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Worsening Wealth Gap Seen as Biggest Risk Facing the World in 2014

The chronic gap between the incomes of the richest and poorest citizens is seen as the risk that is most likely to cause serious damage globally in the coming decade, according to over 700 global experts that contributed to the World Economic Forum’s Global Risks 2014 report.

Taking a 10-year outlook, the report assesses 31 risks that are global in nature and have the potential to cause significant negative impact across entire countries and industries if they take place. The risks are grouped under five classifications – economic, environmental, geopolitical, societal and technological – and measured in terms of their likelihood and potential impact. Most likely global risks: After income disparity, experts see extreme weather events as the global risk next most likely to cause systemic shock on a global scale.

This is followed by unemployment and underemployment, climate change and cyberattacks. Most potentially impactful global risks: Fiscal crises feature as the global risk that experts believe has the potential to have the biggest impact on systems and countries over the course of the next 10 years. This economic risk is followed by two environmental risks – climate change and water crises – then unemployment and underemployment, and fifth critical information infrastructure breakdown, a technological risk.

“Each risk considered in this report holds the potential for failure on a global scale; however, it is their interconnected nature that makes their negative implications so pronounced as together they can have an augmented effect,” said Jennifer Blanke, Chief Economist at the World Economic Forum. “It is vitally important that stakeholders work together to address and adapt to the presence of global risks in our world today.”

In addition to measuring the seriousness, likelihood and potential impact of these 31 global risks, Global Risks 2014 includes special investigations into three specific cases:

  • the increasing risk of “cybergeddon” in the online world;
  • the increasing complexity of geopolitical risk as the world moves to a multipolar distribution of power and influence;
  • and youth unemployment and underemployment.

In particular, the report considers the twin challenges facing those coming of age in the current decade of reduced employment opportunity and the rising cost of education, and considers the impact on political and social stability as well as economic development. With over 50% of young people in some developed markets currently looking for work and rising informal employment in developing regions where 90% of the world’s youth live, the report offers insight into how technological and other measures can be deployed to mitigate some of this risk.

David Cole, Group Chief Risk Officer of Swiss Re, said: "Many young people today face an uphill battle. As a result of the financial crisis and globalisation, the younger generation in the mature markets struggle with ever fewer job opportunities and the need to support an ageing population. While in the emerging markets there are more jobs to be had, the workforce does not yet possess the broad based skill-sets necessary to satisfy demand. It's vital we sit down with young people now and begin planning solutions aimed at creating fit-for-purpose educational systems, functional job-markets, efficient skills exchanges and the sustainable future we all depend on!”

Most likely risks

  • Income disparity (societal risk)
  • Extreme weather events (environmental risk)
  • Unemployment and underemployment (economic risk)
  • Climate change (environmental risk)
  • Cyberattacks (technological risk)

Most potentially impactful risks

  • Fiscal crises (economic risk)
  • Climate change (environmental risk)
  • Water crises (environmental risk)
  • Unemployment and underemployment (economic risk)
  • Critical information infrastructure breakdown (technological risk)

 

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