Vous êtes sur la page 1sur 80

Insight Report

The Global Risks

Report 2018
13th Edition
The Global Risks Report 2018, 13th Edition, is
published by the World Economic Forum.

The information in this report, or on which

this report is based, has been obtained from
sources that the authors believe to be reliable
and accurate. However, it has not been
independently verified and no representation or
warranty, express or implied, is made as to the
accuracy or completeness of any information
obtained from third parties. In addition, the
statements in this report may provide current
expectations of future events based on certain
assumptions and include any statement that
does not directly relate to a historical fact
or a current fact. These statements involve
known and unknown risks, uncertainties and
other factors which are not exhaustive. The
companies contributing to this report operate
in a continually changing environment and
new risks emerge continually. Readers are
cautioned not to place undue reliance on these
statements. The companies contributing to this
report undertake no obligation to publicly revise
or update any statements, whether as a result
of new information, future events or otherwise
and they shall in no event be liable for any loss or
damage arising in connection with the use of the
information in this report.

World Economic Forum


World Economic Forum®

© 2018 – All rights reserved.

All rights reserved. No part of this publication

may be reproduced, stored in a retrieval system,
or transmitted, in any form or by any means,
electronic, mechanical, photocopying, or
otherwise without the prior permission of the
World Economic Forum.

ISBN: 978-1-944835-15-6

REF: 09012018

The report and an interactive data platform are

available at http://wef.ch/risks2018

World Economic Forum

91-93 route de la Capite
CH-1223 Cologny/Geneva

Tel.: +41 (0) 22 869 1212

Fax: +41 (0) 22 786 2744

Global Risks Landscape
Figure I: The Global Risks Landscape 2018

Weapons of mass destruction
Extreme weather events

Natural disasters

Failure of climate-change
mitigation and adaptation

Water crises

Biodiversity loss and
Food crises ecosystem collapse

3.5 involuntary migration
Spread of infectious Interstate conflict
diseases Man-made environmental
3.40 disasters
Critical information
average Profound social
infrastructure breakdown instability Failure of national
Fiscal crises Terrorist attacks
Unemployment or
Failure of regional or underemployment
global governance
Data fraud or theft
Asset bubbles in a major
Failure of critical
State collapse or crisis

Failure of financial
Energy price shock
mechanism or institution

Adverse consequences of Failure of urban planning

technological advances


Illicit trade
Unmanageable inflation Deflation

2.5 3.0 4.0 4.5

3.48 plotted
Likelihood 5.0

Top 10 risks in terms of Top 10 risks in terms of

1.0 5.0
Likelihood Impact

1 Extreme weather events 1 Weapons of mass destruction

2 Natural disasters 2 Extreme weather events
3 Cyberattacks 3 Natural disasters

4 Data fraud or theft 4 Failure of climate-change mitigation and adaptation Environmental

5 Failure of climate-change mitigation and adaptation 5 Water crises

6 Large-scale involuntary migration 6 Cyberattacks Geopolitical

7 Man-made environmental disasters 7 Food crises

8 Terrorist attacks 8 Biodiversity loss and ecosystem collapse


9 Illicit trade 9 Large-scale involuntary migration

10 Asset bubbles in a major economy 10 Spread of infectious diseases

Source: World Economic Forum Global Risks Perception Survey 2017–2018.

Note: Survey respondents were asked to assess the likelihood of the individual global risk on a scale of 1 to 5, 1 representing a risk that is very unlikely to happen and 5 a risk
that is very likely to occur. They also assess the impact on each global risk on a scale of 1 to 5 (1: minimal impact, 2: minor impact, 3: moderate impact, 4: severe impact and
5: catastrophic impact). See Appendix B for more details. To ensure legibility, the names of the global risks are abbreviated; see Appendix A for the full name and description.
Figure II: The Risks-Trends Interconnections Map 2018

Trend Interconnection Map

Rising chronic diseases

Increasing national
Changing climate
Changing climate

Changing landscape of
international governance
Biodiversity loss and
ecosystem collapse

Man-made environmental Natural disasters

Degrading environment disasters

Food crises Extreme weather events

Spread of infectious
Energy price shock diseases
Failure of climate-change Shifting power
Water crises mitigation and adaptation

involuntary migration Interstate conflict
Failure of urban planning
Weapons of mass destruction
Failure of regional or
State collapse or crisis global governance

Rising urbanization Profound social Failure of national

Failure of critical Terrorist attacks Unmanageable inflation
Unemployment or
Adverse consequences of underemployment
Critical information technological advances Increasing polarization
infrastructure breakdown
of societies
Cyberattacks Deflation

Illicit trade Fiscal crises

Growing middle class in

emerging economies
Data fraud or theft Asset bubbles in a
major economy
Failure of financial
mechanism or institution

Rising income and wealth

Rising geographic mobility
Rising geographic mobility

Ageing population
Rising cyber dependency
Rising cyber dependency

Risks Trends

Economic Geopolitical Technological

Risks Risks Risks
Number and strength Number and strength
Environmental Societal of connections of connections
Risks Risks (“weighted degree”) (“weighted degree”)

Source: World Economic Forum Global Risks Perception Survey 2017–2018.

Note: Survey respondents were asked to select the three trends that are the most important in shaping global development in the next 10 years. For each of the three trends
identified, respondents were asked to select the risks that are most strongly driven by those trends. See Appendix B for more details. To ensure legibility, the names of the
global risks are abbreviated; see Appendix A for the full name and description.
Risk Interconnection Map
Figure III: The Global Risks Interconnections Map 2018

Biodiversity loss and

ecosystem collapse

Food crises Natural disasters

Extreme weather events

Energy price shock Spread of infectious

Failure of climate-change diseases

Water crises mitigation and adaptation

involuntary migration
Interstate conflict

Failure of urban planning Weapons of mass destruction

State collapse or crisis Failure of regional or

global governance
Profound social
Terrorist attacks instability
Failure of critical Failure of national
infrastructure governance

Unmanageable inflation
Unemployment or
Adverse consequences of
technological advances

Critical information Cyberattacks

infrastructure breakdown
Illicit trade Fiscal crises Deflation

Data fraud or theft Asset bubbles in a

major economy

Failure of financial
mechanism or institution

Economic Geopolitical Technological

Risks Risks Risks
Number and strength
Environmental Societal of connections
Risks Risks (“weighted degree”)

Source: World Economic Forum Global Risks Perception Survey 2017–2018.

Note: Survey respondents were asked to identify between three and six pairs of global risks they believe to be most interconnected. See Appendix B for more details. To
ensure legibility, the names of the global risks are abbreviated; see Appendix A for the full name and description.
Figure IV: The Evolving Risks Landscapes, 2008–2018

Top 5 Global Risks in Terms of Likelihood

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Asset price Asset price Asset price Storms and Severe income Severe income Income disparity Interstate conflict Large-scale Extreme weather Extreme weather
1st collapse collapse collapse cyclones disparity disparity with regional involuntary events events
consequences migration

Breakdown of critical information infrastructure

Middle East Slowing Chinese Slowing Chinese Flooding Chronic fiscal Chronic fiscal Extreme weather Extreme weather Extreme weather Large-scale Natural disasters
2nd instability economy (<6%) economy (<6%) imbalances imbalances events events events involuntary

Failed and failing Chronic disease Chronic disease Corruption Rising greenhouse Rising greenhouse Unemployment Failure of national Failure of climate- Major natural Cyberattacks
3rd states gas emissions gas emissions and governance change mitigation disasters
underemployment and adaptation
Breakdown of
critical information
Oil and gas price Global governance infrastructure
Fiscal crises Biodiversity loss Cyber attacks Water supply Climate change State collapse or Interstate conflict Large-scale Data fraud or theft
4th spike gaps crises crisis with regional terrorist attacks

Chronic disease, Retrenchment Global governance Climate change Water supply Mismanagement Cyber attacks High structural Major natural Massive incident Failure of climate-
5th developed world from globalization gaps crises of population unemployment or catastrophes of data fraud/theft change mitigation
(emerging) ageing underemployment and adaptation

Top 5 Global Risks in Terms of Impact

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Asset price Asset price Asset price Fiscal crises Major systemic Major systemic Fiscal crises Water crises Failure of climate- Weapons of mass Weapons of mass
1st collapse collapse collapse financial failure financial failure change mitigation destruction destruction
and adaptation

Breakdown of critical information infrastructure

Retrenchment Retrenchment Retrenchment Climate change Water supply Water supply Climate change Rapid and massive Weapons of mass Extreme weather Extreme weather
2nd from globalization from globalization from globalization crises crises spread of destruction events events
(developed) (developed) (developed) infectious diseases

Slowing Chinese Oil and gas Oil price spikes Geopolitical Food shortage Chronic fiscal Water crises Weapons of mass Water crises Water crises Natural disasters
3rd economy (<6%) price spike conflict crises destruction

Breakdown of
critical information
Oil and gas Chronic disease infrastructure
Chronic disease Asset price Diffusion of Unemployment Interstate conflict Large-scale Major natural Failure of climate-
4th price spike collapse imbalances weapons of mass and with regional involuntary disasters change mitigation
destruction underemployment consequences migration and adaptation

Pandemics Fiscal crises Fiscal crises Extreme energy Extreme volatility Failure of climate- Critical information Failure of climate- Severe energy Failure of climate- Water crises
5th price volatility in energy and change mitigation infrastructure change mitigation price shock change mitigation
agriculture prices and adaptation breakdown and adaptation and adaptation

Economic Environmental Geopolitical Societal Technological

Source: World Economic Forum 2008–2018, Global Risks Reports.

Note: Global risks may not be strictly comparable across years, as definitions and the set of global risks have evolved with new issues emerging on the 10-year horizon. For example, cyberattacks, income disparity and unemployment entered the set
of global risks in 2012. Some global risks were reclassified: water crises and rising income disparity were re-categorized first as societal risks and then as a trend in the 2015 and 2016 Global Risks Reports, respectively.
The Global Risks
Report 2018
13th Edition

Strategic Partners
Marsh & McLennan Companies
Zurich Insurance Group

Academic Advisers
National University of Singapore
Oxford Martin School, University of Oxford
Wharton Risk Management and Decision Processes Center, University of Pennsylvania

Preface 5
By Klaus Schwab and Børge Brende

Executive Summary 6

Global Risks 2018: Fractures, Fears and Failures 8

Economic Storm Clouds 18

Future Shocks 25
Grim Reaping
A Tangled Web
The Death of Trade
Democracy Buckles
Precision Extinction
Into the Abyss
Inequality Ingested
War without Rules
Identity Geopolitics
Walled Off

Geopolitical Power Shifts 36

Hindsight 43
Antimicrobial Resistance
Youth Unemployment
Digital Wildfires

Risk Reassessment 53
Resilience in complex organizations by Roland Kupers
Cognitive bias and risk management by Michele Wucker

Appendices 59
Appendix A: Descriptions of Global Risks and Trends 2018
Appendix B: Global Risks Perception Survey and Methodology

Acknowledgements 66
The World Economic Forum presents Our hope is that this edition of the
the latest Global Risks Report at a Global Risks Report and the debates
transformational time for the world. it fosters at the World Economic
Encouraging signs suggest that we Forum’s Annual Meeting 2018 will
have put the worst financial crisis of focus minds on the need for systems
the post–World War II period behind thinking and new ways of collaborating
us. Globally, people are enjoying the globally and involving all stakeholders.
highest standards of living in human This year’s report grapples with some
history. And yet acceleration and of the most pressing challenges
interconnectedness in every field that we face, including biodiversity
of human activity are pushing the loss, cybersecurity threats, rising
absorptive capacities of institutions, geopolitical tensions, and the risk of
communities and individuals to their another financial crisis erupting. A new
limits. This is putting future human “Future Shocks” section highlights
development at risk. In addition to the importance of being prepared not
dealing with a multitude of discrete just for familiar slow-burn risks, but for
local problems, at a global level dramatic disruptions that can cause
humanity faces a growing number rapid and irreversible deterioration in
of systemic challenges, including the systems we rely on.
fractures and failures affecting
the environmental, economic, The Global Risks Report occupies
technological and institutional systems a unique position in the World
on which our future rests. Economic Forum, at the heart of
our deepening partnerships with the
This generation enjoys unprecedented world’s governments and international
technological, scientific and financial organizations. It operates across
Klaus Schwab resources, which we should use the network of thematic, industry
Founder and Executive Chairman to chart a course towards a more and regional teams that shape our
World Economic Forum sustainable, equitable and inclusive systems-based approach to the
future. And yet this is perhaps the first challenges facing the world. This
generation to take the world to the allows it to leverage the full extent of
brink of a systems breakdown. There the Forum’s internal expertise as well
are many signs of progress and many its global expert networks in order to
reasons for hope—but we still lack the analyse the evolution of global risks.
momentum and the necessary depth As in previous years, this year’s report
of collaboration to deliver change also draws on our annual Global
on the scale required. By providing Risks Perceptions Survey, which is
a global platform for public-private completed by around 1,000 members
collaboration, the World Economic of our multistakeholder communities.
Forum seeks to advance this goal by
working with governments, businesses As one of our flagship reports, the
and civil society organizations to find Global Risks Report is a collaborative
new ways of tackling the systemic effort and we would like to thank
risks that affect us all. all those across the Forum and its
communities who have contributed
We have to work together—that is the to this year’s edition. We are
key to preventing crises and making particularly grateful for the energy and
the world more resilient for current commitment of the report’s Advisory
and future generations. Humanity Board. We would also like to thank
cannot successfully deal with the our long-standing strategic partners,
multiplicity of challenges we face Marsh & McLennan Companies and
either sequentially or in isolation. Zurich Insurance Group, as well as
Børge Brende Just as global risks are increasingly our academic advisers at the National
President complex, systemic and cascading, so University of Singapore, Oxford Martin
World Economic Forum
our responses must be increasingly School at the University of Oxford
interconnected across the numerous and the Wharton Risk Management
global systems that make up our and Decision Processes Center at the
world. Multistakeholder dialogue University of Pennsylvania.
remains the keystone of the strategies
that will enable us to build a better

The Global Risks Report 2018 5

Last year’s Global Risks Report was to sustain the long-term, multilateral
published at a time of heightened responses that are required to counter
global uncertainty and strengthening global warming and the degradation of

Summary popular discontent with the existing

political and economic order. The
report called for “fundamental reforms
the global environment.

