'Businesses dabbling with 25 global risks'
A big concern in today's inter-connected world is that none of the global risks identified can be addressed in isolation.india Updated: Jan 27, 2006 12:08 IST
The world economy is fraught with risks, some known and others unknown. Even as known risks like the oil-price spike above $80/bl, terrorism, and pandemic flu will remain the known suspects in 2006, there will also be lesser understood risks like climate change and electro magnetic fields generated by the electronic devices that will keep both trade and polity up at night.
Risks like climate change whose cumulative impact will only be understood over a longer period have now moved to the centre of policy debate, according to the risks identified by the Global Risk Programme of the World Economic Forum.
But a bigger concern in a world so inter-connected is that none of the global risks identified can be addressed in isolation. The combination of speed and the interconnectivity of global system can lead to a rapid and unexpected contagion of global risks across industries.
As Merrill Lynch International UK Chairman Kevan V Watts puts it: "The interplay of multiple global risks and their combined ripple effect can create potentially disastrous cumulative events which can damage far in excess of the sum of each individual risk event."
Terrorist attacks involving aircraft and high explosive have already had a massive global impact politically, socially and on several business sectors, including financial services, especially insurance, and the travel and tourism industries.
"The geopolitical risk landscape is still dominated by the perceived as well as the real risk of terrorism. The capacity of terrorist organisations to act globally has in a way diminished but the risks of localised terror remains high," adds Cleary.
While businesses are dabbling with the 25 global risks identified under the WEF Global Risk Program, the delegates arrived at a consensus regarding the need for most businesses to have a chief risk officer who can take a rational look at risks, both known and perceived, and allocate rational resources to mitigate the same.