmins, E.M. & Beltrán-Sánchez, H. Mortality and Morbidity Trends: Is There Compression of Morbidity? In The Journals of Gerontology Series B: Psychological Sciences and Social Sciences, 2011, 66B:75-86. 15. Martin, L. G., Freedman, V. A., Schoeni, R. F., et al. Trends in Disability and Related Chronic Conditions among People Ages Fifty to Sixty-four. In Health Affairs (Millwood), 2010, 29:725-31. 16. Tatar, M., Bartke, A. & Antebi, A. The Endocrine Regulation of Aging by Insulin-like Signals. In Science, 2003, 299:1346-51. 17. Goldman, D. Personal Communication. In Nature, Editor 2012. Section 4 The fledgling space economy had a big year in 2012, which saw the birth of space trucking when the first commercially built and operated spacecraft successfully rendezvoused with the International Space Station, and a host of celebrity billionaires declared intentions to make asteroid mining a reality. Discovery of an Earth 2.0 or life beyond our planet might inspire new generations of space entrepreneurs to also take on the challenge of taking human exploration of the galaxy from the realm of fiction to fact. 1. Section 3 The discovery’s largest near-term impact would likely be on science itself. Suppose observations point to a potential future home for mankind around another star, or the existence of life in our solar system – in the Martian poles, or in the subsurface oceans of Jupiter’s frozen moon Europa, or even in the hydrocarbon lakes of Saturn’s moon Titan. Scientists will immediately start pushing for robotic and even human missions to study the life forms in situ – and funding agencies, caught up in the excitement, might be willing to listen. References Section 2 The discovery would certainly be one of the biggest news stories of the year, and interest would be intense. But it would not change the world immediately. Alien life has been ‘discovered’ before, after all. Around the turn of the 20th century, the US astronomer Percival Lowell convinced a great many people (including himself) that Mars was crisscrossed by a vast system of canals built by a dying civilization. But the belief that humankind was not alone did not do much to usher in an era of brotherhood and earthly harmony, nor did it stop the outbreak of World War I in 1914. Section 5 Over the long term the psychological and philosophical implications of the discovery could be profound. If lifeforms (even fossilized lifeforms) are found in our own solar system, for example, it will tell us that the origin of life is ‘easy’ – that anyplace in the universe life can emerge, it will emerge. It will suggest that life is as natural and as ubiquitous a part of the universe as stars and galaxies are. The discovery of even simple life would fuel speculation about the existence of other intelligent beings and challenge many assumptions which underpin human philosophy and religion. Through basic education and awareness campaigns the general public can achieve a higher science and space literacy and cognitive resilience that would prepare them and prevent undesired social consequences of such a profound discovery and paradigm shift concerning mankind’s position in the universe. Section 6 Global Risks 2013 59 Section 1 Conclusion Section 2 The eighth edition of the Global Risks report has sought to highlight the theme of resilience in the context of systems thinking. Exogenous in nature, global risks cannot be adequately managed or mitigated by any single organisation. We have introduced the conceptual framework of Professors Kaplan and Mikes1, contrasting “external” risks such as global risks with “preventable” and “strategic” risks, to assist clarity of thought about how global risks should be approached. Whenever it is difficult to predict how and when a risk will manifest, nurturing resilience is the preferred approach. Section 3 Section 4 Throughout this report we have sought to frame risks in a systems context given its nature of interdependencies and to assist clarity of thinking about the best ways to build resilience. Our three risk cases have discussed what happens when two major systems are stressed simultaneously (Testing Economic and Environmental Resilience); when a seemingly more minor system punches above its weight (Digital Wildfires in a Hyperconnected World); and when we become complacent in the continued ability of a system to stay one step ahead of a changing problem (The Dangers of Hubris on Human Health). In the Special Report, we explored the thinking of systems theorists about how to build resilient systems, describing how five components – redundancy, robustness, resourcefulness, response and recovery – can be applied to selected national subsystems. Section 5 As ever, this report forms the starting point of dialogue which will continue throughout the year, through a number of channels: our dedicated virtual platform for members of the Risk Response Network’s trusted community; the Resilience Practices Exchange; workshops with our report partners and their stakeholders; regional events around the world; and, of course, our Annual Meetings in the People’s Republic of China and in Davos-Klosters, Switzerland, where the theme for 2013 is resilient dynamism. Specifically, in 2013 we will take forward the task of building a trusted network of risk experts to help global leaders map, mitigate, monitor and enhance resilience to global risks. And we will work to develop and refine the National Resilience Rating proposed in the Special Report. The hyperconnected nature of the modern world makes it increasingly urgent to understand how best to build resilience in the face of global risks. Section 6 More information on these initiatives and other World Economic Forum activities on global risks can be found at www.weforum.org/risk. You can contact us at rrn@weforum.org and stay connected by following us at @WEFRisk. 1 60 Kaplan, R.S. & Mikes, A. Managing Risks: A New Framework. In Harvard Business Review, 2012. Global Risks 2013 Section 1 Type of Organization International Organizations - 95 (7.7%) Government - 100 (8.1%) Other - 102 (8.3%) Section 2 Appendix 1 The Survey Figure 41: Breakdown of Survey Sample Business - 519 (42.1%) NGO - 198 (16.0%) Academia - 220 (17.8%) Region of Residence Europe - 368 (29.8%) Latin America - 116 (9.4%) The survey sample includes experts in a range of subjects. Approximately 29% of respondents are female, and the average age of survey respondents is 43. With the inclusion of the new Global Shapers Community – a group of young leaders between 20 and 30 years oldliv – the range of age groups covered by the survey is wider than it was last year. North America - 327 (26.5%) Region of Expertise Middle East/North Africa - 83 (6.7%) Sub-Saharan Africa - 95 (7.7%) Europe - 316 (25.6%) Latin America - 132 (10.7%) North America - 302 (24.5%) Asia - 306 (24.8%) Age 19-20 3 20-30 294 30-40 249 40-50 288 50-60 216 60-70 125 70-80 21 200 300 Section 6 100 The survey sample closely resembles the targeted survey population as described above. The distribution of people across regions and types of organizations is nearly identical; the average age is slightly lower (by two years) and the proportion of women is slightly higher (by 3 percentage points). It is important to note that the data is not intended to be representative of wider populations than this specific survey population. Section 5 In the 2012 survey, in addition to greater diversity of affiliation, respondents also come from more diverse regions of the world (see Figure 41). They indicated 101 different countries as their country of residence, and self-identified expertise on 115 different countries. This has increased compared to 2011, where only 69 countries were chosen as country of residence. There was an increase in representation from Asia, Latin America, Middle East/North Africa and Sub-Saharan Africa with a larger number of responses from Japan, China and India for Asia; Costa Rica, Mexico and Brazil for Latin America; and Nigeria and South Africa for Sub-Saharan Africa. Asia - 274 (22.2%) Section 4 The Global Risks Perception Survey was carried out as an online survey during September 2012. The purpose of the survey is to sample the views of the World Economic Forum’s communities, which comprise of top experts and high-level leaders from business, academia, NGOs, international organizations, the public sector and civil society. Over 6,000 invitations were sent out and 1,234 respondents returned the questionnaire with usable information; 1,006 of these were complete responses – compared to 469 in 2011. Section 3 Survey Sample Sub-Saharan Africa - 72 (5.8%) Middle East/North Africa - 77 (6.2%) Number of responses Area of Expertise Economic Issues 612 Societal Issues 569 Geopolitical Issues 372 Technological Issues 327 Environmental Issues 234 100 200 300 400 500 600 Number of responses NB: Multiple selections were possible for the question on expertise Source: World Economic Forum liv See http://www.weforum.org/globalshapers for more information. Global Risks 2013 61 Section 1 The Questionnaire