Cybersecurity risks are also growing,

to market capitalism” and a rebuilding both in their prevalence and in their
of solidarity within and between disruptive potential. Attacks against
countries. One year on, a global businesses have almost doubled
economic recovery is under way, in five years, and incidents that
offering new opportunities for progress would once have been considered
that should not be squandered: the extraordinary are becoming more and
urgency of facing up to systemic more commonplace. The financial
challenges has, if anything, intensified impact of cybersecurity breaches
amid proliferating indications of is rising, and some of the largest
uncertainty, instability and fragility. costs in 2017 related to ransomware
attacks, which accounted for 64% of
Humanity has become remarkably all malicious emails. Notable examples
adept at understanding how to included the WannaCry attack—which
mitigate conventional risks that affected 300,000 computers across
can be relatively easily isolated 150 countries—and NotPetya, which
and managed with standard risk- caused quarterly losses of US$300
management approaches. But we million for a number of affected
are much less competent when businesses. Another growing trend
it comes to dealing with complex is the use of cyberattacks to target
risks in the interconnected systems critical infrastructure and strategic
that underpin our world, such as industrial sectors, raising fears that, in
organizations, economies, societies a worst-case scenario, attackers could
and the environment. There are signs trigger a breakdown in the systems
of strain in many of these systems: that keep societies functioning.
our accelerating pace of change is
testing the absorptive capacities Headline economic indicators
of institutions, communities and suggest the world is finally getting
individuals. When risk cascades back on track after the global crisis
through a complex system, the danger that erupted 10 years ago, but this
is not of incremental damage but upbeat picture masks continuing
of “runaway collapse” or an abrupt underlying concerns. The global
transition to a new, suboptimal status economy faces a mix of long-standing
quo. vulnerabilities and newer threats that
have emerged or evolved in the years
In our annual Global Risks Perception since the crisis. The familiar risks
Survey, environmental risks have include potentially unsustainable asset
grown in prominence in recent years. prices, with the world now eight years
This trend has continued this year, into a bull run; elevated indebtedness,
with all five risks in the environmental particularly in China; and continuing
category being ranked higher than strains in the global financial system.
average for both likelihood and impact Among the newer challenges are
over a 10-year horizon. This follows limited policy firepower in the event
a year characterized by high-impact of a new crisis; disruptions caused
hurricanes, extreme temperatures by intensifying patterns of automation
and the first rise in CO2 emissions for and digitalization; and a build-up
four years. We have been pushing of mercantilist and protectionist
our planet to the brink and the pressures against a backdrop of rising
damage is becoming increasingly nationalist and populist politics.
clear. Biodiversity is being lost at
mass-extinction rates, agricultural
systems are under strain and pollution
of the air and sea has become an
increasingly pressing threat to human
health. A trend towards nation-state
unilateralism may make it more difficult

6 The Global Risks Report 2018

The world has moved into a new In Hindsight we look back at risks
and unsettling geopolitical phase. we have analysed in previous editions
Multilateral rules-based approaches of the Global Risks Report, tracing
have been fraying. Re-establishing the evolution of the risks themselves
the state as the primary locus of and the global responses to them.
power and legitimacy has become Revisiting our past reports in this way
an increasingly attractive strategy for allows us to gauge risk-mitigation
many countries, but one that leaves efforts and highlight lingering risks that
many smaller states squeezed as might warrant increased attention.
the geopolitical sands shift. There This year we focus on antimicrobial
is currently no sign that norms and resistance, youth unemployment, and
institutions exist towards which “digital wildfires”, which is how we
the world’s major powers might referred in 2013 to phenomena that
converge. This creates new risks and bear a close resemblance to what is
uncertainties: rising military tensions, now known as “fake news”.
economic and commercial disruptions,
and destabilizing feedback loops In Risk Reassessment, selected
between changing global conditions risk experts share their insights
and countries’ domestic political about the implications for decision-
conditions. International relations now makers in businesses, governments
play out in increasingly diverse ways. and civil society of developments
Beyond conventional military build- in our understanding of risk. In this
ups, these include new cyber sources year’s report, Roland Kupers writes
of hard and soft power, reconfigured about fostering resilience in complex
trade and investment links, proxy systems, while Michele Wucker
conflicts, changing alliance dynamics, calls for organizations to pay more
and potential flashpoints related to attention to cognitive bias in their risk
the global commons. Assessing management processes.
and mitigating risks across all these
theatres of potential conflict will require
careful horizon scanning and crisis
anticipation by both state and non-
state actors.

This year’s Global Risks Report

introduces three new series:
Future Shocks, Hindsight and Risk
Reassessment. Our aim is to broaden
the report’s analytical reach: each of
these elements provides a new lens
through which to view the increasingly
complex world of global risks.

Future Shocks is a warning against

complacency and a reminder that
risks can crystallize with disorientating
speed. In a world of complex and
interconnected systems, feedback
loops, threshold effects and cascading
disruptions can lead to sudden and
dramatic breakdowns. We present
10 such potential breakdowns—from
democratic collapses to spiralling
cyber conflicts—not as predictions,
but as food for thought: what are
the shocks that could fundamentally
upend your world?

The Global Risks Report 2018 7

REUTERS/ Rentsendorj Bazarsukh

Global Risks 2018:

Fractures, Fears
and Failures
Last year’s Global Risks Report was albeit a relatively modest one—the
published at a time of heightened International Monetary Fund (IMF)
global uncertainty and rising popular expects global GDP growth of 3.6%
discontent with the existing political for 2017, up from 3.2% in 2016.2
and economic order. The report Recovery is underway in all of the
called for “fundamental reforms to major economies, leading to a sharp
market capitalism” and a rebuilding improvement in sentiment.
of solidarity within and between
countries. One year on, the urgency But it is important to ask whether
of facing up to these challenges has, if this swing to optimism suggests
anything, intensified. Economic growth the possibility of complacency and
is picking up, but 2017 was a year of a developing blind spot around
widespread uncertainty, instability and economic risks? There are certainly
fragility—and the latest results of our reasons to be cautious: one does not
annual Global Risks Perception Survey have to look far for signs of economic
(GRPS) suggest respondents are and financial strain. In the chapter The importance of inequality is
pessimistic about the year ahead: in Economic Storm Clouds (see page reflected again in the GRPS this
a new question gauging expectations 18) we suggest that greater attention year, with “rising income and wealth
for 2018, only 7% of responses point should be paid to the risks of another disparity” ranking third as a driver of
to a reduction of risk, compared with crisis erupting. Even without another global risks over the next 10 years.
59% pointing to an increase.1 In the crisis, economic risks can be hugely Automation is another potential
sections that follow, we highlight four disruptive, and last year brought driver of growing inequality, and
concerns: (1) persistent inequality fresh evidence of chronic economic this year’s GRPS reflects increasing
and unfairness, (2) domestic and problems, particularly related to concerns about its impacts on the
international political tensions, (3) earnings and inequality. In its latest labour market. When respondents
environmental dangers and (4) cyber Global Wage Report, the International were asked to highlight the most
vulnerabilities. We conclude by Labour Organization highlighted that closely interconnected risks, the most
reflecting on the increased dangers of worldwide earnings growth has been frequently cited pairing was “adverse
systemic breakdown. decelerating since 2012. It called, consequences of technological
among other things, for the increased advances” and “high structural
use of collective bargaining to reverse unemployment or underemployment”.
Inequality and this trend.3 While global inequality is
down, within-country inequality is an
Automation has already been a
disruptive labour-market force,5
unfairness increasingly corrosive problem in many and its effects are likely to be long-
places. According to the IMF, over the lasting as new technologies diffuse
One of the most striking findings past three decades 53% of countries throughout the global economy.6 For
of this year’s GRPS is the reduced have seen an increase in income the foreseeable future, automation and
prominence of economic risks (see inequality, with this trend particularly digitalization can be expected to push
Figure I, The Global Risks Landscape pronounced in advanced economies.4 down on levels of employment and
2018). This continues the trend Furthermore, today’s economic strains wages, and contribute to increases in
of recent years: as the financial are likely to sow the seeds for longer- income and wealth at the top of the
crisis has receded, economic risks term problems. High levels of personal distribution.
have faded sharply in prominence debt, coupled with inadequate savings
in GRPS responses, replaced and pension provisions, are one These are not just economic risks.
increasingly by environmental risks. reason to expect that frustrations may Norms relating to work are an
The latest results come at a time of deepen in the years ahead. important part of the implicit contract
improvement in the global economy, that holds societies together. If many
people’s hopes and expectations

The Global Risks Report 2018 9

relating to employment are fraying, States, the two Western countries that of geopolitical risks was one of the
we should not be surprised if this has recorded dramatic anti-establishment most pronounced trends of 2017,
wider political and societal effects. democratic results in 2016. The particularly in Asia, where the North
The idea that “the system is rigged” United Kingdom’s political system is Korea crisis has arguably brought
has gained electoral traction in recent struggling to cope with the strains the world closer than it has been for
years, and research suggests that unleashed by the decision to leave decades to the possible use of nuclear
concerns about inequality rest on the European Union, while in the weapons. There are numerous other
more fundamental worries about United States deepening polarization potential flashpoints around the world,
societal fairness.7 One fault line has, among other things, weakened not least in the Middle East, where
around fairness that came to particular democratic debate and increased the an increasing number of destabilizing
prominence in 2017 is gender. The confidence of far right movements.11 forces might lead to the eruption of
global gender parity gap across new military conflicts in addition to
health, education, politics and the In Europe, fears about the rise of the those in Syria and Yemen.
workplace widened for the first time far right were allayed by the victory
since we began tracking it in 2006,8 of Emmanuel Macron in the French Perhaps surprisingly given the febrile
while a succession of high-profile presidential election in May 2017— backdrop, there was relatively little
cases are highlighting continuing but perhaps at the risk of fostering movement of perception among the
endemic levels of sexual harassment, complacency about the region’s core geopolitical risks in the latest
both in the workplace and in society political stability. As highlighted by GRPS. However, when asked about
generally.9 elections in Germany and Austria in risk trajectories in 2018 the level of
late 2017, far right parties continue concern is clear: 93% of respondents
to grow in strength and influence expect a worsening of “political or
Risks of conflict in many European countries. More economic confrontations/frictions
generally, issues of culture and identity between major powers” this year.
Debates about the populist surge of are causing political tension within Perhaps more worryingly, nearly 80%
recent years tend to pit economic and between a growing number of respondents reckoned that risks
causes against cultural ones, but of EU countries, including Poland, associated with “state-on-state military
there is a strong case for arguing Hungary and, in different ways, conflict or incursion” and “regional
that the two are closely related—that Spain. Polarization between groups conflicts drawing in major power(s)”
economic pain has been sufficiently with different cultural heritages or would be higher in 2018 than in 2017
concentrated among groups and values looks set to remain a source (see Figure 1.1).
geographic regions for those groups of political risk in Western countries in
and regions to begin to assert 2018 and beyond. Geopolitical risks are exacerbated by
themselves politically.10 Clashes the continuing decline in commitment
related to identity and community Identity politics could fuel geopolitical to rules-based multilateralism. In
continue to drive political dislocations as well as domestic risks. As 2017, President Trump delivered on
in many countries and are increasingly discussed in the chapter Geopolitical some of his unilateralist campaign
fuelling cross-border tensions. Power Shifts (see page 36), pledges, withdrawing the United
charismatic strongman politics is on States from both the Paris Agreement
In the latest GRPS, societal the rise across the world. In addition on climate change and the Trans-
polarization slipped slightly in to the “America First” platform of Pacific Partnership (TPP) trade deal.
respondents’ rankings of the main President Trump, variations on this Although the United States has not
underlying drivers of global risks— theme can be seen in numerous withdrawn from the deal designed
replaced in the top three by rising countries from China to Japan, to halt Iran’s nuclear weapons
cyber dependency—but it remains Russia, Turkey, Saudi Arabia, the programme, the Joint Comprehensive
a politically destabilizing force. This Philippines and elsewhere. The trend Plan of Action (JCPA), in October
is perhaps still most evident in the towards increasingly personalized 2017 President Trump signalled his
United Kingdom and the United power takes place amid rising
geopolitical volatility. The escalation

10 The Global Risks Report 2018

dissatisfaction by refusing to certify
that Iran is in compliance with it. It
appointments to the WTO’s seven-
member appellate body; since
Our planet on the
is to important note that all of these December 2017 only four seats have brink
agreements remain in place and that been filled and in theory the body
other states and non-state actors could cease functioning in 2019. Environmental risks have grown in
have sought to compensate for the A weakening of the global trading prominence over the 13-year history
waning multilateralism of the United system’s institutional architecture of the Global Risks Report, and this
States. Nevertheless, the erosion of creates risks beyond a renewed trend continued in the latest GRPS.
institutions of multilateral dialogue slowdown in trade and growth:12 the All five risks in this category occupy
and decision-making damages the possibility of trade tensions spilling the top-right quadrant of The Global
prospects of reaching new global over into increased geopolitical strains Risks Landscape 2018 (see Figure
agreements at a time when the need should not be dismissed. In this year’s I), indicating higher-than-average
for cooperation looks more urgent GRPS, 73% of respondents said they perceptions of both likelihood and
than ever. expect the risks associated with the impact. Among the most pressing
erosion of multilateral trade rules and environmental challenges facing us
One institutional risk that is likely to agreements to increase next year (see are extreme weather events and
intensify in 2018 relates to the World Figure 1.1). temperatures; accelerating biodiversity
Trade Organization (WTO) and its loss; pollution of air, soil and water;
ability to resolve trade disputes. This failures of climate-change mitigation
is particularly important at a time and adaptation; and transition
when protectionist sentiment and risks as we move to a low-carbon
policies are on the rise. However,
the United States has been blocking

Figure 1.1: Geopolitical Worries

Do you think that, in 2018, the risks presented by the following

issues will decrease or increase compared to 2017?

