Weak public finances ‘exacerbating global risks’

15 Jan 15
Strained public finances and persistent unemployment are aggravating global risks posed by cyber attacks, climate change, conflict and terrorism, and the looming water crisis, according to the World Economic Forum’s (WEF) annual survey.

By Judith Ugwumadu | 15 January 2015

Strained public finances and persistent unemployment are aggravating global risks posed by cyber attacks, climate change, conflict and terrorism, and the looming water crisis, according to the World Economic Forum’s (WEF) annual survey.

The survey, published today ahead of the WEF’s annual meeting in Davos next week, was conducted to prompt discussion on how these risks could be mitigated. Almost 900 WEF members took part in the 10th edition of the Global Risks 2015 survey. They identified conflict and water crisis as the top global risks facing the world. Other major risks alongside them are: spread of infectious diseases (2); weapons of mass destruction (3); state collapse or crisis (4); and failure of climate changes adaptation (5).

The WEF is warning that theses multiple cross-cutting challenges could threaten social stability, which is perceived to be the issue most interconnected with other risks in 2015.

It said this highlighted an important ‘paradox’ that had existed since the global financial crisis but surfaced prominently in this year’s report.

‘Global risks transcend borders and spheres of influence and require stakeholders to work together, yet these risks also threaten to undermine the trust and collaboration needed to adapt to the challenges of the new global context,’ the report noted.

‘The world is, however, insufficiently prepared for an increasingly complex risk environment.’

It said Europe, Latin America and the Caribbean, and the Middle East and North Africa were the regions least prepared for social instability.

Other societal risks, ranging from the failure of urban planning in South Asia to water crises in the Middle East and North Africa, are also prominent. The report said these risks could lead to a wide range of catastrophic scenarios from social unrest to pandemic outbreak.

It added that the inability of governments to provide appropriate infrastructure and public services was at the core of many urban challenges in developing countries. Such challenges ranged from a lack of capacity to contain infectious disease to the need to build climate resilient cities. Leaders from city government, civil society and the private sector are ideally positioned to plan rapid urbanisation and must act to sustain metropolitan growth, the report advised.

Persistent unemployment was also cited an important risk connected with social instability and is a major concern in Europe and sub-Saharan Africa.

The report said a better understanding of global risks and the interconnections between them was key to prompting discussion about how to prepare, mitigate and prevent them.

Speaking at the report launch this morning at Bloomberg’s European headquarters in London, WEF lead economist Margareta Drzeniek-Hanouz said: ‘Addressing all these possible triggers and seeking to return the world to a path of partnership, rather than competition, should be a priority for leaders as we enter 2015.’

The report assessed 28 global risks, grouping them into five categories (economic, environmental, societal, geopolitical and technological) and also considered the drivers of those risks in the form of 13 trends.

 

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