The questionnaire consisted of three different sections with the following questions: Section 2 Section 1 covered the above-mentioned demographic information. In Section 2, respondents were asked to assess each of the 50 global risks covered in this report, by stating how they would rate, on a scale from 1 to 5, the likelihood that the risk is to occur over the next 10 years, and if it were to occur, the impact it would have on the world. Section 3 In addition, a new question was introduced this year to think about the country that they had identified in Section 1 as the country about which they have most expertise, and rate the ability of that country to adapt and/or recover from the impact of each of the 50 global risks. The answer options to these three questions were presented as Likert-type scales, where the respondent, using a slider on the screen, was able to select a value ranging from 1 (low) to 5 (high) as well as the midpoints between these integers. Section 4 For each category of risks – economic, environmental, geopolitical, societal and technological – the last question in Section 2 asks survey respondents to select what they thought would be the “Centre of Gravity”, i.e. the single most important risk from a systemic perspective. They could choose from the 10 risks in each category via a drop-down menu. Finally, in Section 3, respondents were asked to identify strong connections between pairs of risks. They had the opportunity to select at least three and up to 10 combinations, by dragging tiles into paired boxes from the pool of 50 risks. Section 5 Margin of Errors Based on the spread of the answers as well as the survey sample size, one can calculate the margin of error, based on a 95% confidence level. For the global likelihood and global impact questions (Figures 1, 2, 29, 30), which were answered by all 1,234 respondents, the maximumlv margin of error is 0.07 units. Section 6 For the question on the Centres of Gravity (Figure 36), the maximumlvi margin of error is 2.7 percentage points. For the question on country recovery and adaptability, the margin of error is heavily dependent on how many people assessed the country in the question (as explained above, survey respondents could choose which country to assess). The tables in Appendix 3 detail the values. lv lvi 62 The margin of error varies slightly across the 50 risks. See Table 3 in Appendix 2. The margin of error varies across the five categories and the different possible answers. Global Risks 2013 Appendix 2 Likelihood and Impact Likelihood: Comparisons The number of survey responses received from different regions ranges from 64 from Sub-Saharan Africa to 330 from Europe. For stakeholder groups the range was from 88 from international organizations to 471 from business. As illustrated in Table 1, out of 50 global risks, only two risks – extreme volatility in energy and agriculture prices and major systemic financial failure – did not have any statistically significant differences between any groups. The other 48 risks had at least one group difference. Arguably the risk with the most differences, especially between regions, was failure of drug policies. Only 8 out of 50 risks had statistically significant differences between respondents under 40 and over 40 years of age. Four of these risks were in the environmental category: failure of climate change adaptation, irremediable pollution, rising greenhouse gas emissions, and unprecedented geophysical destruction. Similarly, the environmental category had the largest percentage of risks with statistically significant differences between experts and non-experts. Where there are differences, generally experts perceived the risk as more likely to occur, though non-experts found four risks more likely: severe income disparity, unmanageable inflation and deflation, rising religious fanaticism and unforeseen consequences of nanotechnology. Interestingly, rising religious fanaticism was one of the most highly connected risks in the Risks Interconnection Map. Finally, where there were statistically significant gender differences, females were more pessimistic and rated the risks as more likely to occur. The biggest difference between male and female opinions was regarding the risk of unprecedented geophysical destruction, with a difference of 0.41 (on a scale of 1 to 5). Table 1-2: Legends Region of Residence Stakeholder As Asia Ac Academia E Europe B Business LatAm Latin America G Government NthA North America IO International Organization MENA Middle East/ North Africa N NGO SSA Sub-Saharan Africa Other Other Section 1 Table 1: Comparisons between Groupslvii for Likelihood of Global Risks Occurring in the Next 10 Yearslviii Risk Region of Residence Stakeholder Age Gender Under 40 Over 40 Expertise Male Female Expert Non-Expert NthA > All other regions - - - 4.02 > 3.91 NthA, SSA > E, LatAm - - 3.65 < 3.79 - - - - - - - - - Extreme volatility in energy and agriculture prices Hard landing of an emerging economy NthA > E, LatAm, MENA, SSA As > MENA Major systemic financial failure - - - NthA > All other regions - - 3.24 < 3.38 - - Recurring liquidity crises NthA, E, MENA > LatAm - - - - Severe income disparity NthA > As, E, LatAm NGO > G - 4.19 < 4.31 4.15 < 4.29 Unforeseen negative consequences of regulation NthA > LatAm B > NGO, Ac, G, IO - - 3.41 > 3.21 Unmanageable inflation or deflation As > NthA, E, LatAm SSA > LatAm - 3.25 > 3.11 - 3.12 < 3.24 Antibiotic-resistant bacteria NthA > As, LatAm E > LatAm Other > IO - - 3.67 > 3.36 Failure of climate change adaptation NthA > As, E, MENA NGO > G 3.69 < 3.81 3.71 < 3.89 4.04 > 3.69 3.48 > 3.24 3.25 < 3.6 3.62 > 3.28 - 3.54 < 3.77 3.91 > 3.53 Irremediable pollution Land and waterway use mismanagement NthA > As, E, MENA NthA > As, E, MENA NthA > As, E, MENA Rising greenhouse gas emissions NthA > All other regions Species overexploitation NthA > MENA Unprecedented geophysical destruction As > MENA, E NthA > E Vulnerability to geomagnetic storms Critical fragile states NGO > IO NGO > B NGO > G - 3.64 < 3.8 3.9 > 3.64 - 3.64 < 3.85 4.07 > 3.61 - 4.28 > 3.86 3.87 < 4 - - - 3.24 > 3.11 3.06 < 3.47 - As > E, MENA - - 2.53 < 2.75 - NthA > As, LatAm - - - - - 3.14 < 3.3 - 3.34 > 3.18 - - Diffusion of weapons of mass destruction NthA > All other regions NthA, LatAm > As, E NthA > As, E, LatAm, SSA NthA > As, LatAm Global governance failure E > As - Militarization of space As > LatAm - Pervasive entrenched corruption NthA > As, E Terrorism Unilateral resource nationalization 3.57 > 3.41 - - - - - 2.75 < 2.95 - - - 3.69 < 3.87 - NthA > As, LatAm, E - - - - NthA > MENA, LatAm, SSA - - - - Widespread illicit trade NthA > As, E, LatAm - - 3.38 < 3.57 - Backlash against globalization NthA > LatAm - - 3.18 > 3.04 - Food shortage crises NthA > As, LatAm - - 3.55 < 3.71 3.69 > 3.52 Ineffective illicit drug policies LatAm, NthA > As, E, SSA E > As - - - - Mismanagement of population ageing NthA, E > As, LatAm, SSA, MENA NGO > G Rising rates of chronic disease NthA > As, E, MENA, LatAm Rising religious fanaticism NthA > As, E, LatAm Unmanaged migration NthA, E > As NthA > E, MENA, LatAm As > E Water supply crises - - - 3.37 < 3.57 3.52 > 3.36 - - - 3.59 < 3.71 - 3.34 < 3.63 3.5 > 3.36 - 3.52 > 3.38 3.39 < 3.6 3.53 > 3.37 - - - - - - 3.78 < 4.01 - Critical systems failure NthA, E, As, SSA > LatAm - Ac, Other > IO, NGO - - - Cyber attacks NthA > All other regions E > SSA Ac, B, NGO > IO - - 4.01 > 3.75 Failure of intellectual property regime As, E, NthA > MENA B>G - - 3.13 > 2.96 Massive digital misinformation As > LatAm - - - Massive incident of data fraud/theft NthA > As, E, LatAm B > IO - - 3.68 > 3.46 Mineral resource supply vulnerability E > LatAm, MENA As > MENA NGO, B > IO - - - Proliferation of orbital debris - Ac > IO - - 2.97 > 2.83 Unforeseen consequences of climate change mitigation NthA > E Other > IO - 3.17 < 3.36 - - Unforeseen consequences of nanotechnology - - - 2.71 < 3 Unforeseen consequences of new life science technologies - - - 3.08 < 3.22 lvii lviii Section 6 Vulnerability to pandemics - NGO > G - - 3.4 < 3.61 - Unsustainable population growth All other stakeholders > G Section 5 Entrenched organized crime Failure of diplomatic conflict resolution 4 > 3.6 Section 4 Mismanaged urbanization Persistent extreme weather - Section 3 - Prolonged infrastructure neglect Section 2 Chronic fiscal imbalances Chronic labour market imbalances 2.69 < 2.83 - An analysis of variance (ANOVA) tested whether or not the means of sub-groups were all equal. For those risks where they were not all equal, a Sidak post-hoc test established which of the pair-wise differences between groups were significant at the 5% level. Only statistically significant differences are noted; otherwise, the table cell is empty. Global Risks 2013 63 Section 1 Impact: Comparisons Section 2 In terms of perceived impact, regional differences were found for 48% of the risks, with the most differences found in the environmental category and the least in the economic category (see Table 2). Where there were statistically