Political or economic confrontations/

6% 53% 40%
frictions between major powers

20% 60% 19%
military conflict or incursion

Regional conflicts
19% 58% 20%
drawing in major power(s)

Erosion of multilateral
20% 53% 20%
trading rules and agreements

Loss of confidence
27% 51% 16%
in collective security alliances

Erosion of global policy coordination

14% 26% 39% 19%
on climate change
Percentage of respondents

Significantly Somewhat No change Somewhat Significantly

decrease decrease increase increase

Source: World Economic Forum Global Risks Perception Survey 2017–2018.

The Global Risks Report 2018 11

future. However, the truly systemic Figure 1.2: Billion-Dollar Disasters its most extensive wildfires ever—eight
challenge here rests in the depth of Number of US weather-related disasters times the long-run average—while
the interconnectedness that exists in Portugal more than 100 wildfire-
both among these environmental related deaths were recorded.16
risks and between them and risks
in other categories—such as water Rising temperatures and more
crises and involuntary migration. And frequent heatwaves will disrupt
as the impact of Hurricane Maria on agricultural systems that are
Puerto Rico has starkly illustrated, already strained. The prevalence of
environmental risks can also lead monoculture production heightens
to serious disruption of critical vulnerability to catastrophic
infrastructure. breakdowns in the food system—
more than 75% of the world’s food
Extreme weather events in 2017 comes from just 12 plants and five
included unusually frequent Atlantic animal species, according to the Food
hurricanes, with three high-impact and Agriculture Organization of the
storms—Harvey, Irma and Maria— United Nations, and it is estimated that
making landfall in rapid succession. there is now a one-in-twenty chance
According to the Accumulated per decade that heat, drought, and
Source: NOAA National Centers for Environmental
Cyclone Energy (ACE) index, which Information (NCEI) U.S. Billion-Dollar Weather and flood events will cause a simultaneous
is used to measure the intensity and Climate Disasters (2017). https://www.ncdc.noaa.gov/ failure of maize production in the
duration of Atlantic storms, September world’s two main growers, China and
2017 was the most intense month on Note: Data are inflation-adjusted and valid as of the United States.17 This would cause
record. It was also the most expensive October 2017. widespread famine and hardship.
hurricane season ever.13 These Fears of “ecological Armageddon”
extreme incidents continue a trend Last year also saw numerous are being raised by a collapse in
towards increasingly costly weather instances of extreme temperatures. populations of insects that are
events over recent decades (see When the data are finalized, 2017 critical to food systems: researchers
the US data in Figure 1.2), although is expected to be among the three in Germany found falls in such
rising costs reflect factors such as the hottest years on record—the hottest populations of more than 75% over 27
location and concentration of assets was 2016—and the hottest non–El years.18
as well as changing weather patterns. Niño year ever. In the first nine months
Extreme rainfall can be particularly of the year, temperatures were 1.1°C More broadly, biodiversity loss is
damaging—of the 10 natural disasters above pre-industrial levels and further now occurring at mass-extinction
that caused the most deaths in the increases are inevitable—the most rates.19 The populations of vertebrate
first half of 2017, eight involved floods ambitious target included in the Paris species declined by an estimated 58%
or landslides.14 Storms and other Agreement envisages increases only between 1970 and 2012.20 Globally,
weather-related hazards are also a to 1.5°C. Average changes are giving the primary driver of biodiversity
leading cause of displacement, with rise to localized extremes: during loss is the human destruction of
the latest data showing that 76% 2017, record high temperatures were habitats including forests—which are
of the 31.1 million people displaced experienced from parts of southern home to approximately 80% of the
during 2016 were forced from their Europe to eastern and southern world’s land-based animals, plants,
homes as a result of weather-related Africa, South America, and parts of and insects21—for farming, mining,
events.15 Russia and China. California had its infrastructure development and oil
hottest summer ever and by the end and gas production. A record 29.7
of November, wildfire burn across million hectares of tree cover was lost
the United States was at least 46% in 2016—an area about the size of
above the 10-year average, and was New Zealand. This loss was about
continuing into December. Chile had 50 percent higher than 2015.22 As

12 The Global Risks Report 2018

much as 80% of the deforestation on Pollution and Health.25 The The risk that political factors might
in Amazon countries is accounted Commission estimates the overall disrupt efforts to mitigate climate
for by cattle ranching, suggesting annual cost of pollution to the global change was highlighted last year when
that pressures on environmental and economy at US$4.6 trillion, equivalent President Trump announced plans to
agricultural systems will intensify to around 6.2% of output. Many of the withdraw the United States from the
as the global population increases, associated risks to health are still not Paris Agreement. However, several
pushing up demand for meat. well understood. Research suggests, other major economies—notably
for example, that the huge volume of China—reaffirmed their support of
Pollution moved further to the fore plastic waste in the world’s water— the Paris Agreement during 2017. In
as a problem in 2017: indoor and approximately 8 million more tons addition, many US businesses, cities
outdoor air pollution are together every year26—is finding its way into and states have pledged to help
responsible for more than one humans. People eating seafood could deliver on the country’s emissions
tenth of all deaths globally each be ingesting up to 11,000 pieces reduction targets. This kind of
year, according to the World Health of micro-plastic every year.27 Micro- network of subnational and public-
Organization (WHO). More than plastic fibres are found in 83% of the private collaboration may become
90% of the world’s population live in world’s tap water.28 One concern is an increasingly important means of
areas with levels of air pollution that that these micro-fibres could bind countering climate change and other
exceed WHO guidelines.23 Deaths with compounds containing toxic environmental risks, particularly at a
are overwhelmingly concentrated in pesticides or metals, providing these time when nation-state unilateralism
low- and middle-income countries, toxins with a route into the body.29 appears to be ascendant.
where health problems caused
by pollution exacerbate strains on The growing urgency of acting to halt In addition to meeting the immediate
already stretched health systems climate change was demonstrated in environmental challenges that we
and public finances. In November 2017 with the news that emissions face, we also need to focus more
2017, a public health emergency was of CO2 had risen for the first time acutely on the potential economic
declared in Delhi when air pollution in four years, bringing atmospheric and societal risks that may arise
reached more than 11 times the WHO concentrations of CO2 to 403 parts as transition to a low-carbon and
guideline levels.24 Urban air pollution per million, compared with a pre- environmentally secure world
is likely to worsen, as migration and industrial baseline of 280 parts per accelerates. Moves towards financial
demographic trends drive the creation million. The increase in emissions disclosures to quantify the transition
of more megacities. last year was partly a result of risks that businesses face have
developments in China, where the been accelerating, as has the idea of
Soil and water pollution cause about heatwaves mentioned above led to a fossil-fuel divestment.33 For example,
half again as many deaths, according 6.3% increase in energy consumption, in November 2017 the managers
to findings published in October and extreme drought in the north of of Norway’s sovereign wealth fund
2017 by the Lancet Commission the country led to a switch from hydro recommended divesting from oil and
to coal-fired power generation. There gas shares, and in December the
are reasons to expect further upward World Bank announced a moratorium
pressure on CO2 concentrations in after 2019 on financing upstream oil-
the future. Having absorbed 93% of and gas-related investments.34
the increase in global temperatures
between 1971 and 2010,30 the world’s The potential spillover effects of
oceans continue to get warmer and climate-related transition will be
studies suggest that their capacity more far-reaching than its effect
to absorb CO2 may be declining.31 on financial disclosure norms. For
Research also suggests that tropical example, dramatic changes in the
forests are now releasing rather than way energy is produced are likely
absorbing carbon dioxide.32 to trigger large-scale labour-market

The Global Risks Report 2018 13

disruptions.35 Structural economic
changes in affected countries and
Cyber-defences are Cyber breaches recorded by
businesses have almost doubled
regions could also stoke societal being tested in five years, from 68 per business
in 2012 to 130 per business in
and geopolitical risks. There is
no scope for complacency about Moving from the environmental 2017.36 Having been choked off
the sufficiency of global efforts to commons to the virtual commons, by law enforcement successes in
deal with climate change and the cyber-risks intensified in 2017. 2010–2012, “dark net” markets for
continued degradation of the global Although in previous years malware goods and services have
environmental commons. Equally, respondents to the GRPS have tended seen a resurgence:37 in 2016 alone,
however, it is time to prepare for the to be optimistic about technological 357 million new malware variants
structural challenges and changes that risks, this year concerns jumped, and were released and “banking trojans”
lie ahead as those efforts gather pace. cyberattacks and massive data fraud designed to steal account login details
both appear in the list of the top five could be purchased for as little as
global risks by perceived likelihood. US$500.38 In addition, cybercriminals
have an exponentially increasing
Attacks are increasing, both in number of potential targets, because
prevalence and disruptive potential. the use of cloud services continues

REUTERS/Pedro Nunes

14 The Global Risks Report 2018

growing form of malware that locks an attack on the SWIFT messaging
targets out of their data and demands network led to the theft of US$81
a ransom in return for restoring million from the central bank of
access. Ransomware attacks Bangladesh. The European Aviation
accounted for 64% of all malicious Safety Agency has stated that aviation
emails sent between July and systems are subject to an average
September last year,45 affecting double of 1,000 attacks each month.49 Last
the number of businesses compared year saw reports of attempts to use
with 2016.46 Notable examples spear-phishing attacks (stealing data
included the WannaCry attack, or installing malware using individually
which affected 300,000 computers targeted email scams) against
across 150 countries, and Petya companies operating nuclear power
and NotPetya, which caused huge plants in the United States.50
corporate losses: for example, Merck,
FedEx and Maersk each reported Most attacks on critical and strategic
third-quarter losses of around US$300 systems have not succeeded—but
to accelerate and the Internet of million as a result of NotPetya.47 the combination of isolated successes
Things is expected to expand from with a growing list of attempted
an estimated 8.4 billion devices in Beyond its financial cost, the attacks suggests that risks are
2017 to a projected 20.4 billion in WannaCry attack disrupted critical increasing. And the world’s increasing
2020.39 What would once have been and strategic infrastructure across interconnectedness and pace
considered large-scale cyberattacks the world, including government heightens our vulnerability to attacks
are now becoming normal. For ministries, railways, banks, that cause not only isolated and
example, in 2016, companies revealed telecommunications providers, energy temporary disruptions, but radical and
breaches of more than 4 billion data companies, car manufacturers and irreversible systemic shocks.
records, more than the combined hospitals. It illustrated a growing trend
total for the previous two years.40 of using cyberattacks to target critical
Distributed denial of service (DDoS) infrastructure and strategic industrial Our growing
attacks using 100 gigabits per second
(Gbps) were once exceptional but
sectors, raising fears that, in a worst-
case scenario, attackers could
vulnerability to
have now become commonplace,
jumping in frequency by 140% in 2016
trigger a breakdown in the systems
that keep societies functioning.
systemic risks
alone.41 And attackers have become Many of these attacks are thought
more persistent—in 2017 the average Humanity has become remarkably
to be state sponsored. WannaCry’s adept at understanding how to
DDoS target was likely to be hit 32 ultimate impact was relatively low,
times over a three-month period.42 mitigate countless conventional risks
largely because a “kill switch” was
that can be relatively easily isolated
discovered, but it highlighted the
The financial costs of cyberattacks are and managed with standard risk-
vulnerability of a wide range of
rising. A 2017 study of 254 companies infrastructure organizations and management approaches. But we
across seven countries put the annual installations to disruption or damage. are much less competent when it
cost of responding to cyberattacks at Since the 2015 attack on Ukraine’s comes to dealing with complex risks
£11.7 million per company, a year- power grid—which temporarily shut in systems characterized by feedback
on-year increase of 27.4%.43 The cost down 30 substations, interrupting loops, tipping points and opaque
of cybercrime to businesses over the power supply to 230,000 people48— cause-and-effect relationships that
next five years is expected to be US$8 evidence has been mounting of can make intervention problematic.51
trillion.44 Some of the largest costs in further attempts to target critical
2017 related to ransomware, a rapidly infrastructure. In 2016, for example,

The Global Risks Report 2018 15

Societies, ecosystems, economies When a risk cascades through a As the pace of change accelerates,
and the global financial system complex system, the danger is not of signs of strain are evident in many of
are all examples of such complex incremental damage but of “runaway the systems on which we rely. We
systems, and they have various collapse”—or, alternatively, a transition cannot discount the possibility that
intersections. Think of how the world’s to a new, suboptimal status quo one or more of these systems will
infrastructure—from power generation that becomes difficult to escape. For collapse. Just as a piece of elastic
to transport networks—is increasingly example, even though a runaway can lose its capacity to snap back
digitally networked. Think of the collapse of the global financial system to its original shape, repeated stress
tensions between our creaking global was averted a decade ago, the global can lead systems—organizations,
institutional framework and the pace financial crisis triggered numerous economies, societies, the
of change in the 21st century. Think economic, societal, political and environment—to lose their capacity to
even of the ethical value systems that geopolitical disruptions. Many are rebound. If we exhaust our capacities
shape behaviour within and between still only poorly understood, but they to absorb disruption and allow our
countries, and the unpredictability shape a “new normal” that in turn will systems to become brittle enough to
that can result when there is a re- create its own disruptions, spillovers break, it is difficult to overstate the
evaluation of what is acceptable and and feedback loops in the months and damage that might result.
unacceptable. years ahead.

