The University of the West Indies, Mona

The World Economic Forum has outlined that the top five risks that are most likely to occur in 2018 are extreme weather conditions, natural disasters, cyber attack, data fraud or theft, and failure of climate change mitigation and action. Meanwhile, the top five risks that might have the most impact are weapons of mass destruction, extreme weather events and natural disasters, failure of climate change mitigation, and water crisis.

The report highlights numerous concerns that might adversely affect global output and cohesion in 2018.

These include:

- INCREASING ENVIRONMENTAL RISKS

The planet is not being protected and cared for by its inhabitants. Consequently, the World Economic Forum has highlighted extreme weather events as the top global risk that is more likely to occur in 2018. The planet has been exploited and eroded and is being further pushed to the brink by the adverse effects of pollution and other climate/weather-inducing events; as a result, environmental risks continue to increase.

In the 2018 report, every type of risk associated with the environment registered in the high-impact, high-likelihood category, where the threat of occurrence is very high. They highlight that efforts must be put in place to minimize the level of carbon emission before it is too late.

- INCREASE RISKS OF CYBER ATTACK

The increase in cyberactivity has expanded the risks and threats associated with data and the cyber system. The World Economic Forum has outlined cyberattack and massive data fraud as two of the top five risks that are most likely to occur. They outlined that cybersecurity risks are more frequent and increasing in their ability to disrupt the cyber system. Their data have shown that attacks on businesses are almost twice as much as it was five years ago, and attacks on the financial system have been very costly. They fear that attackers might be able to breach and disrupt whatever systems are being put in place to increase the functioning of society. There has been an increase in a cyber attack on critical infrastructure, which poses a problem and requires constant expenditure on mitigation efforts.

 - IMBEDDED ECONOMIC RISKS

Although the global economy has been gradually recovering from the effects of the financial crisis in 2008, as reflected by positive economic indicators, it remains vulnerable to emerging and/or threats that have evolved.

The report highlights lingering risks, such as asset price bubbles, high indebtedness and increasing pressure on the global financial system, and emerging risks arising from increased automation and digitalization, which includes the increase in use and prevalence of crypto-currency, and the increase in tension in buying and selling amid anti-globalization policies. There needs to be a balanced approach towards changing global conditions and country-specific political conditions.

 - INCREASING SYSTEMIC RISKS

The natural environment and the global economy are becoming more susceptible to structural risks that are embedded in the way people, governments, and businesses operate on a day-to-day basis. Solutions to these risks must, therefore, seek to change how the system responds to the environment and how it responds to social and human needs. 

The report goes further to introduce three new categories: future shocks, hindsight, and risk reassessment.

The world is a multifaceted, interconnected system that loops and feeds back into itself, it is also characterized by asymmetry and threshold effects that, if slightly mismanaged, can have a severe impact on the global economy. The report cites examples of these. In hindsight, the report recaps the risk reports of previous years to provide insight into how risks have evolved over the last couple of years.

Designated risk experts help unravel the implications of risk for decision-making in businesses, governments, and civil society.

 Published: Wednesday | January 31, 2018, | 12:00 AM Dr. Andre Haughton  Department of Economics