significant differences, respondents from Latin America perceived 50% of these risks as having higher impact than did respondents from other regions. Apart from the risk mineral resource supply vulnerability, European respondents generally perceived risks as having lower impact. Section 3 Among stakeholder groups, statistically significant differences were found for less than half the risks, with NGOs perceiving impacts to be higher and businesses lower. There were two exceptions: hard landing of an emerging economy and mismanagement of population ageing. Between respondents under and over 40 years of age, there were statistically significant differences for half the risks, with younger respondents perceiving higher impact. The largest difference, 0.32 units, was for irremediable pollution. Section 4 Male and female opinions differed significantly for 39 out of 50 risks, most obviously in the geopolitical category, with all 10 risks having differences. In all 39 cases, men perceived the impact of the risks as lower, with the largest difference, of 0.43, for entrenched organized crime. Fewest statistically significant differences were found between experts and non-experts – only 15 risks, none in the geopolitical category and only one in the technological category. Where there were differences, experts generally rated risks as having a higher impact, except in the case of two risks: severe income disparity and unforeseen consequences of nanotechnology. Section 5 Section 6 64 Global Risks 2013 Section 1 Table 2: Comparisons between Groupslix for Impact of Global Risks if they were to Materializelx Risk Region of Residence Stakeholder Age Gender Under 40 - - - - Extreme volatility in energy and agriculture prices - - Hard landing of an emerging economy - Major systemic financial failure - Prolonged infrastructure neglect B, Ac > G NthA > E Recurring liquidity crises - 4.03 > 3.92 3.68 < 3.88 - 3.84 < 3.98 - - - - - - - - Unforeseen negative consequences of regulation SSA > E, NthA As > E Other > Ac, IO 3.71 > 3.61 3.24 > 3.13 3.15 < 3.29 - 3.71 < 4.06 3.72 < 3.89 3.12 < 3.33 3.25 > 3.11 3.63 > 3.52 - - 3.63 > 3.51 - - 4.17 > 3.84 Irremediable pollution LatAm > E, NthA Land and waterway use mismanagement LatAm > As, E NGO > Ac, B Mismanaged urbanization LatAm > E NGO, Other > B - 3.31 < 3.59 3.6 > 3.33 Persistent extreme weather NthA, LatAm > E NGO > B - 3.56 < 3.87 3.95 > 3.57 Rising greenhouse gas emissions NthA > As Species overexploitation - 3.8 < 4.16 - - 3.82 < 4.04 4.23 > 3.8 3.29 < 3.55 3.72 > 3.27 3.25 < 3.55 - LatAm > NthA, E, As - Diffusion of weapons of mass destruction NthA > As - Global governance failure - Militarization of space - Pervasive entrenched corruption LatAm > As, E SSA > E Terrorism NthA, As, MENA > E Unilateral resource nationalization Widespread illicit trade IO, NGO > B Other > B NGO > Ac, B, G Other > B - Rising religious fanaticism NthA > E, As Unmanaged migration Unsustainable population growth - - - 3.64 < 3.81 - - 3.74 < 3.92 - 3.24 > 3.1 3.57 > 3.38 3.67 > 3.52 3.1 < 3.33 - 3.38 < 3.69 - 3.5 < 3.82 - NGO > B 3.94 > 3.73 - NGO, B > G - - 3.09 < 3.52 2.91 < 3.33 - - - 3.3 > 3.13 - - LatAm, NthA > E 3.86 < 4.07 NGO > Ac, B - Rising rates of chronic disease - - 3.36 < 3.53 - Mismanagement of population ageing - 3.5 < 3.63 3.61 > 3.46 - Food shortage crises LatAm > All other regions - NGO > IO Backlash against globalization Ineffective illicit drug policies - NGO > B 3.42 > 3.28 - - 3.76 < 4.01 - 2.95 < 3.25 3.14 > 2.94 3.25 < 3.58 3.44 > 3.27 - 3.59 < 3.76 - - 3.27 < 3.69 3.49 > 3.3 3.78 > 3.64 3.63 < 3.91 NthA > E - 3.68 > 3.54 3.56 < 3.71 - Water supply crises LatAm > E, As - 4.12 > 3.87 3.89 < 4.22 4.05 > 3.93 3.74 > 3.52 - - Cyber attacks - - Failure of intellectual property regime - - 3.05 > 2.94 - 3.47 < 3.63 - 3.8 > 3.63 - Massive digital misinformation MENA > E, NthA - 3.36 > 3.15 3.15 < 3.48 - Massive incident of data fraud/theft MENA, LatAm > E - 3.34 > 3.21 3.2 < 3.46 - Mineral resource supply vulnerability E > NthA NGO > IO - - - Proliferation of orbital debris LatAm, As > NthA NGO > B, IO Other > IO - 2.73 < 2.96 - - 3.27 < 3.57 - Unforeseen consequences of climate change mitigation - Other > B Unforeseen consequences of nanotechnology - NGO > B, IO 3.09 > 2.91 2.9 < 3.23 2.84 < 3.04 Unforeseen consequences of new life science technologies - NGO > IO 3.43 > 3.3 3.29 < 3.53 - lix lx Section 6 - Vulnerability to pandemics Critical systems failure Section 5 MENA > As, E, NthA LatAm > As, E SSA > E - 3.45 > 3.24 Section 4 - Failure of diplomatic conflict resolution 3.72 > 3.54 - Vulnerability to geomagnetic storms LatAm > As, E, NthA - 3.47 < 3.83 - Entrenched organized crime 3.55 < 3.92 NGO > B, G NthA, LatAm, As > E Critical fragile states 3.82 > 3.5 3.66 > 3.5 NGO > B Unprecedented geophysical destruction Section 3 - NGO > B - 3.62 < 3.75 - NonExpert - Ac, NGO, Other > B Failure of climate change adaptation - Expert 4.1 > 4 SSA > As, E Antibiotic-resistant bacteria - Expertise Female - Severe income disparity Unmanageable inflation or deflation 3.86 > 3.62 Male Section 2 Chronic fiscal imbalances Chronic labour market imbalances Over 40 An analysis of variance (ANOVA) tested whether or not the means of sub-groups were all equal. For those risks where they were not all equal, a Sidak post-hoc test established which of the pair-wise differences between groups were significant at the 5% level. Only statistically significant differences are noted; otherwise, the table cell is left empty. Global Risks 2013 65 Section 1 Likelihood and Impact – Average Scores and Margin of Error Section 2 The table below shows the average likelihood and impact scores and their margins of error (based on a 95% confidence level). The larger the margin of error, the lower the confidence that the result is close to the “true” figure of the whole survey populations (see Appendix 1). Appendix 3 Resilience Table 3: Average Likelihood and Impact Scores and their Margin of Error Section 3 Section 4 Section 5 Section 6 Risk Likelihood Impact Chronic fiscal imbalances 3.97 +/- 0.05 3.97 +/- 0.05 Chronic labour market imbalances 3.69 +/- 0.05 3.73 +/- 0.05 Extreme volatility in energy and agriculture prices 3.71 +/- 0.05 3.88 +/- 0.05 Hard landing of an emerging economy 3.46 +/- 0.05 3.49 +/- 0.05 Major systemic financial failure 3.44 +/- 0.06 4.04 +/- 0.05 Prolonged infrastructure neglect 3.32 +/- 0.06 3.19 +/- 0.05 Recurring liquidity crises 3.36 +/- 0.05 3.66 +/- 0.05 Severe income disparity 4.22 +/- 0.05 3.8 +/- 0.05 Unforeseen negative consequences of regulation 3.31 +/- 0.06 3.18 +/- 0.06 Unmanageable inflation or deflation 3.18 +/- 0.05 3.57 +/- 0.05 Antibiotic-resistant bacteria 3.42 +/- 0.06 3.57 +/- 0.06 Failure of climate change adaptation 3.76 +/- 0.06 3.9 +/- 0.06 Irremediable pollution 3.35 +/- 0.06 3.65 +/- 0.06 Land and waterway use mismanagement 3.61 +/- 0.06 3.57 +/- 0.05 Mismanaged urbanization 3.69 +/- 0.06 3.39 +/- 0.06 Persistent extreme weather 3.7 +/- 0.06 3.65 +/- 0.06 Rising greenhouse gas emissions 3.94 +/- 0.05 3.88 +/- 0.05 Species overexploitation 3.68 +/- 0.06 3.36 +/- 0.06 Unprecedented geophysical destruction 3.17 +/- 0.06 3.33 +/- 0.06 Vulnerability to geomagnetic storms 2.59 +/- 0.06 3.16 +/- 0.06 Critical fragile states 3.38 +/- 0.06 3.53 +/- 0.05 Diffusion of weapons of mass destruction 3.23 +/- 0.06 3.92 +/- 0.06 Entrenched organized crime 3.46 +/- 0.06 3.21 +/- 0.06 Failure of diplomatic conflict resolution 3.58 +/- 0.06 3.69 +/- 0.05 Global governance failure 3.69 +/- 0.06 3.79 +/- 0.05 Militarization of space 2.81 +/- 0.06 3.16 +/- 0.06 Pervasive entrenched corruption 3.74 +/- 0.06 3.47 +/- 0.06 Terrorism 3.64 +/- 0.06 3.59 +/- 0.06 Unilateral resource nationalization 3.35 +/- 0.06 3.4 +/- 0.06 Widespread illicit trade 3.43 +/- 0.06 3.03 +/- 0.06 Backlash against globalization 3.14 +/- 0.06 3.34 +/- 0.06 Food shortage crises 3.6 +/- 0.06 3.83 +/- 0.06 Ineffective illicit drug policies 3.41 +/- 0.06 3.03 +/- 0.06 Mismanagement of population ageing 3.83 +/- 0.05 3.67 +/- 0.05 Rising rates of chronic disease 3.43 +/- 0.06 3.35 +/- 0.05 Rising religious fanaticism 3.66 +/- 0.06 3.64 +/- 0.06 Unmanaged migration 3.42 +/- 0.06 3.39 +/- 0.06 Unsustainable population growth 3.45 +/- 0.06 3.71 +/- 0.06 Vulnerability to pandemics 3.2 +/- 0.06 3.6 +/- 0.06 Water supply crises 3.85 +/- 0.05 3.98 +/- 0.05 Critical systems failure 2.96 +/- 0.06 3.62 +/- 0.06 Cyber attacks 3.82 +/- 0.06 3.52 +/- 0.06 Failure of intellectual property regime 3 +/- 0.06 2.99 +/- 0.06 Massive digital misinformation 3.36 +/- 0.07 3.24 +/- 0.06 Massive incident of data fraud/theft 3.52 +/- 0.06 3.27 +/- 0.06 Mineral resource supply vulnerability 3.42 +/- 0.06 3.45 +/- 0.06 Proliferation of orbital debris 2.87 +/- 0.06 2.8 +/- 0.06 Unforeseen consequences of climate change mitigation 3.23 +/- 0.06 3.35 +/- 0.06 Unforeseen consequences of nanotechnology 2.79 +/- 0.06 2.99 +/- 0.06 Unforeseen consequences of new life science technologies 3.11 +/- 0.06 3.36 +/- 0.06 66 Global Risks 2013 Appendix 3.1 Over 14,000 respondents to the World Economic Forum’s Executive Opinion Surveylxi were asked to rate their government’s risk management effectiveness: How would you assess your national government’s overall risk management effectiveness of monitoring, preparing for, responding to and mitigating against major global risks (e.g. financial crisis, natural disasters, climate change, pandemics, etc.)