16 The Global Risks Report 2018

Notes World Meteorological Organization. 2017. Op cit. D. Sulla-Menashe, and R. A. Houghton. 2017.
Kent, C., E. Pope, V. Thompson, K. Lewis, “Tropical Forests Are a Net Carbon Source Based
A. A. Scaife, and N. Dunstone. 2017. “Using on Aboveground Measurements of Gain and Loss”.
Climate Model Simulations to Assess the Current Science 358 (6360) 230–34.
The new question asked respondents whether they
Climate Risk to Maize Production”. Environmental 33
In June 2017, the Task Force on Climate-
thought the risks associated with a series of 36 issues
Research Letters 12 (5). http://iopscience.iop.org/ Related Financial Disclosures (TCFD) published
would increase or decrease in 2018 compared to
article/10.1088/1748-9326/aa6cb9/meta three documents intended to help implement its
2017. 18
Hallmann, C. A., M. Sorg, E. Jongejans, . . . , H. recommendations. Further information can be found at
International Monetary Fund (IMF). 2017. World
de Kroon. 2017. “More Than 75 Percent Decline over https://www.fsb-tcfd.org/
Economic Outlook October 2017: Seeking Sustainable
27 Years in Total Flying Insect Biomass in Protected 34
World Bank. 2017. “World Bank Group
Growth. Washington, DC: IMF. https://www.imf.org/
Areas”. PLoS ONE 12 (10). https://doi.org/10.1371/ Announcements at One Planet Summit”. Press
journal.pone.0185809 Release, 12 December 2017. http://www.worldbank.
economic-outlook-october-2017 19
Cebellos, G., P. R. Ehrlich, A. D. Barnosky, A. García, org/en/news/press-release/2017/12/12/world-bank-
International Labour Organization (ILO). 2016.
R. M. Pringle, and T. M. Palmer. 2015. “Accelerated group-announcements-at-one-planet-summit; see
Global Wage Report 2016/17: Wage Inequality in the
Modern Human–Induced Species Losses: Entering the also Ryan, J. and A. Hirtenstein. 2017. “Norway Idea
Workplace. Geneva: ILO. http://www.ilo.org/global/
Sixth Mass Extinction”. Science Advances 1 (5). June to Exit Oil Stocks Is ‘Shot Heard Around the World’”.
2015. http://advances.sciencemag.org/content/1/5/ Bloomberg. 17 November 2017. https://www.
e1400253 bloomberg.com/news/articles/2017-11-17/norway-
International Monetary Fund (IMF). 2017. Fiscal 20
World Wide Fund for Nature (WWF). 2016. Living idea-to-exit-oil-stocks-is-shot-heard-around-the-world
Monitor: Tackling Inequality, October 2017.
Planet Report 2016: Risk and Resilience in a New Era. 35
See World Economic Forum. 2018, forthcoming.
Washington, DC: IMF. https://www.imf.org/en/
Gland, Switzerland: WWF International. http://wwf. Fostering Effective Energy Transition: A Fact-Based
panda.org/about_our_earth/all_publications/lpr_2016/ Framework to Support Decision Making. Geneva:
october-2017 21
Wintle, B. and S. Bekessy. 2017. “Let’s Get World Economic Forum.
Hicks, M. and S. Deveraj. 2015. The Myth and the
This Straight, Habitat Loss Is the Number-One 36
Accenture. 2017. Cost of Cyber Crime
Reality of Manufacturing in America. https://projects.
Threat to Australia’s Species”. The Conversation. Study. https://www.accenture.com/
17 October 2017. https://theconversation.com/ t20170926T072837Z__w__/us-en/_acnmedia/PDF-61/
According to the International Federation of Robotics
lets-get-this-straight-habitat-loss-is-the-number-one- Accenture-2017-CostCyberCrimeStudy.pdf
(IFR), average industrial robot density in 2016 was
threat-to-australias-species-85674. See also United 37
Kessem, L. 2017. “Commercial Malware Makes
74 robots per 10,000 employees, whereas the figure
Nations. 2016. Life on Land: Why It Matters. http:// a Comeback in 2016”. IBM SecurityIntelligence,
is much higher in advanced economies such as the
www.un.org/sustainabledevelopment/wp-content/ 29 March 2017. https://securityintelligence.com/
United States (189 robots per 10,000 employees) and
uploads/2016/08/15_Why-it-Matters_Goal15__Life-on- commercial-malware-makes-a-comeback-in-2016/
South Korea (631). See the executive summary of IFR’s
Land_3p.pdf 38
Symantec. 2017. Internet Security Threat Report,
World Robotics 2017 at https://ifr.org/downloads/ 22
Weisse, M. and E. Goldman. 2017. “Global volume 22. April 2017. https://www.symantec.com/
Tree Cover Loss Rose 51 Percent in 2016”. World content/dam/symantec/docs/reports/istr-22-2017-en.
Robots.pdf. See also Ryan Avent on how innovation
Resources Institute. 23 October 2017. http://www. pdf
supply and demand dynamics can lead to patchy
wri.org/blog/2017/10/global-tree-cover-loss-rose-51- 39
Gartner. 2017. “Gartner Says 8.4 Billion Connected
diffusion of technology. Avent, R. 2017. “Take My Job
percent-2016 ‘Things’ Will Be in Use in 2017”. 7 February 2017.
(Please)”. 8 November 2017. https://medium.com/@ 23
Health Effects Institute (HEI). 2017. State of Global https://www.gartner.com/newsroom/id/3598917
Air 2017. Special Report. Boston: HEI. https://www. 40
IBM. 2017. IBM X-Force Threat Intelligence Index
Starmans, C., M. Sheskin, and P. Bloom. 2017.
stateofglobalair.org/sites/default/files/SoGA2017_ 2017. White Paper. https://securityintelligence.com/
“Why People Prefer Unequal Societies”. Nature
report.pdf media/ibm-x-force-threat-intelligence-index-2017/
Human Behaviour. 1 (0082). http://christinastarmans. 24
The Guardian. 2017. “Delhi Doctors Declare Pollution 41
Akamai. 2016. Q4 2016 State of the Internet /
Emergency as Smog Chokes City”. The Guardian. Security Report. https://www.akamai.com/us/en/
7 November 2017. https://www.theguardian.com/ about/our-thinking/state-of-the-internet-report/global-
World Economic Forum. 2017. The Global Gender
world/2017/nov/07/delhi-india-declares-pollution- state-of-the-internet-security-ddos-attack-reports.jsp
Gap Report 2017. Geneva: World Economic Forum.
emergency-as-smog-chokes-city?CMP=share_btn_link 42
Akamai. 2017. Q2 2017 State of the Internet /
https://www.weforum.org/reports/the-global-gender- 25
Landrigan, P., R. Fuller, J. R. Acosta, . . . , M. Zhong. Security Report. https://www.akamai.com/us/en/
2017. The Lancet Commission on Pollution and about/our-thinking/state-of-the-internet-report/global-
Traister, R. 2017. “Your Reckoning. And Mine”.
Health. http://www.thelancet.com/pdfs/journals/lancet/ state-of-the-internet-security-ddos-attack-reports.jsp
The Cut. 12 November 2017. https://www.thecut.
PIIS0140-6736(17)32345-0.pdf 43
Accenture. 2017. Op cit.
com/2017/11/rebecca-traister-on-the-post-weinstein- 26
Jambeck, J., R. Geyer, C. Wilcox, T.R. Siegler, . . . , 44
Juniper Research. 2017. The Future of Cybercrime &
K. L. Law. 2015. “Plastic Waste Inputs from Land into Security: Enterprise Threats & Mitigation 2017-2022.
Sandbu, M. 2017. “Is Culture or Economics at
the Ocean”. Science 347 (6223): 768–71. 45
Proofpoint. 2017. Quarterly Threat Report Q3 2017.
the Root of Our Strange Politics?” Financial Times. 27
Van Cauwenberghe*, L. and C. R. Janssen. https://www.proofpoint.com/sites/default/files/pfpt-us-
11 September 2017. https://www.ft.com/content/
2014. “Microplastics in Bivalves Cultured for Human tr-q317-threat-report_1.pdf
Consumption”. Environmental Pollution 193 (2014): 46
Accenture. 2017. Op cit.
O’Brien, L. 2017. “The Making of an American Nazi”.
65–70. https://www.expeditionmed.eu/fr/wp-content/ 47
Forrest, C. 2017. “NotPetya Ransomware Outbreak
The Atlantic. December 2017. https://www.theatlantic.
uploads/2015/02/Van-Cauwenberghe-2014- Cost Merck More Than $300M per Quarter”.
microplastics-in-cultured-shellfish1.pdf TechRepublic. 30 October 2017. https://www.
american-nazi/544119/ 28
Tyree, C. and D. Morrison. Invisibles: The Plastic techrepublic.com/article/notpetya-ransomware-
World Trade Organization (WTO). 2017. World
inside Us. https://orbmedia.org/stories/Invisibles_ outbreak-cost-merck-more-than-300m-per-quarter/
Trade Statistical Review 2017. Geneva: WTO. https://
plastics 48
Zetter, K. 2016. “Inside the Cunning, Unprecedented
www.wto.org/english/res_e/statis_e/wts2017_e/ 29
Adams, R. 2017. “Plastic in Drinking Water: What Hack of Ukraine’s Power Grid”. Wired. 3 March 2016.
Are the Risks to Human Health?” The Conversation. https://www.wired.com/2016/03/inside-cunning-
Sullivan, B. 2017. “The Most Expensive U.S.
13 September 2017. https://theconversation.com/ unprecedented-hack-ukraines-power-grid/
Hurricane Season Ever: By the Numbers”. Bloomberg.
plastic-in-drinking-water-what-are-the-risks-to-human- 49
Valero, J. 2016. “Hackers Bombard Aviation Sector
26 November 2017. https://www.bloomberg.com/
health-83844 with over 1,000 Attacks per Month”. Euractiv. 11 July
news/articles/2017-11-26/the-most-expensive-u-s- 30
Levitus, S., J. I. Antonov, T. P. Boyer, O. K. 2016. https://www.euractiv.com/section/justice-home-
Baranova, H. E. Garcia, . . ., and M. M. Zweng. 2012. affairs/news/hackers-bombard-aviation-sector-with-
CredCrunch. 2017. “Natural Disasters over the First
“World Ocean Heat Content and Thermosteric Sea more-than-1000-attacks-per-month/
Semester of 2017”. September 2017. http://cred.be/
Level Change (0–2000 m), 1955–2010”. Geophysical 50
Gallagher, S. 2017. “FBI-DHS “Amber” Alert Warns
Research Letters 39 (10). 17 May 2012, http:// Energy Industry of Attacks on Nuke Plant Operators”.
Internal Displacement Monitoring Centre (IDMC).
onlinelibrary.wiley.com/doi/10.1029/2012GL051106/ Ars Technica. 7 July 2017. https://arstechnica.com/
2017. GRID 2017: Global Report on Internal
abstract information-technology/2017/07/dhs-fbi-warn-of-
Displacement. Geneva: IDMC. http://www.internal- 31
Ayres, R. 2016. “The Ocean Cannot Absorb Much attempts-to-hack-nuclear-plants/
More CO2”. Knowledge, INSEAD Blog. 19 October 51
International Risk Governance Council. 2018,
2016. https://knowledge.insead.edu/blog/insead-blog/ forthcoming. Guidelines for Dealing with Systemic
the-ocean-cannot-absorb-much-more-co2-4990 Risks in the Context of Transitions. Lausanne,
Baccini, A., W. Walker, L. Carvalho, M. Farina, Switzerland: IRGC.
Economic Storm
REUTERS/Nguyen Huy Kham
Headline economic indicators suggest 19%, the Hang Seng in Hong Kong If there were to be a sharp market
the world is finally getting back on SAR by 35%, the Nikkei in Japan by correction, the impact on the real
track after the global crisis that 19%, the DAX in Germany by 11% economy would arguably be greatest
erupted 10 years ago. A broad-based and the CAC40 in France by 8%. in countries most heavily exposed to
pickup in GDP growth rates is under According to one commonly used sectors and markets in which bubbles
way, stock markets have never been measure of cyclically adjusted prices have formed—for example, a country
higher and the world’s major central (see Figure 2.1), US stocks have only economically reliant on exports of
banks are cautiously preparing to twice in history been higher than they a commodity that plunges in value.
unwind the exceptional policies of the are at the moment: just prior to the The impact of confidence and wealth
post-crisis period. crashes of 1929 and 2000. effects means that real-economy
impacts would also be felt strongly in
However, this relatively upbeat picture Bond valuations are even more countries—notably the United States
masks numerous concerns. This has dramatic. In mid-2017, around 9 and the United Kingdom—in which
been the weakest post-recession trillion US dollars’ worth of bonds the ownership of financial assets is
recovery on record. Productivity were trading with a negative yield, most widespread.
growth remains puzzlingly weak. meaning that investors were, in
Investment growth has been subdued, effect, paying bond issuers for the It is not just stocks and bonds that
and in developing economies it has privilege of holding their risky financial have seen their prices rise. The
slowed sharply since 2010.1 And in instruments. This anomaly reflects the International Monetary Fund (IMF)’s
many countries the social and political impact of the huge asset-purchase index of global house prices is close
fabric has been badly frayed by many programmes launched by central to its pre-crisis peak again (see
years of stagnating real incomes. banks in the wake of the crisis, which Figure 2.2), and signs of stretched
seem to have divorced asset prices valuations are evident in numerous
The reassuring headline indicators from assessments of their underlying cities including Hong Kong, London,
mean that economic and financial riskiness. In Europe, for example, Stockholm, and Toronto. Inflation in
risks are becoming a blind spot: during 2017, yields on high-risk all these traditional asset classes has
business leaders and policy-makers corporate bonds converged with been dwarfed by more speculative
are less prepared than they might yields on US government debt, the assets such as the cryptocurrency
be for serious economic or financial global financial system’s Bitcoin, which increased in value by
turmoil. The risks can be divided risk-free benchmark.3 around 1200% in 2017.
into two categories: (1) familiar
vulnerabilities that have grown, Figure 2.1: Equities on the Up A further source of potential market
mutated or relocated over time; and Cyclically adjusted price/earnings ratio (CAPE) risk at present is that innovations
(2) newer fragilities that have emerged in financial assets and asset
in recent years. management have yet to be tested in
crisis conditions. One example is the
rapidly expanding class of exchange-
Long-standing traded funds (ETFs), which have
vulnerabilities grown in value by 500% since 2008
and now account for US$4 trillion
Unsustainable asset prices? of assets and around 25% of all US
stock market trading.4 Some analysts
The world is eight years into a bull suggest that ETFs would cushion the
run, with global stock markets hitting blow of a major market correction,
all-time high after all-time high. This while others reckon they would
has raised fears that this is another exacerbate it.
episode of “irrational exuberance”, that
the lessons of the crisis have gone
Source: Robert Shiller.
unlearned,2 and that a deep correction http://www.econ.yale.edu/~shiller/data.htm
may follow. In 2017, the Dow Jones
increased by 25%, the S&P500 by

