Glass-half-full types will be tempted to toast new evidence that the risk of system-shocking financial catastrophe seems to be behind us.
Economic and financial threats have dominated the top five list of global risks for the past decade, according to the World Economic Forum’s annual Global Risks reports. Now they scarcely register.
- “This year features a radical departure from the past decade; for the first time in the report’s history, economic risks feature only marginally in the top five,” notes the 2015 edition of that report, http://bit.ly/1y1JuBq released last week.
But don’t uncork the bubbly yet.
The report goes on to say that the risk of economic catastrophe is as big as it has ever been. It only looks relatively smaller because geopolitical risks are bigger than they used to be.
- “The interplay between geopolitics and economics is intensifying – governments are turning more protectionist, and making more use of sanctions, tariffs, etc. as economic weapons,” John Drzik, president of insurance brokerage and risk advisory firm Marsh Global Risk and Specialties LLC, which collaborated in the report, told Risk & Compliance Journal.
- Interstate conflict is the top global risk over the near term, 18-month horizon, he said, and the report ranks it even likelier than an extreme weather event.
- Rounding out the five most-likely list are:
- failure of national governance systems,
- state collapse or crisis and high structural unemployment or underemployment.
What can enterprises do to protect themselves in the new risk environment?
Mr. Drzik observed that insurance is available only for some of the newly prominent risks, cyber and political risk among them.
- “For other risks, where insurance markets are not an alternative, companies should consider further diversifying their supply chains as well as their investment portfolios to avoid a concentrated business interruption or loss from a single global risk event,” he recommended.
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