? (1 = Not effective in managing major global risks; 7 = Effective in managing major global risks) Table 4 provides the average results for each country, ranked from highest (best) to lowest (worst). Singapore and many innovation-driven economies (Stage 3 in the Forum’s Global Competitiveness Index) are ranked higher than factor-driven (Stage 1) economies (for definitions of stages, see page 68). The table also gives the survey sample size and the margin of error for each country, its ISO code, and development stage. Countries marked in light blue were used for the preliminary analysis presented in the Special Report section; the selection criterion was the available sample size from the Global Risks Perception Survey (see Table 5). lxi The Executive Opinion Survey is the Forum’s flagship opinion poll that is conducted every year to sample the perception of top managers from small- and medium-sized firms on the economies in which they are operating. Section 1 Country ISO Economic Development Stage Sample Risk Management Score Margin of Error at 95% Confidence Level Rank Country ISO Economic Development Stage Sample Risk Management Score Margin of Error at 95% Confidence Level Singapore SGP Stage 3 171 6.08 0.11 55 Tajikistan TJK Stage 1 97 3.91 0.35 2 Qatar QAT Transition from 1 to 2 113 6.01 0.18 56 Macedonia, FYR MKD Stage 2 86 3.90 0.35 3 Oman OMN Transition from 2 to 3 75 5.55 0.26 57 Poland POL Transition from 2 to 3 205 3.87 0.19 4 United Arab Emirates ARE Stage 3 163 5.47 0.17 58 Czech Republic CZE Stage 3 159 3.87 0.25 59 Peru PER Stage 2 83 3.83 0.31 5 Canada CAN Stage 3 101 5.41 0.20 60 Ethiopia ETH Stage 1 57 3.83 0.34 6 Sweden SWE Stage 3 76 5.41 0.28 61 Uruguay URY Transition from 2 to 3 80 3.80 0.33 7 Saudi Arabia SAU Transition from 1 to 2 94 5.41 0.29 62 Austria AUT Stage 3 105 3.80 0.29 8 New Zealand NZL Stage 3 52 5.40 0.24 63 Cape Verde CPV Stage 2 103 3.75 0.27 9 Finland FIN Stage 3 36 5.32 0.43 64 Lithuania LTU Transition from 2 to 3 148 3.74 0.25 10 Chile CHL Transition from 2 to 3 78 5.20 0.29 65 Ireland IRL Stage 3 60 3.70 0.34 11 Norway NOR Stage 3 74 5.15 0.24 66 Philippines PHL Transition from 1 to 2 126 3.69 0.25 12 Mexico MEX Transition from 2 to 3 268 5.13 0.15 67 Japan JPN Stage 3 111 3.67 0.28 13 Netherlands NLD Stage 3 81 5.06 0.25 68 Armenia ARM Stage 2 77 3.65 0.28 14 Malaysia MYS Transition from 2 to 3 78 4.97 0.25 69 Burkina Faso BFA Stage 1 39 3.64 0.46 15 Hong Kong SAR HKG Stage 3 68 4.96 0.35 70 Benin BEN Stage 1 81 3.62 0.40 16 Kazakhstan KAZ Transition from 2 to 3 100 4.93 0.35 71 Guinea GIN Stage 1 57 3.61 0.44 17 Germany DEU Stage 3 127 4.90 0.25 72 Namibia NAM Stage 2 81 3.60 0.32 73 Russian Federation RUS Transition from 2 to 3 413 3.60 0.14 Transition from 2 to 3 84 4.83 0.28 CHE Stage 3 77 4.82 0.32 20 United Kingdom GBR Stage 3 102 4.81 0.28 74 Iceland ISL Stage 3 92 3.58 0.31 21 Botswana BWA Transition from 1 to 2 78 4.80 0.27 75 Iran, Islamic Rep. IRN Transition from 1 to 2 560 3.57 0.13 22 Gambia, The GMB Stage 1 84 4.78 0.26 76 Nicaragua NIC Stage 1 77 3.57 0.25 23 Taiwan, China TWN Stage 3 70 4.75 0.26 77 Zambia ZMB Stage 1 88 3.57 0.33 24 Brunei Darussalam BRN Transition from 1 to 2 41 4.75 0.39 78 Mozambique MOZ Stage 1 87 3.56 0.35 79 Liberia LBR Stage 1 84 3.56 0.31 25 Luxembourg LUX Stage 3 44 4.65 0.43 80 Jamaica JAM Stage 2 75 3.53 0.30 26 Azerbaijan AZE Transition from 1 to 2 89 4.63 0.30 81 Ghana GHA Stage 1 77 3.53 0.31 27 Mauritius MUS Stage 2 91 4.58 0.31 82 Bolivia BOL Transition from 1 to 2 71 3.52 0.27 28 Estonia EST Transition from 2 to 3 82 4.54 0.31 83 Côte d'Ivoire CIV Stage 1 91 3.46 0.30 29 United States USA Stage 3 390 4.53 0.14 84 Costa Rica CRI Stage 2 94 3.44 0.27 30 China CHN Stage 2 369 4.51 0.13 85 Colombia COL Stage 2 281 3.43 0.17 31 France FRA Stage 3 128 4.51 0.27 86 Vietnam VNM Stage 1 94 3.40 0.30 32 Australia AUS Stage 3 67 4.49 0.41 87 Timor-Leste TLS Stage 2 33 3.39 0.61 33 Bahrain BHR Transition from 2 to 3 63 4.47 0.38 88 DOM Stage 2 90 3.38 0.32 34 South Africa ZAF Stage 2 45 4.42 0.38 Dominican Republic 35 Malta MLT Stage 3 57 4.36 0.44 89 Senegal SEN Stage 1 91 3.35 0.33 36 Gabon GAB Transition from 1 to 2 48 4.34 0.36 90 Libya LBY Transition from 1 to 2 68 3.33 0.40 37 Morocco MAR Stage 2 40 4.33 0.45 91 Mongolia MNG Transition from 1 to 2 82 3.27 0.31 38 India IND Stage 1 119 4.31 0.27 92 Bulgaria BGR Stage 2 119 3.26 0.24 39 Italy ITA Stage 3 86 4.24 0.32 93 Latvia LVA Transition from 2 to 3 98 3.24 0.29 40 Barbados BRB Transition from 2 to 3 69 4.24 0.34 94 BIH Stage 2 100 3.22 0.24 41 Korea, Rep. KOR Stage 3 98 4.23 0.25 Bosnia and Herzegovina 42 Montenegro MNE Stage 2 74 4.20 0.35 95 Cameroon CMR Stage 1 61 3.21 0.36 43 Seychelles SYC Transition from 2 to 3 32 4.20 0.51 96 TTO Transition from 2 to 3 149 3.21 0.23 44 Israel ISR Stage 3 50 4.19 0.40 Trinidad and Tobago 45 Brazil BRA Transition from 2 to 3 141 4.16 0.23 97 Suriname SUR Stage 2 36 3.17 0.37 46 Panama PAN Stage 2 132 4.15 0.20 98 Slovak Republic SVK Stage 3 65 3.11 0.33 47 Denmark DNK Stage 3 128 4.10 0.28 99 Mali MLI Stage 1 99 3.06 0.35 48 Cambodia KHM Stage 1 73 4.09 0.33 100 Malawi MWI Stage 1 60 3.05 0.38 49 Indonesia IDN Stage 2 88 4.08 0.32 101 Nigeria NGA Stage 1 102 3.05 0.31 50 Belgium BEL Stage 3 83 4.07 0.36 102 Guatemala GTM Stage 2 83 3.04 0.29 51 Portugal PRT Stage 3 114 4.06 0.25 103 Hungary HUN Transition from 2 to 3 103 3.03 0.32 52 Puerto Rico PRI Stage 3 70 4.05 0.40 104 Bangladesh BGD Stage 1 84 3.03 0.31 53 Spain ESP Stage 3 90 4.03 0.36 105 Egypt EGY Transition from 1 to 2 73 3.02 0.33 54 Jordan JOR Stage 2 155 3.92 0.24 106 Guyana GUY Stage 2 89 3.02 0.31 107 Croatia HRV Transition from 2 to 3 107 3.00 0.23 lxii Countries highlighted had sufficient sample sizes based on responses for the Global Risks Perception Survey. Section 6 TUR Section 5 Turkey Switzerland Section 4 18 19 Section 3 1 Table continued on next page Global Risks 2013 Section 2 Rank Table 4: Executive Opinion Survey Question 2.07 Risk Management Effectiveness Resultslxii 67 Sample Risk Management Score Margin of Error at 95% Confidence Level Section 5 Economic Development Stage Section 4 ISO Section 3 Country Section 2 Rank Section 1 108 Uganda UGA Stage 1 87 2.99 0.30 109 Thailand THA Stage 2 75 2.98 0.37 110 Cyprus CYP Stage 3 78 2.97 0.30 111 Mauritania MRT Stage 1 78 2.97 0.37 112 Kenya KEN Stage 1 109 2.93 0.31 113 Moldova MDA Stage 1 112 2.93 0.25 114 Tanzania TZA Stage 1 97 2.90 0.29 115 Lesotho LSO Stage 1 80 2.87 0.34 116 Slovenia SVN Stage 3 109 2.84 0.28 117 Kuwait KWT Transition from 1 to 2 37 2.81 0.62 118 Serbia SRB Stage 2 99 2.81 0.31 119 Ukraine UKR Stage 2 108 2.65 0.27 120 Nepal NPL Stage 1 91 2.64 0.28 121 Algeria DZA Transition from 1 to 2 33 2.64 0.57 122 Sierra Leone SLE Stage 1 99 2.59 0.31 123 Romania ROU Stage 2 98 2.53 0.27 124 Swaziland SWZ Stage 2 50 2.52 0.39 125 Chad TCD Stage 1 103 2.49 0.27 126 Pakistan PAK Stage 1 106 2.47 0.24 127 Zimbabwe ZWE Stage 1 63 2.46 0.28 128 Honduras HND Transition from 1 to 2 85 2.43 0.27 129 Lebanon LBN Transition from 2 to 3 38 2.42 0.39 130 Madagascar MDG Stage 1 88 2.40 0.21 131 Paraguay PRY Stage 2 78 2.29 0.26 132 El Salvador SLV Stage 2 34 2.28 0.41 133 Kyrgyz Republic KGZ Stage 1 96 2.21 0.26 134 Burundi BDI Stage 1 90 2.18 0.21 135 Haiti HTI Stage 1 66 2.16 0.29 136 Greece GRC Stage 3 78 2.12 0.23 137 Yemen YEM Stage 1 52 2.12 0.35 138 Argentina ARG Transition from 2 to 3 96 2.08 0.25 139 Venezuela VEN Transition from 1 to 2 38 1.68 0.28 Meanwhile, respondents to the Global Risks Perception Survey were asked, per risk, about their country of expertise’s ability to adapt and or recover from its impact: “What would be your country’s capability to adapt and or recover from the national impact of this global risk?” Table 5 ranks the countries from the highest to lowest according to their adaptability/ recoverability score. As with the Executive Opinion Survey risk-management question results, Singapore again and many Stage 3, innovation-driven economies are ranked higher than Stage 1, factor-driven economies. Additional details about the survey sample size for each country and its economic development stage are also provided in the table. Analysing the countries in table 5 in terms of their economic development stage presents an interesting way to group countries and tests whether this is the best method to do so.lxiii In the Global Competitiveness Report 2012-2013, the economic development stages are as defined below: -- Economies in the first stage are mainly factor-driven and compete based on their factor endowments—primarily low-skilled labour and natural resources. -- Transition from stage 1 to stage 2 -- Economies in the second stage have moved into an efficiency-driven stage of development, when they must begin to develop more efficient production processes and increase product quality because wages have risen and they cannot increase prices. -- Transition from stage 2 to stage 3 -- Economies in stage 3 have moved into the innovation-driven stage, wages will have risen by so much that they are able to sustain those higher wages and the associated standard of living only if their businesses are able to compete with new and/or unique products, services, models, and processes. Countries highlighted in blue were used for the preliminary analysis presented in the Special Report section. The selection criterion was the sufficiency of the country sample size to guarantee a margin of error smaller than 0.5 units (equal to a 95% confidence interval of less than one unit). 