The Global Risks Report 2018 19

Figure 2.2: Building High debt totalled US$135 trillion, up from The regulatory separation of the
IMF Global House Price Index US$80 trillion in 2007.6 financial sector in China from that
of the rest of the world reduces
Indebtedness has risen differently in the risk of systemically significant
advanced and emerging economies. financial spillovers, but as early as
Advanced economies built up huge 2015 the governors of the European
debts before the crisis erupted, but Central Bank were cautioning that
their overall level of debt has remained “financial developments in China
relatively constant in the subsequent could have a larger than expected
decade: as a proportion of GDP, adverse impact.”10 Given how deeply
modest deleveraging by households embedded China now is in the world
and financial institutions has been economy, if the country’s authorities
offset by increases in government were to step in decisively to secure
debt resulting from stimulus spending. the stability of the financial system,
Meanwhile, signs of strain are evident the resulting slowdown in domestic
in parts of the corporate debt market. growth could represent a damaging
According to S&P Global, 162 blow to global demand.
Source: International Monetary Fund (IMF). corporate defaults worldwide occurred
in 2016, the most since 2009 and China can deploy vast resources
up from 113 in 2015.7 The debt-to- to protect its economy, but most
Indebtedness equity ratio of the median S&P 1500 emerging economies are much more
company (excluding financials) has directly exposed to any worsening of
High levels of indebtedness— almost doubled since 2010 and is now global conditions. If the major central
particularly among households and in well above its pre-crisis level. banks’ interest rates were to move
the financial sector—were a key driver significantly higher, lower-income
of the financial crisis and one reason In emerging markets, by contrast, emerging market economies would
the recovery of the real economy aggregate debt levels were relatively take a direct hit from the combination
has been so slow. Recessions low and stable prior to the crisis but of higher rates and worse exchange
accompanied by credit contractions have increased sharply since. This is rates, increasing the cost of borrowing
or housing slumps tend to be much especially true in China, where debt US dollars or other hard foreign
deeper and take longer to recover issuance has surged to help deliver currency. Already there are signs that
from, because they leave a legacy of the high levels of growth the country’s debt-servicing costs for many of these
expansive boom-era debts that act as plans require. The rapid expansion of countries are rising gradually from
a drag on consumption debt in the Chinese economy is now the record lows of a few years ago.
and investment.5 one of the world’s clearest flashpoints These problems are most pronounced
for potential economic turmoil: in countries with high levels of
Prior to the 2008 crisis, the world according to some analysts, China’s foreign-currency debt, particularly oil-
was awash with cheap loans. current credit trajectory is “dangerous exporting countries where sustained
Remarkably, there has been no with increasing risks of a disruptive low oil prices have hit companies’
aggregate deleveraging since. In fact, adjustment.”8 revenues and governments’ fiscal
the total global debt-to-GDP ratio is positions. In October 2017, for
significantly higher now than it was China’s banking sector has ballooned example, the governor of the Central
before the crisis. In its latest Global to hold assets valued at US$33 Bank of Kenya cautioned that
Financial Stability Report, the IMF trillion, or 3.1 times the country’s government debt in a number of
highlighted the potential risks posed annual output. Arguably, these African countries has reached levels at
by the build-up of non-financial sector figures understate the full extent which an external shock “could push
debt in the G20 (i.e. the debt held by of the country’s potential fragilities, us over”.11 Countries facing significant
households, governments and non- because they do not capture the strain include Angola, Gabon, Ghana,
financial companies). In 2016, this rapid growth of the more lightly Mozambique and Zambia.
regulated shadow banking sector.9

20 The Global Risks Report 2018

at the end of 2016.12 Widespread but there appears to be no political
changes in the structure of the sector will to introduce major reforms.
include collapses, mergers, and a In fact, deregulation may now be
politically sensitive supranational more likely: for example, pressure is
“banking union” in the Eurozone.13 already mounting for a loosening of
Restrictions—such as the Volcker the Volcker Rule. The issue of banks
Rule, which since 2015 has prohibited being “too big to fail” has not gone
banks in the United States from away, however: the assets held by the
making market bets with their own largest 30 banks have grown from less
capital—have been put on the risks than US$30 trillion in 2006 to almost
that banks are allowed to take.14 And US$43 trillion, and concentration is
there has been a winding down of the continuing to increase.16 Meanwhile
sector’s reliance on wholesale inter- strains have spread to emerging
bank lending, a potentially volatile markets: banks that were relatively
source of funding that evaporated in unscathed at the height of the crisis
2008 as banks began to lose trust in have since had to contend with
The global financial system each other’s creditworthiness. the resulting deterioration of global
financial conditions and the sharp
The third long-standing risk is the There are reasons to be cautious, downward turn of many
health of the financial system, despite this progress. Measures of commodity prices.17
even though much has been done banks’ capitalization continue to rest
to restore the banking system to on risk-weighting methodologies
stability after its near-collapse in that mask a lot of uncertainty about
2008. Regulators have overseen an underlying risks. Calls are becoming
increase in the core capital ratios louder for radical reform of the
of 30 globally systemic banks, from fundamental principles of banking,15
10.3% at the end of 2011 to 12.6%


The Global Risks Report 2018 21

New and emerging similar level of stimulus, the European
Central Bank, the Bank of Japan and
Although technological advances have
provided many benefits in emerging
challenges the Bank of England would all face economies, the associated risks are
even greater shortfalls given that their arguably most pronounced in these
The familiar vulnerabilities outlined interest rates are currently even lower countries too. The World Bank,
above are now compounded by a than the Fed’s. among others, has cautioned that
range of newer fragilities that have current patterns of innovation threaten
emerged or strengthened materially Central banks were crucial to restoring the viability of long-established
since the crisis. economic confidence among paths to development.22 Historically
households, businesses and markets economies have developed by moving
Limited firepower after the crisis. Repeating that feat workers from agricultural jobs into
could be a struggle without interest export-oriented manufacturing jobs
How much room for manoeuvre rates at their disposal. And without that require similarly low skill levels
policy-makers retain is open to a floor placed under confidence, but deliver much higher productivity.
question. Put simply, is there enough the risk of the next downturn being This “escalator to higher income
fiscal and monetary policy firepower much deeper and longer than might levels” breaks down when the
left to deal with another crisis? In otherwise be the case would increase. manufacturing sector becomes
theory, the major Western economies sufficiently automated to require
that were at the centre of the global Technological disruption workers who are more highly skilled.23
crisis could respond with another In these circumstances, developing-
wave of major policy interventions A second emergent source country productivity can stagnate or
reflecting the synergies that are of economic risk is the rapid decline if workers move back from
currently at play between monetary technological change that has taken manufacturing into agriculture, or
and fiscal policies, with central bank place even in the decade since the from agriculture into low-end service
asset purchases helping to alleviate global crisis. The history of previous sectors where productivity can be
governments’ fiscal pressures by waves of innovation suggests even lower.24 Latin America is the
keeping down debt-servicing costs.18 that the nascent Fourth Industrial clearest example of a region where
However, this scenario places a Revolution will ultimately deliver “premature deindustrialization” has
lot of faith in the effectiveness of broad-based economic benefits. held back countries’ productivity
unconventional monetary policies However, technological pessimists growth.25 The associated risks are not
such as asset purchases, particularly query whether current innovation purely economic—recent research
when deployed as the primary line has little of the transformative suggests that weak industrialization
of defence rather than alongside a power analogous to that of previous can hamper the development of liberal
sharp interest-rate stimulus. Facing discoveries and inventions, such as democratic institutions by affecting
a recession—let alone a crisis—with electricity, household appliances the political divisions that become
very limited scope to cut interest rates and the combustion engine.20 Even dominant in a country.26
would be unprecedented. optimists caution that major disruption
may be inevitable as societies adapt: Politics and protectionism
The Fed has responded to past US the original Industrial Revolution
recessions by cutting its benchmark delivered huge increases in human Last year’s Global Risks Report
policy rate by an average of 5.5 welfare, but it also caused prolonged discussed the spillover of economic
percentage points. That benchmark social and economic turmoil and risks into various recent episodes of
rate currently stands at just 1.25%, set the scene for new revolutionary political disruption across the world.27
and market expectations are that it modes of politics.21 Worries about The directionality can run both ways,
will plateau at around 3%. In other the economic impact of new as discussed in the chapter on
words, even if the Fed were to cut technologies were prominent in this Geopolitical Power Shifts: populist
rates to zero in response to a new year’s Global Risks Perception Survey and identity politics can amplify risks
recession, there would still be at least (GRPS)—the most frequently cited of economic and financial disorder
a 2.5 percentage point shortfall relative risk interconnection was the pairing by upending previously stable
to the usual scale of response.19 between unemployment and adverse economic principles and practices,
Assuming they wanted to deliver a impacts of technological advance. particularly those relating to trade.

22 The Global Risks Report 2018

to cross-border business and
constraints on labour mobility.

The backdrop of pronounced

geopolitical uncertainty and
increasingly transactional approaches
to interstate relations increases
the risk that economic disputes
will flare up. We can distinguish
between (1) disputes stemming
from tensions between countries’
economic agendas and policies,
and (2) geopolitical tensions—up to
and including military conflict—that
cause disruption to economies and
markets. The results of the GRPS
The two countries that experienced
are pessimistic in this regard: the
the most disruptive political results in
overwhelming majority of respondents
2016—the United Kingdom and the
expect the risks of interstate military
United States—have both entered a
conflict or incursion to increase in
period of uncertainty and volatility in
2018. New technologies add a layer of
their external economic relations. The
economic vulnerability to geopolitical
United Kingdom is in the process of
disruptions, with emerging risks
leaving the European Union, while the
of asymmetric economic warfare
United States has withdrawn from
including potential cyberattacks
the Trans-Pacific Partnership (TPP)
designed to disrupt critical financial
and is seeking a renegotiation of the
North American Free Trade Agreement
It is striking how sanguine financial
markets have remained while political
Mercantilist and protectionist
and geopolitical risk has jumped in
pressures have been building in
recent years. Given current market
many countries for years: according
dynamics, it may not be rational for
to Global Trade Alert, protectionist
any single market participant to price
interventions have increased
in rising political and geopolitical
markedly since 2012. A new high
tensions. The risk is that we will hit a
was recorded 2016, when 571 of the
tipping point at which point everyone
771 trade interventions tracked by
prices in these tensions, with a rush to
Global Trade Alert were characterized
the exits that hits asset prices, strains
as discriminatory and just 200 as
the resilience of the global financial
liberalizing. Early data for 2017 point to
system and tests whether policy-
a continuation of this trend, particularly
makers retain the firepower to prevent
in the United States, where the first six
deep and long-lasting impacts on the
months of the year saw a 26% jump in
real economy.
trade actions against G20 partners.28
The risk of economic damage is not
restricted to trade protectionism—
mercantilism and unilateralism could
trigger a wider deterioration of global
interconnectedness, including reduced
investment flows, increased obstacles

