Key risk areas creating significant liabilities: World Economic Forum

The frequency and severity of risks to global stability have amplified, while the financial crisis has drained the ability of global governance systems to deal with shocks, according to the World Economic Forum (WEF)’s Global Risks 2011, Sixth Edition.”Twentieth century systems are failing to manage 21st century risks; we need new networked systems to identify and address global risks before they become global crises,” said Robert Greenhill, the WEF’s managing director and chief business officer.In particular, the report identifies three key clusters of risk that are creating significant liabilities:

• Macroeconomic risks: imbalances, fiscal crises in the developed economies, massive unfunded social liabilities and weak financial markets form a complex nexus of risk. Crisis-induced indebtedness has reduced the capacity to handle further shocks to critically low levels;
• The illegal economy: in 2009 the value of illicit trade around the world was estimated at $1.3 trillion and growing. A networked world, governance failures and economic disparity create opportunities for illegality to flourish; and
• Resource limits to growth: rising populations and consumption and climate change drive this challenge, while interconnections between these issues make response difficult. Most interventions only create new and worse problems, or shift risk across the nexus.