66 countries were not included below as the sample size was smaller than 5.lxiv Section 6 lxiii lxiv 68 Global Risks 2013 The economic development stage groupings are the best data currently available for this report. Further analysis will investigate other potential groups, for example, GDP per capita or income level. Margin of errors can still be large for the countries with small sample sizes listed in Table 5 and therefore were not included in the detailed analysis. Section 1 1.07 3.37 0.43 5 United Arab Emirates Stage 3 11 3.28 1.01 6 Canada Stage 3 18 3.27 0.63 7 People's Republic of China Stage 2 72 3.26 0.25 8 Chile Transition from 2 to 3 6 3.24 1.71 9 USA Stage 3 283 3.23 0.12 10 Denmark Stage 3 8 3.21 1.20 11 Netherlands Stage 3 20 3.19 0.51 12 Germany Stage 3 40 3.19 0.36 13 Israel Stage 3 8 3.16 1.26 14 Australia Stage 3 13 3.15 0.76 15 Belgium Stage 3 7 3.15 1.35 16 Japan Stage 3 60 3.07 0.29 17 Brazil Transition from 2 to 3 35 3.01 0.44 18 South Korea Stage 3 6 2.96 1.32 19 United Kingdom Stage 3 64 2.95 0.29 20 Mexico Transition from 2 to 3 25 2.93 0.52 21 Indonesia Stage 2 9 2.9 1.08 22 Saudi Arabia Transition from 1 to 2 9 2.87 1.21 23 Poland Transition from 2 to 3 14 2.86 0.74 24 Tunisia Stage 2 16 2.85 0.77 25 Russian Federation Transition from 2 to 3 35 2.84 0.48 26 France Stage 3 6 2.81 1.63 27 Vietnam Stage 1 13 2.79 0.77 28 South Africa Stage 2 25 2.77 0.57 29 Thailand Stage 2 6 2.75 1.51 30 Costa Rica Stage 2 11 2.74 0.97 31 Peru Stage 2 6 2.73 1.65 32 India Stage 1 64 2.71 0.28 33 Panama Stage 2 13 2.67 0.95 34 Italy Stage 3 31 2.67 0.40 35 Malaysia Transition from 2 to 3 10 2.64 0.80 36 Turkey Transition from 2 to 3 11 2.61 0.95 37 Ukraine Stage 2 11 2.54 0.99 38 Kuwait Transition from 1 to 2 7 2.52 1.48 39 Egypt Transition from 1 to 2 10 2.47 0.89 40 Mauritius Stage 2 9 2.46 1.01 41 Argentina Transition from 2 to 3 6 2.46 1.41 42 Dominican Republic Stage 2 5 2.44 1.94 43 Spain Stage 3 9 2.4 1.10 44 Philippines Transition from 1 to 2 9 2.4 0.89 45 Pakistan Stage 1 10 2.37 1.17 46 Colombia Stage 2 7 2.34 1.20 47 Jordan Stage 2 7 2.23 1.48 48 Nigeria Stage 1 16 2.21 0.66 49 Ethiopia Stage 1 7 2.08 1.41 Potential Quantitative Indicators 3.46 32 Potential Executive Opinion Survey Indicators 8 Stage 3 Component Attributes Margin of Error at 95% Confidence Level Stage 3 Switzerland Robustness Resilience Components Adaptability/ Recoverability Score Sweden 4 Monitoring system health Quality of natural Logistics Performance Index from the environment World Bank Quality of healthcare system Quality of overall infrastructure Quality of education system Modularity State cluster development Economic Freedom of the World Index from Gwartney, J., Lawson, R., & Clark, J. R. Economic Freedom of the world, 2012. Adaptive decisionmaking models Willingness to delegate authority Index of Economic Freedom from 2012 Index of Economic Freedom, the Heritage Foundation. Redundancy Sample 3 Table 6: Potential Indicators for Resilience Componentslxvi Redundancy Quantity of local of critical suppliers infrastructure Resourcefulness Economic Development Stage 1.62 Capacity for selforganization Response Country 0.93 3.56 Communication Recovery Rank 3.66 6 Responsive Reform regulatory implementation feedback efficiency mechanisms Actionable Governance Indicators from Actionable Governance Indicators Data Portal, the World Bank. Active “horizon scanning” Some studies have suggested potential quantitative data for this attribute including developing public-private partnerships for Research and Development and Innovation and promoting centres and networks of excellence, regional research driven clusters and innovation poles (Manjón, J. & Vicente J. A Proposal of Indicators and Policy Framework for Innovation Benchmark in Europe. In Journal of Technology Management and Innovation, 2010, 5:13-23.) Reserves Renewable freshwater resources Density of physicians from World Health Statistics, World Health Organization. Diversity of solutions and strategy Value chain breadth Environmental Performance Index (Ecosystem Vitality) from Environmental Performance Index, Yale University. Accessibility of Education Index from International digital content Human Development Indicators, United Extent to which Nations Development Programme. virtual social networks are used Creativity and innovation Latest technologies Research and development expenditure as a percentage of gross domestic production from World Development Indicators, the World Bank. Public trust in politicians Media Sustainability Index from IREX. Inclusive participation Businessgovernment relations Business regulatory environment Structural policies cluster from Country Policy and Institutional Assessment, the World Bank. Collaboration within clusters Section 6 10 Stage 3 Table 7 shows the questions identified in the Executive Opinion Survey that are potential variables for the Country Resilience framework described in the Special Report section of this report. lxv lxvi See Table 7 for detailed questions for each of the qualitative indicators. These potential indicators are still work in progress. Further development, research and refinement will be conducted in the coming year. Global Risks 2013 Section 5 Stage 3 Norway Section 4 Singapore 2 As presented in the Special Report section, a country system is assessed using five components of resilience: robustness, redundancy, resourcefulness, response and recovery. Each component is further defined by key attributes, and for each of these attributes, potential qualitativelxv and quantitative indicators have been identified (see Table 6). Section 3 1 Appendix 3.2 Section 2 *by country of expertise Table 5: Global Risks Perception Survey Resilience Question Results 69 Section 1 Table 7: Executive Opinion Survey Questions Section 2 Section 3 Section 4 Question Variable Name Executive Opinion Survey Question 0208 Businessgovernment relations How would you characterize business-government relations in your country? (1 = Generally confrontational; 7 = Generally cooperative ) 0304 Public trust of politicians How would you rate the level of public trust in the ethical standards of politicians in your country? (1 = Very low; 7 = Very high) 0305 Reform implementation efficiency In your country, to what extent are government reforms implemented efficiently? (1 = Reforms are never implemented; 7 = Reforms are implemented highly efficiently) 0306 Politicians' ability to govern In your country, how you would rate the ability of politicians to govern effectively? (1 = Very weak; 7 = Very strong) 0308 Wastefulness of government spending How would you rate the composition of public spending in your country? (1 = Extremely wasteful; 7 = Highly efficient in providing necessary goods and services ) 0510 Government provision of services for improved business performance To what extent does the government in your country continuously improve its provision of services to help businesses in your country boost their economic performance? (1 = Not at all; 7 = Extensively) 0401 Quality of overall infrastructure How would you assess general infrastructure (e.g. transport, telephony and energy) in your country? (1 = Extremely underdeveloped; 7 = Extensive and efficient by international standards) 0501 Availability of latest To what extent are the latest technologies available in technologies your country? (1 = Not available; 7 = Widely available) 0507 Collaborations within clusters In your country, how extensive is collaboration among firms (e.g. suppliers, competitors, clients) in order to promote knowledge flows and innovation? (1 = Collaboration is non-existent; 7 = Collaboration is extensive) 0524 Accessibility of digital content In your country, how accessible is digital content (e.g. text and audio-visual content, software products) via multiple platforms (e.g. fixed-line Internet, wireless Internet, mobile network, satellite)? (1 = Not accessible at all; 7 = Widely accessible) Section 5 Section 6 0525 Extent of virtual social networks use How widely used are virtual social networks (e.g. Facebook, Twitter, LinkedIn) for professional and personal communications in your country? (1 = Not used at all; 7 = Used widely) 0803 Local supplier quantity How numerous are local suppliers in your