ESRM: A Shift in Global Risk

​The quest to better understand the sources of global risk, and the effect those sources of risk may have on security, is of continuing importance to many practitioners of enterprise security risk management (ESRM). 

And now, global risk has entered into a new era, with people around the world facing more political instability, more economic challenges, and the prospect that more national policy decision making will be driven by emotion rather than reason, a new study finds. 

The study, The Global Risks Report 2017, is the 12th edition of one of the flagship reports issued annually by the World Economic Forum. The report postulates that the new era of risk began last year, a watershed time for instability when increasing economic populism and political polarization came to a head in unexpected election results and the disquieting rise of former fringe nationalist parties. 

“The year 2016 saw profound shifts in the way we view global risks. Societal polarization, income inequality, and the inward orientation of countries are spilling over into real-world politics,” reads the study, which was conducted with the help of academic advisors from the University of Oxford, the National University of Singapore, and the Wharton Risk Management and Decision Processes Center at the University of Pennsylvania. 

The report argues that five “gravity centers” will shape global risks moving forward, and it sketches out the challenges that will result from each of them.  First, continued slow economic growth, in tandem with high debt and demographic changes, will create an environment conducive to financial crises and growing inequality. Second, corruption and unequal distribution of the benefits of growth will convince a growing number of people that the current economic model is not working for them.

Third, the transition towards a more multipolar world order will put a greater strain on global cooperation. Fourth, the fourth industrial revolution—Internet-connected technologies—will continue to transform societies, their economies, and their ways of doing business. Fifth, more people will seek to reassert identities that have been blurred by globalization, so decision making and election choices will be increasingly influenced by emotions rather than reason.

There is no one silver bullet solution to these challenges. But the report argues that the problems “create the opportunity to address global risks and the trends that drive them.” In that spirit, the study sets out several actions that leaders should take to push forward in creating a more secure and stable world. 

The report argues that political leaders need a deeper commitment to fostering inclusive development and equitable growth, on both a national and global scale, instead of allowing increasing economic inequality to further destabilize societies. And while the report praises innovation, it also argues for better management of technological change, so the growth of new uses for technology causes less disruption and leaves fewer behind. 

Finally, at a time when multinational institutions like the European Union and NATO are under unprecedented attack, the report calls on leaders to redouble efforts to protect and strengthen systems of global collaboration. Destabilizing international events—which range from migration flows created by the Syrian war to major weather events that impact several countries to a potential global water crisis—all warrant more cooperation between countries.  

“It is ever clearer,” the report argues, “how important global cooperation is on the interconnections that shape the risk landscape.”