The Global Risks Report 2018 23

Notes See Cetorelli, N. and L. S. Goldberg. 2011. “Global

Banks and International Shock Transmission: Evidence

from the Crisis”. IMF Economic Review 59 (1): 41–76.
See chapter 3 of World Bank. 2017. Global Economic id=1801096; and Christensen, B. V. 2016. “Challenges
Prospects: Weak Investment in Uncertain Times. http:// of Low Commodity Prices for Africa”. BIS Papers No.
pubdocs.worldbank.org/en/712231481727549643/ 87. http://www.bis.org/publ/bppdf/bispap87.htm.
Global-Economic-Prospects-January-2017-Weak- 18
For a discussion of “fiscal space” in advanced
investment-uncertain-times.pdf economies, see Botov, J., M.-M. Fournier, and A.
Kumar, N. and S. Waite. 2017. “Greenlight’s Einhorn Mourougane. 2016. “A Re-Assessment of Fiscal Space
Says Issues That Caused the Crisis Are Not Solved”. in OECD Countries”. OECD Economic Department
Bloomberg. 15 November 2017. https://www. Working Papers No. 1352. https://www.oecd.org/
bloomberg.com/news/articles/2017-11-15/greenlight- eco/A-re-assessment-of-fiscal-space-in-OECD-
s-einhorn-says-issues-that-caused-crisis-not-solved- countries.pdf
ja1cw3ws 19
Yellen, J. 2016. “The Federal Reserve’s Monetary
Gilbert, M. and M. Ashworth. 2017. “Euro High-Yield Policy Toolkit: Past, Present, and Future”. Presentation
Looks Frothy”. Bloomberg. 7 August 2017. https:// at “Designing Resilient Monetary Policy Frameworks
www.bloomberg.com/gadfly/articles/2017-08-07/euro- for the Future,” a symposium sponsored by the Federal
high-yield-looks-frothy Reserve Bank of Kansas City, Jackson Hole, Wyoming,
Wigglesworth, R. 2017. “Global ETF Assets Reach 26 August 2016. https://www.federalreserve.gov/
$4tn”. Financial Times. 10 May 2017. https:// newsevents/speech/yellen20160826a.htm
www.ft.com/content/89c18106-3591-11e7-bce4- 20
Gordon, R. J. 2016. The Rise and Fall of American
9023f8c0fd2e Growth: The U.S. Standard of Living since the Civil
Claessens, S., M. A. Kose, and M. E. Terrones. 2008. War. Princeton, NJ: Princeton University Press.
“What Happens During Recessions, Crunches and 21
Cowen, T. 2017. “Industrial Revolution
Busts?” IMF Working Paper WP/08/274. Washington, Comparisons Aren’t Comforting”. Bloomberg. 16
DC: IMF. https://www.imf.org/external/pubs/ft/ February 2017. https://www.bloomberg.com/view/
wp/2008/wp08274.pdf articles/2017-02-16/industrial-revolution-comparisons-
International Monetary Fund (IMF). 2017. Global aren-t-comforting
Financial Stability Report: Is Growth at Risk? October. 22
Hallward-Driemeier, M. and G. Nayyar. 2017. Trouble
Washington, DC: IMF. https://www.imf.org/en/ in the Making? The Future of Manufacturing-Led
Publications/GFSR/Issues/2017/09/27/global-financial- Development. Washington, DC: World Bank. http://
stability-report-october-2017, p. 33 www.worldbank.org/en/topic/competitiveness/
S&P Global Ratings. 2017. 2016 Annual Global publication/trouble-in-the-making-the-future-of-
Corporate Default Study And Rating Transitions. 13 manufacturing-led-development
April 2017. Standard & Poor’s Financial Services LLP. 23
Rodrik, D. 2017. “Growth without Industrialization?”
http://media.spglobal.com/documents/SPGlobal_ Project Syndicate. 10 October 2017. https://www.
Ratings_Article_13+April+2017_Annual+Corporate+De project-syndicate.org/commentary/poor-economies-
fault+Study+and+Rating+Transitions.pdf growing-without-industrializing-by-dani-rodrik-2017-10
International Monetary Fund (IMF). 2017. People’s 24
Hallward-Driemeier and Nayyar. 2017. Op cit., p. 60.
Republic of China: Selected Issues. IMF Staff Country 25
Report No. 17/248. August 2017. Washington, 26
Mukand, S. and D. Rodrik. 2015. “The Political
DC: IMF. http://www.imf.org/en/Publications/CR/ Economy of Liberal Democracy”. NBER Working Paper
Issues/2017/08/15/People-s-Republic-of-China- No. 21540. September 2015. http://www.nber.org/
Selected-Issues-45171, p. 17. papers/w21540
Elliott, D., A. Kroeber, and Y. Qiao. 2015. “Shadow 27
World Economic Forum. 2017. The Global Risks
Banking in China: A Primer”. Washington, DC: Report 2017. Geneva: World Economic Forum. https://
Brookings. March 2015. https://www.brookings.edu/ www.weforum.org/reports/the-global-risks-report-2017
wp-content/uploads/2016/06/shadow_banking_china_ 28
Global Trade Alert. “Global Dynamics”. http://www.
elliott_kroeber_yu.pdf globaltradealert.org/global_dynamics
Account of the ECB governing council’s monetary
policy meeting on 15–16 July. https://www.ecb.
Quoted in Pilling, D. 2017. “African Debt Worries
Intensify as Levels Near Tipping Point”. Financial
Times. 20 October 2017. https://www.ft.com/
Bank for International Settlements (BIS). 2017. Basel
Monitoring Report: September 2017. https://www.bis.
org/bcbs/publ/d416.pdf, p. 72.
See Schoenmaker, D. 2016. “The Banking Union: An
Overview and Open Issues”. May 2016. Chapter 17 in
the Palgrave Handbook on European Banking. https://
See, for example, Morrison & Foerster LLP. 2014. “A
User’s Guide to The Volcker Rule”. http://www.iflr.com/
See, for example, King, M. 2016. The End of
Alchemy: Money, Banking and the Future of the Global
Economy. New York: Norton.
See World Economic Forum. 2017. The Global
Competitiveness Report 2017–2018. Geneva: World
Economic Forum. http://reports.weforum.org/global-
competitiveness-index-2017-2018/, p.14.
As the world becomes more complex and interconnected, easily managed
incremental change is giving way to the instability of feedback loops, threshold
effects and cascading disruptions. Sudden and dramatic breakdowns—
future shocks—become more likely. In the pages that follow, we present 10
such potential future shocks. Some are more speculative than others; some
extrapolate from risks that have already begun to crystallize. These are not
predictions. They are food for thought and action—what are the possible future
shocks that could fundamentally disrupt or destabilize your world, and what can
you do to prevent them?

Illustrations: Patrik Svensson

The Global Risks Report 2018 25

Grim Reaping
Simultaneous breadbasket failures threaten sufficiency of global
food supply

In a world of growing Widespread fear—let alone Even on optimistic climate-

environmental strains our death on a large scale— change trajectories food-
increasingly complex food could lead to devastating supply risks will remain
system is becoming more spillover effects. Social elevated. Steps are needed
vulnerable to sudden supply fractures would intensify in to improve sustainability and
shocks. The interaction of affected and at-risk resilience throughout the
disruptors such as extreme countries. Political and food system. Among the
weather, political instability economic crises would be changes that could help are
or crop diseases could likely. So too would a surge increasing crop diversity,
result in a simultaneous in smuggling, both of food establishing stress tests of
blow to output in key and people. Against such a “choke points” and other
food-producing regions, volatile backdrop, cross- national and regional
triggering global shortages border tensions could vulnerabilities, reducing
and price spikes. The risk of worsen sharply, hampering waste along supply chains,
a systemic breakdown existing humanitarian reaffirming humanitarian
could be further elevated by response networks, principles and commitments
wider fragilities, including frustrating efforts to develop and establishing early
reduced crop diversity, regional and global warning indicators.
competition for water from mitigation strategies and
other sectors and increasing the possibility of
geopolitical tensions. interstate conflict.

26 The Global Risks Report 2018

A Tangled Web
Artificial intelligence “weeds” proliferate, choking off the
performance of the internet

What if the adverse impact of becomes more likely. A countless

artificial intelligence (AI) divergence could open businesses. It could
involves not a super- between the code we have hobble the Internet
intelligence that takes control created and our capacity to of Things. It would
from humans but “AI track and control it. frustrate users. If the
weeds”—low-level algorithms The tragedy of the commons problem became
that slowly choke off the means we often let chronic significant enough, it
internet? Algorithms are problems with dispersed could prompt some
already proliferating. As they responsibilities fester. Think governments to wall
increase in sophistication—as of plastic in the ocean. A off parts of the
we become more reliant on trend towards reduced internet. If malicious
code that writes code, for internet efficiency would actors found ways
example—explosive growth undermine service delivery in to proliferate or
weaponize the AI
weeds, they could
do extensive

As the global
demands placed on
the internet increase
in scale and
digital hygiene is
likely to become a
more pressing
concern for end-
users. The
development of
overarching norms,
regulations and
structures for AI will
be crucial: without a
robust and
framework, there is
a risk that humans
will in effect be
crowded out from
the internet by the
proliferation of AI.

The Global Risks Report 2018 27

The Death of Trade
Bilateral trade wars cascade and multilateral dispute
resolution institutions are too weak to respond

Political commitment to globalization aggressive mercantilism, the risk would

has weakened in the wake of the global increase of proliferating trade-related
financial crisis and even minor disputes disputes triggering deeper geopolitical
could trigger an unravelling. Against a tensions and policies of gunboat
backdrop of deepening protectionist diplomacy on trade.
sentiment, trade disputes could spread
rapidly by triggering adverse impacts Whatever the settled position on global
and retaliatory moves along global trade is to be, more deliberation and
value chains. The same pressures consensus-building would bolster its
fomenting trade disputes would also legitimacy. A period of de-globalization
undermine the already-weakened may be seen by many as a welcome
institutions designed to resolve them, corrective, but rejecting current
potentially leading to multilateral rules frameworks in favour of binary
being openly breached. nationalistic approaches would cause
significant disruption. Securing durable
A breakdown of the global trade and worldwide support for globalization
system would roil supply chains and would be made easier by an increased
reduce overall economic activity. domestic policy focus on cushioning
Adverse impacts such as lower output the impact on individuals and regions
and employment would be unevenly affected by transitions in economic
distributed within and between activity.
countries, creating new inequalities and
frustrations. If this in turn fuelled more

28 The Global Risks Report 2018

Democracy Buckles
A new wave of populism threatens the social order in
one or more mature liberal democracies

Democracy is already showing signs of impose its will by force, risking long-
strain in the face of economic, cultural reverberating consequences: a state of
and technological disruption. Much emergency, the curtailment of civil
deeper damage is possible: social and liberties, even the cancellation of
political orders can break down. If an elections to protect public order.
evenly divided country sees polarized
positions harden into a winner-takes-all The more that can be done to boost
contest, the risk increases of political the resilience and responsiveness of
debate giving way to forms of democratic institutions, the less likely
secession or physical confrontation. they will be to buckle under pressure.
This might require processes of political
In these circumstances, a tipping point and constitutional experimentation. It
could be reached. A spiral of violence could even mean incorporating ideas
could begin, particularly if public from post-conflict politics into everyday
authorities lost control and then democracy. We also need to better
intervened on one side with understand the democratic fissures
disproportionate force. In some currently being caused by the
countries—with widespread ready economy, by social media and by
access to weapons or a history of changing patterns of national identity.
political violence—armed civil conflict
could erupt. In others, the state might

The Global Risks Report 2018 29

Precision Extinction
AI-piloted drone ships wipe out a large proportion of
global fish stocks

A third of all fish consumed in the A rapid collapse of fish stocks could Targeted schemes such as genetic
world are already caught illegally. AI engender cascading failures across markers to track fish throughout the
and drone technologies are marine ecosystems. Communities reliant supply chain might limit demand for
increasingly commonplace. Add to on fishing for their incomes might struggle illegally caught fish. So might better
these facts the automation of illegal to survive, leading to fiscal pressures vessel observation. But key to progress
fishing, and the impact on fish stocks and/or displacement. A sufficiently large in this and similar areas of hybrid
could be devastating—particularly in surge in the supply of illegal fish might technological disruption will be new
international waters where oversight is distort global food markets, leading to global governance norms and
weaker. Countless other areas exist disruption in the agriculture and food- institutions, particularly those designed
where the same logic might unfold: production sectors. If illegal drone fishing to protect the global commons and
huge short-term incentives might lead crossed national maritime boundaries prevent the destructive deployment of
to the use of emerging technologies in and was perceived to be state- emerging technologies.
ways that trigger irreversible long-term sanctioned, retaliatory measures might
damage. lead to diplomatic or military tensions.

30 The Global Risks Report 2018

Into the Abyss
A cascading series of economic/financial crises overwhelm
political and policy responses

Against a backdrop of domestic and financial-sector bailout further enflamed

international political strife—and with societies rather than calming them? Or
economic policy-makers already what if the financial system’s collapse
operating in uncharted territory—the stemmed from a hostile cyberattack,
eruption of another global financial raising fears that more attacks and
crisis could overwhelm political and disruption lie ahead?
policy responses. A systemic collapse
of the sort that was averted in 2007– More can be done to enhance the
2008 could push countries, regions or resilience of the financial system.
even the whole world over the edge Stress-testing methodologies could be
and into a period of chaos. strengthened by assigning greater
weight to tail events and unexpected
If financial systems go down, consequences. Greater consideration
contemporary economies and could be given to the growing number
societies cannot function. Money of voices calling for radical change of
would stop circulating. Wages would the way the banking system works. But
not be paid. Supply chains would break societies might also want to prepare
down. Scarcity would begin to become more actively for worst-case scenarios.
pervasive, and this would threaten to
upend the political and social order.
Policy-makers would pull every
available lever to restore stability. But
what if the prospect of another

The Global Risks Report 2018 31

Inequality Ingested
Bioengineering and cognition-enhancing drugs widen
the gulf between haves and have-nots

Drugs for human enhancement are in deterioration—emerged in the future it

their early stages, but scientific could create a massive public health
advances may well be exponential. In a crisis.
world of entrenched inequality, many
people might choose to disregard Stronger measures to combat existing
potential health risks in order to inequality might reduce consumption
maintain or elevate their status. incentives, but that seems doubtful.
Ingestion would be impossible to Early and appropriate regulation of
monitor, and even if bans are put in enhancement technologies may be
place black market channels would more successful than an outright ban.
inevitably emerge. For example, new workplace equality
legislation might require employers to
If the price tag is significant and the confirm that all staff are compliant with
benefits are strong, the result would be enhancement rules. If these
ever-deeper and more entrenched technologies were ever proven to be an
inequality. This could trigger social unalloyed good—analogous to
instability and conflict between the vaccinations—then the regulatory
haves and have-nots. Divergent objective might shift to ensuring
regulatory responses could lead to universal access.
productivity disparities across countries
and the emergence of “enhancement
tourism” flows. If unforeseen
consequences—such as serious brain

32 The Global Risks Report 2018

War without Rules
State-on-state cyberattacks escalate unpredictably
owing to a lack of agreed protocols

Offensive cyber capabilities are escalation, including the resort to

developing more rapidly than our ability conventional military force or the
to deal with hostile incidents. This unintended widening of conflict if an
creates a fog of uncertainty in which active cyberweapon inadvertently
potential miscalculations could trigger a spreads through cross-border
spiral of retaliatory responses. Imagine networks into non-target countries.
that a country’s critical infrastructure
systems are compromised by a In conventional warfare, agreed norms
cyberattack, leading to disruption of and protocols provide predictability and
essential services and loss of life—the slow the emergence of crises. If
pressure to retaliate would build rapidly, governments accelerated current
potentially setting off an escalatory efforts to establish similar ground rules
chain reaction. for cyberwarfare, it would help to
prevent conflict erupting by mistake.
Questions of speed and attribution Familiar concepts such as
heighten the risk of unpredictable transparency, proportionality and
consequences. If an attack is non-proliferation could be re-codified
developing more quickly than the for cyber purposes. And perhaps
targeted state’s efforts to identify the classes of cyberweapons could be
attacker, retaliation might be collectively prohibited, in the same way
misdirected, drawing new actors into a biological and chemical weapons have
widening conflict. This would add to the been.
potential for further confusion and

The Global Risks Report 2018 33

Identity Geopolitics
Self-determination around contested borders sparks
regional conflict

At a time of global geopolitical points for interstate conflict, particularly

uncertainty, the twin forces of national in regions where disputes over self-
identity and self-determination are determination are long-standing and
growing in disruptive capacity. Already are likely either to be resolved violently
this is leading to violence and rather than consensually or to draw in
constitutional instability, at times regional hegemons and/or global
spurred on by foreign powers. powers.
Examples include states expelling
ethnic or religious minorities, national Stronger promotion and protection of
minorities attempting to secede and equal cultural and political rights within
nation-states extricating themselves states would help defuse tensions
from international constraints on their about national identity. So would the
sovereignty. fostering of stronger economic and
other links between states sharing
A deepening of disputes over cultural contested borders. Drawing on
and political borders would trigger successful examples of constitutional
widening clashes, potentially causing innovation—such as multilevel and
regional domino effects as states and cross-community forms of
sub-state actors mobilize in defence of governance—might help guide the
or opposition to the status quo. This administration of internally divided
instability would create new trigger- polities.