country? (1 = Largely non-existent; 7 = Very numerous) 0809 State of cluster development In your country, how prevalent are well-developed and deep clusters (geographic concentrations of firms, suppliers, producers of related products and services, and specialized institutions in a particular field)? (1 = Non-existent; 7 = Widespread in many fields) 0902 Value chain breadth In your country, do exporting companies have a narrow or broad presence in the value chain? (1 = Narrow, primarily involved in individual steps of the value chain (e.g., resource extraction or production); 7 = Broad, present across the entire value chain (i.e. do not only produce but also perform product design, marketing sales, logistics and after-sales services)) 0910 Willingness to delegate authority In your country, how do you assess the willingness to delegate authority to subordinates? (1 = Not willing – top management controls all important decisions; 7 = Very willing – authority is mostly delegated to business unit heads and other lower-level managers) 1001 Quality of the educational system How well does the educational system in your country meet the needs of a competitive economy? (1 = Not well at all; 7 = Very well) 1102 Measures to In your country, how effective are the government’s combat corruption efforts to combat corruption and bribery? (1 = Not and bribery effective at all; 7 = Extremely effective) 1303 Quality of natural environment How would you assess the quality of the natural environment in your country? (1 = Extremely poor; 7 = Among the world’s most pristine) 1401 Quality of healthcare services How would you assess the quality of healthcare (public and private) provided for ordinary citizens in your country? (1 = Very poor; 7 = Excellent, among the best healthcare delivery systems of the world) Appendix 3.3 As explained in the Special Report, 10 countries were identified that had a margin of error of less than 0.5: Brazil, China, Germany, India, Italy, Japan, Russia, Switzerland, United Kingdom and United States. Statistical analysislxvii was conducted to identify paired differences between groups for the 10 countries, regionslxviii and economic development stages.lxix Generally, respondents from Stage 3, innovation-driven economies had greater confidence that their country will be able to adapt and/or recover from the impact of a global risk. Respondents from Stage 1, factor-driven economies, were more pessimistic. Most interestingly, in the societal category, we found the only risk that had no statistically significant difference, mismanagement of population ageing, and the only risk where Stage 2, efficiency-driven economies were more optimistic than Stage 3 economies was rising religious fanaticism. Following similar patterns, North Americans generally had greater confidence, while Sub-Saharan Africans had less. Statistically significant differences between countries were found for all risks, other than the two risks hard landing of an emerging economy and species overexploitation. Depending on the category and sometimes the risk, different countries were seen to have comparatively higher ability to adapt and/or recover from the impact of the risks. For the economic and environmental categories, it was Switzerland; for the geopolitical, it was China; for the technological, it was the United States; and for the societal category, there was no one particular country. Across 50 global risks, where there are statistically significant differences (56% of the risks for age and 44% of the risks for gender), respondents under 40 years of age and female respondents rate their country as having less ability to adapt and/or recover from the impact of the risk. The majority of risks that had no statistically significant differences were from the geopolitical and technological category for gender and the environmental category for age. The largest differences in opinion were found on the unsustainable population growth and water supply crises. With regards to perceptions of experts versus non-experts, unlike with likelihood and impact, for this group statistically significant differences were found only in the societal and technological category. Self-identified societal experts were more pessimistic about our recovery from societal risks, while self-identified technological experts were more optimistic about our recovery from technological risks. lxvii lxviii lxix 70 Global Risks 2013 An analysis of variance (ANOVA) tested whether or not the means of sub-groups were all equal. For those risks where they were not all equal, a Sidak post-hoc test established which of the pair-wise differences between groups were significant at the 5% level. The whole survey sample was used. The whole survey sample was used and grouped according to their economic development stages as identified by the Global Competitiveness Report. Section 1 Table 8: Comparisons between Groupslxx for a Country’s Ability to Adapt and/or Recover from the Impact of Global Riskslxxi Country of Expertise Region of Eexpertise Economic Development Stages Stakeholder BRA Asia A Stage 3 S3 Academia A China CHN Europe E Transition from 2 to 3 T2.5 Business B Germany DEU Latin America LA Stage 2 S2 Government G India IND North America NA Transition from 1 to 2 T1.5 International Organization IO Italy ITA Middle East/ North Africa MENA Stage 1 S1 NGO N Japan JPN Sub-Saharan Africa SSA Other Other Russia RUS Switzerland CHE United Kingdom GBR United States USA Country of Expertise *only for the 10 identified countries Region of Expertise Economic Development Stages Stakeholder Age Gender Under 40 CHE > GBR, IND, ITA, JPN, USA CHN > GBR, ITA, JPN, USA DEU, BRA > JPN Chronic labour market imbalances Extreme volatility in energy and agriculture prices Female Expert NonExpert - T2.5 > S1, T1.5, S3 S2, S3 > S1 - 2.91 < 3.11 3.06 > 2.91 - CHE > GBR, IND, ITA, JPN, USA CHN > IND, ITA, USA DEU, BRA, USA > ITA LA, A, E, NA > SSA T2.5, S3 > S1, T1.5 S2 > S1 - 2.86 < 3.09 3.04 > 2.86 - CHN, USA > GBR, IND, JPN BRA > IND, JPN CHE, DEU > JPN NA > E, A, LA, SSA MENA, E, A, LA > SSA S3 > S1, T1.5, S2 S2, T2.5 > S1 - 2.93 < 3.06 NA > E, SSA S3 > All other stages S2 > S1 - - CHN > GBR, RUS USA > GBR NA, A > E S2, T2.5, S3 > S1 Prolonged infrastructure neglect CHE, CHN > BRA, GBR, IND, ITA, RUS, USA DEU, JPN > BRA, GBR, IND, ITA, RUS USA > IND A > LA, SSA E, NA > SSA S3 > S1, T1.5, T2.5 S2 > S1, T1.5 T2.5 > S1 Recurring liquidity CHN > GBR, ITA crises CHE, USA > ITA A > E, SSA NA > SSA S2, T2.5, S3 > T1.5, S1 Severe income disparity DEU > GBR, IND, RUS, USA CHE, JPN > IND E > LA, SSA MENA, NA, A > SSA Unforeseen negative consequences of regulation CHE, CHN > IND, ITA, RUS DEU, USA > ITA Unmanageable inflation or deflation - - - 2.85 < 3.01 2.98 > 2.83 - 2.92 < 3.06 3.06 > 2.85 - G > IO, N 2.92 < 3.17 3.11 > 2.91 - S3 > All other stages S2, T2.5 > S1 B>N 2.7 < 2.89 2.87 > 2.64 - NA > SSA S3 > S1, T1.5, T2.5 S2 > S1, T1.5 A, B > IO 2.85 < 3.02 2.98 > 2.84 - CHN, USA > IND NA > SSA S3 > S1, T1.5, S2 S2, T2.5 > S1, T1.5 G > IO 2.86 < 3.06 3.01 > 2.84 - Antibioticresistant bacteria CHE, JPN, USA > BRA, IND, RUS A, E, NA > LA, SSA MENA > SSA S3 > All S2, T2.5 > S1 - - - - Failure of climate change adaptation CHE, CHN, DEU, JPN, USA > IND A, E, NA > SSA S3 > S1, T1.5 S2, T2.5 > S1 - - - - Irremediable pollution CHE > CHN, IND, ITA GBR, JPN, USA > IND, ITA DEU > IND NA > SSA, LA A, E > SSA S3 > All other stages T2.5 > S1, T1.5 S2 > S1 - lxx lxxi B, G > IO - 2.81 < 2.97 2.96 > 2.73 Section 6 Major systemic financial failure - - Section 5 Hard landing of an emerging economy Male Expertise Section 4 Chronic fiscal imbalances Over 40 Section 3 Risk Section 2 Brazil - An analysis of variance (ANOVA) tested whether or not the means of sub-groups are all equal; for those that were not all equal, a Sidak post-hoc test was then conducted to establish which of the pair-wise differences between groups are significant at the 5% level. Only statistically significant differences are noted; otherwise, the table cell is left empty. Global Risks 2013 71 Section 1 CHE > CHN, IND, ITA, RUS JPN > IND, ITA BRA, DEU, GBR, USA > IND NA > SSA, LA A, E > SSA S3 > All other stages T2.5 > S1, T1.5 S2 > S1 - Mismanaged urbanization CHE > BRA, CHN, IND, RUS DEU, JPN > BRA, IND, RUS CHN, GBR, USA > BRA, IND ITA > IND E > A, MENA, SSA, LA A, NA > SSA, LA S3 > All other stages S2 > S1, T1.5 T2.5 > S1 - Persistent extreme weather CHE > BRA, IND, ITA DEU, JPN > IND, ITA CHN, GBR, USA > IND NA, E > SSA, LA A > SSA S3 > All other stages S2, T2.5 > S1 Rising greenhouse gas emissions CHN, JPN > GBR, IND, USA BRA, CHE, DEU > IND - - Section 2 Land and waterway use mismanagement Section 3 Species overexploitation - 2.85 < 3.01 3.02 > 2.74 - - 3.12 > 2.93 - - - 2.98 > 2.80 - S2, T2.5, S3 > S1, T1.5 - - - - S3 > S1, T1.5 T2.5 > T1.5 - - - - - - - - - - Section 4 Section 5 Section 6 Unprecedented geophysical destruction CHN, DEU > ITA JPN, USA > IND, ITA NA > MENA, LA, E, SSA A > MENA, SSA E > SSA S3 > S1, T1.5, S2 T2.5 > S1, T1.5 S2 > S1 Vulnerability to geomagnetic