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World Economic Forum Global Risks and how they affect South Africa

Posted By IrmsaInsight, 13 August 2013
FNB’s consulting economist Cees Bruggemans assessed the Global Risks Report for 2013 and how potentially they could affect South Africa at this years’ Risk Lab.
This Global Risks Report analyses 50 global risks in terms of their impact and possible likelihood. These risks are based on a survey of over 1000 experts from business, government and academia across the globe. Bruggemans observes that whilst the experts are asked each year to rate what they believe will be top global risks for 10 years – there is always a dramatic shift in terms of what is perceived to be high global risks each year. An explanation given for this is that every year there is new information and changing perceptions around risks.
 
Bruggeman explains that this annual survey is used to outline risks based on five categories namely: Economic, Geo-political, Environmental, Technological and Societal. "In terms of this year’s top risks there are two economic risks, two environmental and one societal risk,” observes Bruggemans.
 
In terms of likelihood of risks to materialise, the top two economic risks are: Severe income discrepancies and chronic fiscal imbalances. The environmental risks are: Rising greenhouse emissions and water supply crises. The societal risk is the mismanagement of social context and population needs.
Similarly, in terms of impact risk: Income discrepancies and fiscal imbalance remain the key concerns. On the environmental context the expert believe that failure of climatic adaptation remains a major risk as well as water supply challenges. In terms of societal risks, the failure of current structures may influence societal risks.
However, Bruggemans also points out some significant considerations to bear in mind when assessing risks – this is in light of the dramatic shifts in the assessment of risks each year. He observes that the new approach is to group some risks together when assessing their potential impact. Secondly, to consider scenarios should risks materialise simultaneously and lastly when there is an impact on minor systems which makes way for potential digital ‘wildfires’.
 
The report pays particular attention to technology, especially how the internet and social media can be used to mobilise society today. The risk here is often around misinformation which can result in quick viral spreading of wrong information which may have disastrous reputational impact. The report highlights that countries and companies should be advocating for greater literacy and an ethos of individuals independently deciding on issues for themselves.
Bruggemans highlighted another possible scenario in terms of social media – a situation where information is true but can result in major panic…how would countries and companies react to this risk? He used the term ‘disconnected ignorance’ which previously was the reality, but not necessarily at present. He also observed that the economic risks (fiscal challenges) may potentially be in a collision course with environmental risks (which may now be treated as a long term challenge thereby not addressing them as urgent due to economy).
 
Bruggemans pointed out that the Global report points to the health and huberis risk: "Huge strides forward in health have left the world dangerously complacent. Rising resistance to antibiotics could push overburdened health systems to the brink, while a hyperconnected world allows pandemics to spread,” states the Global Report.
 
Apart from the health risk, Bruggemans concluded his assessment of the global risk by warning against the risk of focusing on the negatives and possibly getting the upside wrong and underestimating what could be achieved thereby missing opportunity.
In addition, he pointed out that South Africa has a major challenge in dealing with risks around historical legacies which includes factors such as: uneven wealth distribution, crime, racism, poverty and unemployment. He points out that these risks could have a major impact at an individual, business or country level if they are not deal with effectively.

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