34 The Global Risks Report 2018

Walled Off
Regulatory, cybersecurity and protectionist concerns
lead to the fragmentation of the internet

A proliferation of damaging cross- many would not: resistance would be

border cyberattacks might be the most likely, as would the rapid growth of
likely trigger for a government-led illegal workarounds. The pace of
breakup of the internet into national or technological development would slow
regional “walled gardens”, but there are and its trajectory would change.
many other potential drivers that could Human rights abuses would likely
lead governments in this direction: increase as advances in international
economic protectionism, regulatory monitoring were rolled back.
divergence, censorship and repression,
the fraying of national political Advances in cybersecurity governance
discourse and the loss of government and technology ought to mitigate the
power relative to global online risk of worsening cyber disruption and
companies. theft that would trigger the imposition
of firewalls. Ongoing dialogue between
Fragmentation of the internet could governments and technology
involve, among other things, companies would help to ensure that
interruption of technical internet internet-based technologies develop in
functions or barriers to the flow of a politically sustainable context of
content and transactions. Some might shared values and agreed
welcome a move towards a less responsibilities.
hyper-globalized online world, but

The Global Risks Report 2018 35

REUTERS/Mike Segar

Geopolitical Power
The world has moved into a new and
unsettling geopolitical phase. It is not
State-centred protections enjoyed by individuals,
businesses and civil society groups
just multipolar, but multiconceptual. politics become more contingent on leaders’
perceptions of the state interest and—
There is no longer any assumption—
as there had been in the post–Cold At a time of geopolitical flux, re- sometimes seen as the same thing—
War phase, framed by so-called establishing the state as the primary consolidation of their own personal
New World Order and Washington locus of power and legitimacy offers power.1 There are numerous instances
Consensus thinking—that norms governments—and citizens—an to point to, along a spectrum of widely
increasingly attractive strategic anchor. varying severity. An extreme example
and institutions exist towards which
In particular, nationalist agendas and is the flight of Rohingya people from
the world’s major powers might Myanmar. Other recent examples
converge. This creates new risks and the external projection of a strong
state can be an effective strategy include the purge in Turkey following
uncertainties: rising military tensions, the attempted coup in 2016 and
for governments seeking to redress
economic and commercial disruptions, clashes over the separation of powers
perceived international humiliations,
and destabilizing feedback loops past or present. In China, for example, in Poland.2
between changing international President Xi Jinping calls for “the
relations and countries’ domestic great rejuvenation of the Chinese Internationally, two main risks arise.
political conditions. nation” to put the country’s “century First, the danger of miscommunication
of humiliation” firmly behind it. In the and miscalculation between states is
International relations now play out United States, President Trump seeks heightened by the absence of a clear
in increasingly diverse ways: beyond to “make America great again” after rules-based international order or a
conventional military build-ups, these decades of being “taken advantage settled balance of power. Concern
include new cyber sources of hard of.” about possible conflict involving North
and soft power, reconfigured trade Korea is a prominent example: the
Widely differing variations on the volatile clash between the strong-state
and investment linkages, proxy
state-centred theme can be seen instincts of Donald Trump and Kim
conflicts, changing alliance dynamics Jong Un during 2017 has created
and potential flashpoints related to around the world: among these are
Emmanuel Macron’s effort to restore uncertainty about the strength of the
the global commons. Assessing norms created by decades of work to
France’s standing with his “Jupiterian”
and mitigating risks across all these presidency; the United Kingdom’s prevent nuclear conflict.
theatres of potential conflict will require desire to “take back control” by
careful horizon scanning and crisis leaving the European Union; stronger A second international risk relates
anticipation by state and non-state nationalism in Japan under Shinzo to states interfering in the domestic
actors alike. Actors with a global Abe; Vladimir Putin’s focus on affairs of other states. There are a
presence are likely to have to become rebuilding Russia’s international status growing number of incidences of
increasingly adept at calibrating their from the rubble of the Soviet Union; states projecting their power in ways
responses across divergent political the erosion of pluralism in Turkey as that directly encourage or exacerbate
and legal systems. Recep Tayyip Erdogan bridles at his problems inside other countries’
domestic and international opponents. borders. This kind of interference may
foment instability within the “target”
Four related developments stand out
The intensification of nationalist and state, including violent reprisals
as potential sources of disruption or the eruption of civil conflict. By
over the short and medium term. The strong-state narratives creates risks
both domestically and internationally. undermining the non-intervention
intensification of strong-state politics is principle set out in the UN Charter, it
The profile of these risks will vary
affecting both large and small states, in each case, depending, among also ratchets up the risk of retaliation
while global norms are eroding and other things, on the way in which and a slide into interstate conflict.
tensions growing between major power is obtained and asserted, Interference in the affairs of non-
powers. These two trends fuel two and on the ends towards which it is Western states has been one reason
others: increasingly aggressive geo- used. One domestic danger is that for the erosion of the US-led rules-
economic agendas and the mounting the interests of non-state actors will based order; however, the wheel has
pressures faced by small states. suffer. If the protection and projection turned and non-Western countries
of state power becomes more now appear to be increasingly active
central to policy, then the rights or in this area.3

The Global Risks Report 2018 37

Major-power in the Western Pacific, confidence in
the capacity of the United States to
tensions determine outcomes in the region is
being gradually undermined. As has
The intensification of strong-state been seen in the North Korea crisis,
politics has the greatest disruptive the danger that long-term strategic
potential among the world’s major rivalry could spill over and harm
powers: relations between them economic relations is becoming more
are changing, mostly for the worse. real.
As each of these states becomes
increasingly assertive of its own China’s determination to press
interests, consensus is fraying on the territorial and maritime claims,
rules that govern their interactions and its extension of the Belt and
and the directions in which the world Road Initiative (BRI), have triggered
might converge. As a result, there is responses among neighbouring
evidence of a general breakdown in powers. Japan and India, for example,
trust and an erosion of respect for are exploring more structured
global norms designed to govern forms of strategic cooperation in
peaceful international interactions. both economic and military affairs.
This initiative could become more
The United States has become less significant if additional partners—such
willing to act as enforcer of global as Australia, the United States, or
norms at the head of a dominant even European states—were to take
coalition. This reflects, among other part. However, most of these countries
things, divisions within the United are currently cautious and would be
States over whether the benefits that wary of allowing such a hedging policy
flow from this global enforcer role to cause tensions with China.
are sufficient to justify its costs. As a
result, rising and resurgent powers Meanwhile, Russia has used its
calculate that actions that may policy in Syria to reposition itself as
breach international law (UN Charter), a leading foreign policy actor, with
the law of the sea (UNCLOS) or the ability to shape military outcomes
international humanitarian law (Geneva and geopolitical balances. Russia’s
Conventions) can achieve objectives relations with China have improved,
without incurring unacceptable costs but those with Western powers
in terms of opposition or punishment. have deteriorated: Russia’s policies
The emergence of cyberspace as towards Ukraine have been seen
an unregulated battlefield has also as an unacceptable breach of the
created new ways to advance state post–World War II order and have
interests, allowing interference in galvanized a Western coalition around
domestic political or economic affairs a policy of individual and sectoral
that might be considered acts of sanctions. Among other things, this
aggression if pursued by other means. has led to renewed debate in the
European Union about the need for
Strong trade and investment increased military capacity so that
connections between the United the bloc’s defensive stance is less
States and China mean that, whatever dependent on US policy.4
their differences, a significant level of
economic interdependence remains
central to their relationship. However,
as China exercises increasing power

38 The Global Risks Report 2018

Smaller-state Compounding their exposure
to changes in the geopolitical
disruptions environment, smaller states are
more vulnerable to potential second-
Shifting relations between global order effects such as refugee and
and regional powers is creating migration flows resulting from conflicts
increased uncertainty for smaller or recessions in neighbouring
states—an under-appreciated source countries. For example, Syrians who
of geopolitical risk. Smaller states tend fled between 2011 and 2015 are
to benefit from the predictability that estimated to have increased Jordan’s
comes with rules-based order and population by 25%. And smaller
they are among the most affected states’ finances are vulnerable to
when rules erode and major powers even the possibility of geopolitical
jostle for position. These countries risks, because nervousness can lead
are particularly vulnerable to the to lower inward investment and to
weakening of security alliances they governments feeling compelled to
may previously have relied upon, as divert revenues into precautionary
well as to subtle or overt pressures to increases in security-related spending.
adapt policy or strategy to conform
to the interests of a major power or Smaller states are not always passive
regional hegemon. objects of geopolitical disruption: they
can also be its source or conduit in
The dilemma faced by smaller various ways. A weak or collapsing
states, as they assess how best to state can become a locus of instability
recalibrate relations with larger states, that radiates disorder or pulls in larger
was illustrated in Singapore last year. neighbouring states: Libya and South
Mindful of China’s growing power Sudan, for example, have caused
and recent developments in Qatar, instability in neighbouring countries,
some warned against overestimating notably via flows of refugees and
Singapore’s room for manoeuvre: weapons. Elsewhere, for some
“small states must always act like years the near-collapse of the Greek
small states.”5 Others responded that economy was an ongoing source
Singapore should “stand up for the of existential risk for the Eurozone.
autonomy to define and pursue our Smaller states can also amplify
own national interests rather than geopolitical risk by actively asserting
have them defined for us, even if this themselves on their neighbours: this
displeases major powers.”6 This is not can be seen in extreme form in the
an isolated example; an increasing North Korea crisis, where tensions
number of smaller states face similar are particularly acute both because
challenges. Last year, Bhutan found the government fears annihilation and
itself at the centre of a stand-off because of the unique dynamics of
between India and China;7 Lebanon its position relative to China and the
is exposed to changing dynamics United States.
between regional powers in the Middle
East; the annexation of Crimea has
left Ukraine perched between two
mistrustful power blocs; and a number

of smaller EU states are concerned

about whether the eventual departure
of the United Kingdom will affect
decision-making to their detriment.

The Global Risks Report 2018 39

Geo-economic Economic Corridor (BCIM-EC); the
International North-South Transport
a part of Kashmir that is administered
by Pakistan but claimed by India.
risks Corridor (INSTC), which links India,
Iran and Russia; and the Asia-Africa There remain strong incentives on
Increasing geopolitical fluidity and Growth Corridor (AAGC),9 a joint all sides to avoid triggering trade
intensifying strong-state policies initiative by India and Japan. wars, just as there are for all forms
increase the risks associated with of conflict—but the risk of domestic
economic interactions between Proponents of these infrastructure political factors spilling over into
states. States have always used tools plans argue that they will foster disruption of the global trade system
of economic policy and diplomacy peaceful relations by creating new has risen sharply in recent years.
to pursue their geopolitical goals. links and patterns of cooperation. Trade-related tensions could also
While globalization was ascendant, However, the ambitiousness of some create distractions and divisions that
many believed that economic of these plans has raised concerns hamper the unity of regional or global
connectedness—Western companies that they might exacerbate rather than responses to other geopolitical risks
and consumers benefiting from prevent tension. The geostrategic that might crystallize in the evolving
low-cost manufacturing, which interdependence they create—both confluence of strong-state politics,
simultaneously pushed forward through the physical presence of major power tensions and small-
emerging-economy development— assets and people on the ground state disruptions in an increasingly
would contribute to a gradual and through patterns of increased disordered world.
convergence of states’ outlooks indebtedness, which is a potential
and goals, reducing the likelihood source of vulnerability for lower-
of geopolitical tensions. However, income countries in particular—are
confidence in the mutuality of benefits more durable and difficult to unwind
has weakened. This is particularly than mere trade agreements. This
true among Western countries, where raises questions about potential
the strongest geo-economic trend of implications if relationships between
recent years has been the erosion of corridor partners were to sour in the
support for globalization and growing future.
support for protectionist policies. It
is notable that two of the states that Some have argued that criss-
have traditionally been among the crossing the Eurasian landmass with
firmest advocates of global economic a latticework of economic corridors
integration, the United Kingdom and could undermine the stability of the
the United States, have seen the most region’s state system: “connectivity
dramatic uncertainties emerge around does not necessarily presage a more
their trade-related policies. peaceful world … Eurasia is cohering
into both a single trade and conflict
In other parts of the world, plans system.”10 One potential trigger
to extend and deepen networks of for disruption related to economic
economic corridors are spurring huge corridors might be pushback from a
investments in infrastructure. By far country that feels its sovereignty is
the most ambitious is China’s Belt and being undermined. In early 2017 there
Road Initiative (BRI): launched in 2013, were signs of this in Sri Lanka, where
it spans more than 60 countries and violent protests erupted at a ceremony
involves investment plans totalling a to mark the start of construction of
reported US$900 billion.8 However, a Chinese special economic zone.11
there are numerous other such Another potential trigger might come
corridors, most of which connect Asia from economic corridors crossing
and Europe. They include the China contested territory—CPEC, for
Pakistan Economic Corridor (CPEC); example, runs through Gilgit-Baltistan,
the Bangladesh-China-India-Myanmar