storms CHN > BRA USA > BRA, ITA NA > E, LA, MENA, SSA A > MENA, LA, SSA E > LA S3 > All other stages - Critical fragile states CHE > ITA, JPN, RUS CHN > ITA A, E, NA > SSA S3 > S1, T1.5, S2 T2.5 > S1, T1.5 S2 > S1 - Diffusion of weapons of mass destruction CHN, USA > ITA, JPN A, NA > LA, SSA E > SSA S3 > S1, T1.5 S2 > S1 - Entrenched organized crime CHN, USA > BRA, ITA, JPN, RUS CHE, DEU, GBR > ITA, RUS IND, JPN > ITA NA > E, LA, SSA, A, E, MENA > LA, SSA S3 > All other stages - 2.95 < 3.13 Failure of diplomatic conflict resolution CHE, CHN > ITA, JPN, RUS BRA, USA > ITA, JPN DEU, GBR > JPN NA > LA, SSA S3 > S1, T1.5, S2 T2.5 > S1 - 3.01 < 3.13 Global governance failure CHN > IND, ITA, JPN, RUS CHE > ITA, JPN, RUS USA > ITA A, NA > SSA S3 > S1, T1.5 S2 > S1 - Militarization of space USA > BRA, DEU, GBR, IND, ITA, JPN CHN > GBR, ITA, JPN NA > All other regions A > LA S3 > S1, T1.5, T2.5 - Pervasive entrenched corruption USA > BRA, CHN, IND, ITA, RUS CHE, JPN > BRA, IND, ITA, RUS CHN, DEU, GBR > IND, ITA, RUS NA > A, E, LA, SSA A, E, MENA > LA, SSA S3 > All other stages S2, T2.5 > S1 - 2.72 < Terrorism CHN > IND, ITA, JPN, RUS USA > IND, JPN, RUS E, NA, MENA > LA, SSA A > LA S3 > S1, T1.5, T2.5 S2, T2.5 > S1 - 3.01 Unilateral resource nationalization BRA, CHN, USA > DEU, GBR, IND, ITA, JPN CHE > ITA, JPN NA > A, E, LA, SSA T2.5, S3 > S1 - Widespread illicit trade CHN, USA > ITA, RUS NA > E, LA, SSA A > LA, SSA E, MENA > SSA S3 > All other stages S2 > S1 - Backlash against globalization DEU > GBR, IND, ITA, JPN USA > JPN S3 > S1, T1.5, S2 T2.5 > S1 - 72 Global Risks 2013 - A, B > IO 3.13 < 3.27 - 3.26 > 3.09 - 2.88 > 2.72 - 3.11 > 2.88 - - - - - - - - - 2.97 - - < 3.16 - - 2.89 < 3.12 - - 2.98 < 3.13 - - - 3.17 > 3.04 Section 1 Food shortage crises BRA > GBR, IND, JPN CHE, CHN, DEU, USA > IND, JPN NA > A, MENA, LA, SSA E > A, SSA A > SSA T2.5, S3 > S1, T1.5, S2 S2 > S1, T1.5 - Ineffective illicit drug policies CHE, CHN > BRA, GBR, ITA, RUS, USA JPN > BRA, ITA, RUS, USA DEU > BRA, ITA A > LA, NA, SSA E, MENA > LA S3 > S1, T1.5, T2.5 - Mismanagement of population ageing IND > GBR, ITA, RUS CHE > ITA, RUS MENA > NA, E Rising rates of chronic disease JPN > BRA, GBR, IND, RUS, USA A > LA, SSA E, NA, MENA > SSA S3 > All other stages S2 > S1 - Rising religious fanaticism BRA, CHN > IND, RUS, USA CHE > IND, USA JPN > IND LA > E, MENA, NA, SSA S2 > S1, T1.5, S3 S3 > S1, T1.5 T2.5 > S1 - 3.06 < Unmanaged migration BRA > IND, ITA, RUS USA > IND, ITA CHN > IND NA > E All other regions > SSA T2.5, S3 > S1, S2 T1.5, S2 > S1 - 2.91 Unsustainable population growth CHE, CHN, USA > IND NA > A, SSA E > SSA T2.5, S3 > S1, T1.5 S2 > S1 - 2.89 Vulnerability to pandemics CHE, CHN, USA > BRA, IND, RUS DEU, JPN > IND, RUS A, E, NA > LA, SSA S3 > All other stages S2, T2.5 > S1 - Water supply crises BRA > CHN, GBR, IND, ITA, USA CHE, DEU, JPN > CHN, IND, ITA CHN, GBR, RUS, USA > IND E > A, MENA, SSA NA > A, SSA LA > SSA T2.5, S3 > S1, T1.5, S2 S2 > S1 Critical systems failure USA > BRA, GBR, IND, ITA, RUS CHE > IND, ITA, RUS NA > A, E, LA, SSA A > LA, SSA E, MENA > SSA S3 > All other stages S2 > S1 - - Cyber attacks USA > GBR, IND, ITA, JPN, RUS CHN > IND NA > A, E, LA, SSA A, E, MENA > SSA S3 > All other stages S2, T2.5 > S1 - Failure of intellectual property regime USA > RUS NA > LA, SSA, MENA S3 > All other stages - Massive digital misinformation USA > IND, ITA, RUS CHE, CHN > IND, ITA DEU, GBR, JPN > IND NA > A, E, LA, SSA A, E, MENA > SSA S3 > All other stages S2, T2.5 > S1 B > IO 2.99 < 3.11 - 3.18 > 3.01 Massive incident USA > BRA, GBR, of data fraud/theft IND, ITA, RUS NA > A, E, LA, SSA A > LA, SSA E, MENA > SSA S3 > All other stages - 2.88 < 3.04 - 3.13 > 2.91 Mineral resource supply vulnerability USA > DEU, GBR, IND, ITA, JPN CHN, RUS > GBR, IND, ITA, JPN NA > All other regions T2.5, S3 > S1, T1.5 S2 > S1 - 2.85 < 3.01 - Proliferation of orbital debris USA > BRA, GBR, IND, ITA, JPN CHN > BRA NA > All other regions A > LA S3 > S1, S2, T2.5 - - - Unforeseen consequences of climate change mitigation JPN > GBR, IND CHN, USA > GBR NA > LA, SSA S3 > All other stages - - - Unforeseen consequences of nanotechnology USA > BRA, GBR, IND CHN, JPN > BRA NA > E, LA, MENA, SSA A > LA, MENA, SSA Europe > LA, SSA S3 > All other stages - - Unforeseen consequences of new life science technologies USA > BRA, GBR, ITA, RUS NA > E, LA, SSA, MENA A, E > LA, SSA S3 > All other stages - - 3.38 - - 2.81 < 2.95 - < - - - - > 2.82 3.19 3.19 > 2.99 < 3.13 3.08 > 2.89 2.94 < 3.10 < 3.21 3.10 > 2.95 2.99 < 3.12 < 2.87 3.27 > 2.99 - - 3.25 < 3.39 2.98 - 3.1 3.21 Section 3 G, A, B > N < Section 2 - 3.23 - 2.97 < 3.31 - 3.14 > 2.87 - - 3.11 > 2.93 - - Section 4 3.03 2.82 - - 2.84 > Section 6 < > Section 5 2.64 2.77 - 2.67 - 2.62 2.92 > 2.65 2.85 > 2.70 Global Risks 2013 73 Section 1 Acknowledgements Section 2 Section 3 Section 4 Global Risks 2013 synthesises the insights, ideas and contributions of many individuals through workshops, interviews, group calls and research. The project team sincerely thanks everyone who took part in the challenge to think hard about global risks. Without their dedication, guidance and support, we would not have been able to develop this report. Global Risks 2013, Eighth Edition Partners Marsh & McLennan Companies National University of Singapore Oxford Martin School, University of Oxford Swiss Reinsurance Company Wharton Center for Risk Management, University of Pennsylvania Zurich Insurance Group With special thanks to Advisory Group for the Global Risks 2013 Eighth Edition (in alphabetical order by last name): David Cole, Swiss Reinsurance Company John P. Drzik, Oliver Wyman Group (MMCo) Ian Goldin, Oxford Martin School Howard Kunreuther, The Wharton School, University of Pennsylvania Section 5 Axel Lehmann, Zurich Insurance Group Tan Chorh Chuan, National University of Singapore And the following representatives of the global risk partners for their contribution to the Global Risks report content development and dissemination (in alphabetical order by last name): Josephine Chennell, Swiss Reinsurance Company Section 6 Natalie Day, Oxford Martin School Rainer Egloff, Swiss Reinsurance Company Ho Teck Hua, National University of Singapore Erwann Michel-Kerjan, The Wharton School, University of Pennsylvania Lucy Nottingham, Marsh & McLennan Companies Gregory Renand, Zurich Insurance Group Reto Schneider, Swiss Reinsurance Company Andrea Stuermer, Zurich Insurance Group Tay Lee Teng, National University of Singapore Mike Useem, The Wharton School, University of Pennsylvania Steve Wilson, Zurich Insurance Group Alex Wittenberg, Marsh & McLennan Companies 74 Global Risks 2013 Section 1 The project team would also like to thank all the business, public sector, academic and civil society leaders who participated in our interviews, workshops, and risk cases development (in alphabetical order by last name with their affiliation at the time of participation): Tikki Pang, National University of Singapore Dapo Akande, Oxford Martin School Anders Sandberg, Oxford Martin School Mark Ames, Oliver Wyman (Marsh & McLennan Companies) Julian Savulescu, Oxford Martin School Daniel Andris, Swiss Reinsurance Company Oliver Schelske, Swiss Reinsurance Company Dan Awrey, University of Oxford Andreas Schraft, Swiss Reinsurance Company Valerio Bacak, The Wharton School, University of Pennsylvania Martin Schürz, Swiss Reinsurance Company Luis Ballesteros, The Wharton School, University of Pennsylvania Lutfey Siddiqi, National University of Singapore John Boochever, Oliver Wyman (Marsh & McLennan Companies) Richard Smith-Bingham, Oliver Wyman (Marsh & McLennan Companies) Sandra Burmeier, Swiss Reinsurance Company Keoyong Song, The Wharton School, University of Pennsylvania Philippe Brahin, Swiss Reinsurance Company Yumiko Takada, Marsh Japan Inc (Marsh & McLennan Companies) Jerry Cacciotti, Oliver Wyman (Marsh & McLennan Companies) Rolf Tanner, Swiss Reinsurance Company Iordanis Chatziprodromou, Swiss Reinsurance Company Dodo J. Thampapillai, National University of Singapore Oliver Chen, National University of Singapore Carl Frey, Oxford Martin School Cecilia Tortajada, Third World Centre for Water Management, Mexico Tim Garton Ash, University of Oxford Ginger Turner, The Wharton School, University of Pennsylvania Ed George, The Wharton School, University of Pennsylvania Sonia Trigueros, Oxford Martin School Charles Godfray, Oxford Martin School Richard Waterman, The Wharton School, University of Pennsylvania Felix Reed-Tsochas, Oxford Martin School Daniel Ryan, Swiss Reinsurance Company Section 2 Janet Smart, University of Oxford Michael Weissel, Oliver Wyman (Marsh & McLennan Companies) Raja Hafiz Affandi, The Wharton School, University of Pennsylvania Daniel Wesemann, Swiss Reinsurance Company Peter Hausmann, Swiss Reinsurance Company Martin Weymann, Swiss Reinsurance Company Barrie Wilkinson, Oliver Wyman (Marsh & McLennan Companies) Carol Heller, The Wharton School, University of Pennsylvania Ngaire Woods, Blavatnik School of Government Claus Herbolzheimer, Oliver Wyman (Marsh & McLennan Companies) Arran Yentob, Oliver Wyman (Marsh & McLennan Companies) Yoshiki Hiruma, Development Bank of Japan Section 5 Anwarul Hasan, Swiss Reinsurance Company Satoru Hiraga, Marsh Japan (Marsh & McLennan Companies) Section 4 Beat Habegger, Swiss Reinsurance Company Section 3 Mark Goh, National University of Singapore Robert Parisi, Marsh Inc (Marsh & McLennan Companies) Bernard Yeung, National University of Singapore Nick Wildgoose, Zurich Insurance Group Testing Economic and Environmental Resilience Jussi Keppo, National University of Singapore David Bresch, Swiss Reinsurance Company Mike King, NERA, Oliver Wyman (Marsh & McLennan Companies) Davis Cherry, Global Adaptation Institute Heng Yee Kuang, National University of Singapore Megan Clark, Commonwealth Scientific and Industrial Research Organisation Tim Kruger, Oxford Martin School Juan José Daboub, Global Adaptation Institute Susan Lea, Oxford Martin School Charlotta Groth, Zurich Insurance Group George Leeson, Oxford Martin School Jim W Hall, Environmental Change Institute, University of Oxford Elizabeth Leicht, Oxford Martin School Abyd Karmali, Bank of America Merrill Lynch Alexander Leveringhaus, Oxford Martin School Signe Krogstrup, Swiss National Bank Michael Lierow, Oliver Wyman (Marsh & McLennan Companies) Marc Levy, CIESIN, Columbia University John Merkovsky, Marsh Inc (Marsh & McLennan Companies) Manuel Lewin, Zurich Insurance Group Ann Miller, The Wharton School, University of Pennsylvania Anders Lyngaa Kristoffersen, Novozymes Lea Müller, Swiss Reinsurance Company Murray Birt, Deutsche Bank Group Mary Ng Mah Lee, National University of Singapore Guy Miller, Zurich Insurance Group Kalypso Nicolaidis, University of Oxford Chandran Nair, Global Institute for Tomorrow Toby Ord, Oxford Martin School Ian Noble, Global Adaptation Institute Global Risks 2013 75 Section 6 Kurt Karl, Swiss Reinsurance Company Section 1 Tim Palmer, Oxford Martin School Special Report: Building National Resilience to Global Risks Lindene Patton, Zurich Insurance Group Ian Bremmer, Eurasia Group Johan Rockström, Stockholm Resilience Centre Dennis L. Chesley, PwC Juan Carlos Castilla Rubio, Planetary Skin Institute Mary Cline, Eurasia Group John Scott, Zurich Insurance Group Anne-Sophie Crépin, Stockholm Resilience Centre Jorge E. Viñuales, The Graduate Institute, Geneva Elizabeth Eide, The National Academies, Division of Earth and Life Sciences Konrad Otto-Zimmerman, ICLEI Section 2 Digital Wildfires in a Hyperconnected World Victor Galaz, Stockholm Resilience Centre Section 3 Jolyon Barker, Deloitte Touche Tomatsu Ltd Jac C. Heckelman, Wake Forest University Adam Bly, Seed Emily Hoch, Eurasia Group Sadie Creese, Oxford Martin School Anders Hoffman, Danish Enterprise and Construction Authority Scott David, University of Washington Law, Technology and Arts Group Randolph Kent, Humanitarian Futures Programme Giorgos Dimitriou, European Network and Information Security Agency (ENISA) Emma Lindqvist, Eurasia Group Daniel Eherer, Zurich Insurance Group Nik Gowing, BBC World News Szerb László, University of Pecs Alexsandra Lloyd, Eurasia Group Kirstjen Nielsen, Sunesis Consulting, LLC Section 4 Witold Henisz, The Wharton School, University of Pennsylvania Satoru Nishikawa, Japan Water Agency Louis Marinos, European Network and Information Security Agency (ENISA) Sara Pantuliano, Overseas Development Institute Rodrigo Pérez Mackenna, Ministerio de Vivienda y Urbanismo Matthew Prince, CloudFlare Courtney Rickert McCaffrey, Eurasia Group Andreas Sfakianakis, European Network and Information Security Agency (ENISA) Christopher Michaelson, PwC Ray Stanton, British Telecom Michaela Saisana, European Commission Jamie Tomasello, CloudFlare The Dangers of Hubris on Human Health David B. Agus, University of Southern California Dionisis Philippas, JRC Andrea Saltelli, OECD Ross D. Schaap, Eurasia Group Don Tapscott, Moxie Insights Section 5 Lindsey Baden, The New England Journal of Medicine X Factors Richard Bergström, European Federation of Pharmaceutical Industries and Associations Tim Appenzeller, Nature Philip Campbell, Nature Zulfiqar A. Bhutta, The Aga Khan University Otto Cars, ReAct - Action on Antibiotic Resistance Jean Carlet, World Alliance against Antibiotic Resistance (WAAR) Jeffrey M. Drazen, The New England Journal of Medicine Section 6 John Frater, Oxford Martin School Chris Gillies, Zurich Insurance Group Kari Grave, European Medicines Agency Martha Gyansa-Lutterodt, Pharmaceutical Services and Chief Pharmacist of Ghana Anna Hedin, ReAct - Action on Antibiotic Resistance Uppsala University Dominique L. Monnet, European Centre for Disease Prevention and Control Carmem Pessoa, World Health Organization Laura J.V. Piddock, University of Birmingham and Antibiotic Action Paul Rogers, World Health Organization Nabil Safrany, European Centre for Disease Prevention and Control Johan Struwe, World Health Organization 76 Global Risks 2013 We also would like to thank all the people who participated in the Global Risks Survey 2012. Section 1 In addition, the project team expresses its gratitude to the Global Agenda Council community managers, the Business Engagement and Development team, and the following colleagues from the World Economic Forum for their advice and support throughout the Global Risks report development: Viraj Mehta Amrote Abdella Martin Nägele David Aikman Navdeep Guillaume Amigues Lyuba Nazaruk Marisol Argueta Derek O’Halloran Anastassia Aubakirova Sushant Palakurthi Rao Adeyemi Babington-Ashaye Gary Phillips Beñat Bilbao Pengcheng Qu Carl Björkman Olivier Raynaud Jennifer Blanke Lucien Rieben Roberto Bocca Pedro Rodrigues De Almeida Ciara Browne Olivier Schwab Giancarlo Bruno Kate Seiler Sophie Bussmann Bernardo Silva Roberto Crotti Paul Smyke Piers Cumberlege Masao Takahashi Nicholas Davis Michael Tost Margareta Drzeniek Terri Toyota Isabel de Sola Akira Tsuchiya Sean Doherty Tran Tu-Trang Michael Drexler Silvia von Gunten Miroslav Dusek Nina Vugman John Dutton Regula Waltenspuel Rim El Habibi Dominic Waughray Manal El Meligi Bruce Weinelt Cristiana Falcone Tiffany West Brindusa Fidanza Alex Wong Thierry Geiger Founder and Executive Chairman Katherine Milligan John Moavenzadeh Section 3 Section 4 Section 5 Ariane Haeni Matthew Miller Section 2 Martina Gmür Liana Melchenko Klaus Schwab Managing Directors Hala Hanna Børge Brende William Hoffman Robert Greenhill Antonio Human Lee Howell Alexandra Jequier Adrian Monck Julianne Jammers Sarita Nayyar Jeremy Jurgens Gilbert Probst Elsie Kanza Jean-Pierre Rosso Thomas Kerr Kevin Steinberg Hanseul Kim Alois Zwinggi Section 6 Andrew Hagan Pawel Konzal Rodolfo Lara Torres Helena Leurent Alan Marcus Global Risks 2013 77 Section 1 Project Team Section 2 Section 3 The Global Risks 2013 report, Eighth Edition, team includes the following World Economic Forum staff members: Editor in Chief Production Team Lee Howell, Managing Director, Member of the Managing Board Michael Hanley, Editorial Director, Communications Kamal Kimaoui, Director, Head of Production and Design Section 4 Research Team, Global Risks Report Chiemi Hayashi, Director, Head of Risk Response Network and Risk Research Catherine Zwahlen, Senior Knowledge Manager David Gleicher, Manager, Qualitative Research Scott David, Associate Director, Head of Information Interaction Adrian Shawcross, Freelance Graphic Designer David Bustamante, Senior Content Producer, Publication and Design Floris Landi, Graphic Designer, Publication and Design Section 5 Florian Ramseger, Manager, Quantitative Research David Helmsley, Junior Graphic Designer, Publication and Design Amey Soo, Research Associate, Quantitative Research Mary Bridges, Editor Katarina Hruba, Project Associate, Qualitative Research Itonics GmbH, Web Design, Online Data Explorer Karen Campbell, Senior Economist Yoren Geromin, Graphic Design Andrew Wright, Freelance Writer Risk Response Network Team Linda Freiner, Associate Director, Head of Community Engagement Section 6 Samantha Tonkin, Associate Director, Head of Communication Navitri Putri Guillaume, Government Engagement Manager Charles Lane, Supply Chain and Transport Risks Project Manager Alexis Munier, Editorial Manager Ceri Parker, Writer Edward Simmons, Resilience Practices Exchange Project Manager David Connolly, Business Engagement, Senior Community Associate Gregory Coudrier, Digital Associate Rim El Habibi, Media Associate Stéphanie Badawi, Team Coordinator 78 Global Risks 2013 The World Economic Forum is an independent international organization committed to improving the state of the world by engaging business, political, academic and other leaders of society to shape global, regional and industry agendas. Incorporated as a not-for-profit foundation in 1971 and headquartered in Geneva, Switzerland, the Forum is tied to no political, partisan or national interests. World Economic Forum 91-93 route de la Capite CH-1223 Cologny/Geneva Switzerland Tel +41 (0) 22 869 1212 Fax +41 (0) 22 786 2744 contact@weforum.org www.weforum.org

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