40 The Global Risks Report 2018

For a discussion of risks affecting civil society, see
the chapter “Fraying Rule of Law and Declining Civic
Freedoms” in World Economic Forum. 2017. The
Global Risks Report 2017. Geneva: World Economic
Forum. https://www.weforum.org/reports/the-global-
Hansen, S. 2017. “Inside Turkey’s Purge”. The New
York Times Magazine. 13 April 2017. https://www.
See, for example, Benner, T. 2017. “An Era of
Authoritarian Influence?” Foreign Affairs. 15 September
2017. https://www.foreignaffairs.com/articles/
European Union External Action. 2017. “Permanent
Structured Cooperation (PESCO): Deepening
Defence Cooperation among EU Member States”.
Factsheet. 16 November 2017. https://eeas.europa.
Mahbubani, K. 2017. “Qatar: Big Lessons from a
Small Country”. The Straits Times. 1 July 2017. http://
Bilahari Kausikan, cited in “Kishore Reiterates:
S’pore’s Statements Must Be More Prudent”. 3 July
2017. Today. http://www.todayonline.com/singapore/
Saran, S. and W. Dong. 2017. “There’s a Standoff
between China and India in the Himalayas. Both Sides
Explain”. World Economic Forum. 16 August 2017.
Campbell, C. 2017. “China Says It’s Building the
New Silk Road. Here Are Five Things to Know Ahead
of a Key Summit”. Time. 12 May 2017. http://time.
Research and Information System for Developing
Countries (RIS), Economic Research Institute for
ASEAN and East Asia (ERIA), and the Institute of
Developing Economies – Japan External Trade
Organization. 2017. “Asia Africa Growth Corridor:
Partnership for Sustainable and Innovative
Development: A Vision Document”. Prepared for the
African Development Bank Meeting, Ahmedabad,
India, 22–26 May 2017. http://www.eria.org/Asia-
Kaplan, R. D. 2017. “The Return of Marco Polo’s
World and the U.S. Military Response”. Washington,
DC: Center for a New American Security (CNAS).
May 2017. http://stories.cnas.org/wp-content/
p. 25.
Krejsa, H. and A. Cho. 2017. “Is Beijing Adopting an
Ethnonationalist Foreign Policy?” Foreign Affairs. 23
October 2017. https://www.foreignaffairs.com/articles/

Each year the Global Risks Report highlights numerous potential sources of
danger and disruption. In this new Hindsight section, we dip back into
previous editions of the report to consider three of the risks to which we have
previously drawn attention: antimicrobial resistance, youth unemployment
and the phenomenon of online misinformation that we termed “digital
wildfires” when we discussed it five years ago. The aim here is to trace the
progress that has been made in the intervening years. How have these risks
and the global responses to them evolved?
Antimicrobial Resistance

In the 2013 Global Risks Report, drugs continues to spread inexorably. investigation in the United States
a chapter entitled “The Dangers of The stakes are incredibly high—if determined that the accuracy of
Hubris on Human Health” warned resistance overtakes all our available Centers for Disease Control and
about the growing risks associated antibiotics, it would spell the “the end Prevention (CDC) estimates of
with complacency towards of modern medicine”.1 AMR effects—2 million infections
antimicrobial resistance (AMR). It and 23,000 deaths per year—is
highlighted two underlying drivers: undermined by problems such as
the overuse and misuse of antibiotics, The costs are rising… AMR-related deaths being mis-
in both human health systems and recorded on death certificates.4
livestock management; and the fact The latest economic impact One of the most exhaustive official
that no new classes of antibiotics assessments should be cause for studies of AMR—a two-year
had been invented since the 1980s. alarm about the dangers of AMR review commissioned by the UK
The chapter noted newly emerging to human health and the global government—concluded in 2016 that,
resistance to the strongest class of economy. A study published by the globally, 700,000 deaths each year
antibiotics, carbapenems. It cited World Bank in March 2017 estimated can be attributed to AMR.5 The Center
estimates of 100,000 AMR-related that AMR would exert a drag on for Disease Dynamics, Economics
deaths in US hospitals and 80,000 in global GDP of between 1.1 and 3.8 & Policy (CDDEP) has been tracking
China. The potential economic impact percentage points between now antimicrobial resistance globally—the
was put at 0.4% to 1.6% of GDP. and 2050.2 According to estimates maps in Figure 4.1 illustrate their latest
from a report supported by the UK data, which show impacts broadly
The risks posed by AMR have government and the Wellcome Trust, unchanged when compared with
continued to intensify in the five years AMR could cost US$100 trillion the European data for MRSA and
since the 2013 report. Numerous between now and 2050, with the Klebsiella pneumoniae we cited in
welcome initiatives have been annual death toll reaching 10 million 2013.6 In October 2017, a new four-
launched, but concrete successes in over that period.3 year global project that aims to track
addressing the two drivers identified the evolution of AMR in 195 countries
above remain elusive. We still face two As in 2013, the patchiness of since 1990 was announced.7
trends that spell potential disaster: data continues to make a precise
new classes of drugs are not being assessment of the AMR problem
invented and resistance to existing difficult. For example, a 2016 Reuters

Figure 4.1: Selected AMR Rates

Resistance of Staphylococcus aureus to Oxadcillin (MRSA), % Resistant Resistance of Klebsiella pneumoniae to Cephalosporins (3rd gen), % Resistant
(invasive isolates) (invasive isolates)

Source: Figure courtesy Center for Disease Dynamics, Economics and Policy. Used with permission via Creative Commons license. https://resistancemap.cddep.org/

Note: Countries in white indicate no data available.

44 The Global Risks Report 2018

…and resistance is One key objective of these plans is to research in the right direction, such as
reduce excessive use of antibiotics, the first-ever priority list of antibiotic-
spreading both in human health systems and in resistant bacteria published by WHO
livestock and agriculture. The latter, in 2016.18 New incentives are helping
Resistance to the strongest antibiotics
in particular, is a growing problem.11 to catalyse new work. For example,
continues to spread, even as their
In the United States, 62% of the CARB-X is an international non-profit
use increases to cope with still
antibiotics used in agriculture are partnership launched in July 2016
higher levels of resistance to weaker
medically important for humans.12 And to accelerate research that focuses
antibiotics. In 2014, the World Health
agricultural usage is rising sharply: the on the AMR bacteria prioritized as
Organization (WHO) reported that
global use of antimicrobials in meat the most urgent by WHO and the
“K. pneumoniae resistant also to
production is expected to grow by CDC.19 It has already funded 18
carbapenems has been identified in
67% between 2010 and 2030.13 projects from six countries.20 In the
most of the countries that provided
United Kingdom, the innovation
data, with proportions of resistance up
Efforts to reduce the excessive foundation Nesta has offered a £10
to 54% reported.”8 In 2017, research
use of antimicrobials need to also million prize for the invention of a
demonstrated that bacteria resistant
ensure access to affordable life- fast, accurate and affordable test
to colistin, the “antibiotic of last
saving medications in the world’s for bacterial infections to help health
resort”, had spread around the world
poorest countries, as underscored professionals worldwide administer
within 18 months of the resistance first
in a declaration by the G20 leaders the appropriate antibiotics.21 As
in 2017, as well as by UNICEF.14 of October 2017, 250 entries had
UNICEF’s Chief of Health has been submitted. Scientific advances
Global plans are taking recommended using an integrated are allowing researchers to study
shape… community case management (ICCM) a greater number of potential new
approach, which can help to achieve sources of antibiotics; one company
There are some encouraging signs an appropriate balance between undertaking this kind of research is
of action to counter AMR, although ensuring access and preventing NovoBiotic Pharmaceutical, which
most of them are still at the planning misuse of antibiotics.15 studies soil microbes that until
stage. In 2015 WHO’s five-point recently could not be cultivated in a
Global Action Plan on Antimicrobial …but the drugs pipeline laboratory.22 More radical alternatives
Resistance was ratified, and it is to traditional antibiotics are also being
being supplemented with accelerating
is a cause for alarm studied, including the potential use of
completion of national action plans— CRISPR to trick harmful bacteria into
There is still a stark lack of new destroying their own DNA.23
important because the causes and
drugs in the development pipeline.16
consequences of AMR can differ
According to a 2016 study by The
widely across countries. As of April
Pew Charitable Trusts, every currently
2017, 67 countries had completed
available antibiotic is derived from a
national action plans, according to
class discovered by 1984.17 Efforts
WHO, with another 62 in the process
are, however, intensifying to steer
of doing so.10

The Global Risks Report 2018 45

Youth Unemployment

The 2014 Global Risks Report Figure 4.2: Regional Youth Unemployment
highlighted the risk that the global
financial crisis would create a “lost Unemployment rates, indexed to 2007 Unemployment rates, percent

generation”. We pointed to youth

unemployment as a corrosive legacy,
with the capacity to hinder young
people’s integration into traditional
patterns of economic life, such as
earning, saving and building careers.
Among the specific issues raised were
long-term unemployment; low-quality,
part-time and temporary employment;
weak links between education and
work; the impact of demographic
change and migration; and increasing
pressures on social protection
  Arab States   Eastern Asia   European Union   Latin America and the Caribbean
  North America   North Africa   South-Eastern Asia   Southern Asia
Globally, youth unemployment   Sub-Saharan Africa — World

has been broadly static since the

Source: International Labour Organization (ILO) Modelled Estimates. http://www.ilo.org/ilostat
publication of the report in 2014, and it
remains moderately higher than before Note: Data valid as of 9 October 2017.
the global financial crisis. Joblessness
remains alarmingly high in some
countries and regions. Even where job Global average remain much more likely to be
unemployed than their counterparts
creation has picked up since the crisis, masks big underlying either in North America or in most
concerns are rising about the growing
prevalence of low-quality employment
differences… emerging regions (see Figure 4.2). In
and the rise of the “gig economy”.24 some European countries, which had
Regional trends differ markedly, high levels of youth unemployment
Youth unemployment is set to remain
particularly in North America and the before the crisis, the situation remains
an important global challenge—
European Union, where the crisis hit particularly dire—notably in Greece,
particularly as demographic shifts in
hardest, leading to rapid increases in Spain and Italy. These countries have
developing countries gather pace—
average youth unemployment followed seen sharp increases in poverty and
and will continue to amplify numerous
by sharp reversals (see Figure 4.2). other adverse societal impacts.
domestic and global risks, including
Two other regional outliers are North
social exclusion, mass migration and
Africa and Latin America, which have Youth unemployment remains
generational clashes over fiscal and
seen youth unemployment jump for stubbornly high across the Middle
labour-market policies.
reasons unrelated to the crisis. The East and North Africa (MENA), at
trigger in North Africa was the onset around 30%. The ongoing nature of
of the Arab Spring in 2010, while the region’s long-standing challenges
joblessness in Latin America has on this issue are emphasized by
been increasing since 2014 against the latest results of an annual World
a backdrop of mounting political and Economic Forum survey of more
economic turmoil. than 30,000 young people globally: in
2017, respondents from MENA cited
Despite the rapid improvements the “lack of economic opportunity
recorded in Europe since 2013, the and employment” as the most serious
region remains particularly exposed issue facing their country.25
to problems of youth unemployment:
on average, young people in Europe

46 The Global Risks Report 2018

…and positive headline Youth employment Figure 4.3: Public Spending on Active
Labor Market Policies (ALMPs)
trends can mask schemes have their Percent of GDP
structural challenges limits…
Youth unemployment rates are, In 2016, the UN launched the Global
on average, significantly lower in Initiative for Decent Jobs for Youth
developing than advanced economies. to coordinate policies on youth
However, the structural factors employment and young people’s
we highlighted in 2014—notably labour rights.31 A similar umbrella
bulging youth populations and the scheme exists at the EU level—the €6
prevalence of low-quality and informal- billion Youth Guarantee programme,
sector work—continue to challenge under which member states pledge
developing regions. Across Africa, to ensure that within four months
for example, youth unemployment of becoming unemployed young
decreased slightly over the past people are offered new employment,
decade, but levels of working poverty education or a workplace
among the young remain high: 70% apprenticeship.32 However, in
of young people live on less than countries where youth unemployment
US$3.10 per day.26 Since Africa is the appears most intractable, structural Source: Organisation for Economic Co-operation and
Development (OECD). https://stats.oecd.org/Index.
youngest region in the world,27 this is drivers—such as relatively high rates aspx?DataSetCode=LMPEXP
likely to have lasting consequences of early school-leaving—mean that
for the continent and beyond: the such short-term interventions will The increased use of “flexicurity”
extent to which a sufficient number of struggle to have much effect. Deeper policies is another potential way
good jobs can be created for rapidly structural reforms are needed.33 of helping young people who are
growing youth populations will be a currently unemployed or consigned to
key driver of future migration flows.28 …unless accompanied low-quality work. Flexicurity combines
Accelerating technological advances (1) increased flexibility for employers to
will complicate this challenge in by education and hire and fire workers with (2) generous
many countries, requiring major workplace reforms state unemployment payments and
improvements to education systems.29 (3) increased investment in active
The private sector is playing an labour market policies (ALMPs)—
China faces a different challenge: increasingly prominent role in tackling measures that currently differ widely
although youth unemployment in youth unemployment by equipping between countries (see Figure 4.3).36
the country has remained stable, a youth with marketable skills, By encouraging increased movement
10-fold increase in the number of particularly in developing economies. between jobs in the labour market,
university graduates between 1997 Google and IBM, for example, have flexicurity policies help to create
and 2017 has created problems of launched digital-skills programmes for employment openings for young
underemployment. Many graduates young people in Africa.34 There is a people.
are in low-skilled work, with 25% growing recognition of the importance
earning less than the average migrant of apprenticeships and vocational
worker.30 training. In Switzerland, the Global
Apprenticeship Network (GAN) is a
platform of 14 global businesses—
including Adecco, IBM, Microsoft and
Nestle—that help companies around
the world to set up apprenticeship
programmes. The government
of Germany, a clear leader in this
area, is currently working with 18
other countries on apprenticeship
The Global Risks Report 2018 47
Digital Wildfires

Three years before the Brexit The prevalence of online

referendum and US presidential
elections that brought the terms “fake
misinformation has
news” and “post-truth” into broad surged…
circulation, a chapter in the 2013
Global Risks Report entitled “Digital Digital misinformation is not a new
Wildfires in a Hyperconnected World” phenomenon—Freedom House has
warned of the increasing danger of been tracking the use of paid pro-
misinformation being spread by social government commentators to mimic
media. Among the key issues raised grassroots supporters since 2009.
were the intentional use of social Nor is it confined to the United States:
media to spread misinformation (for Freedom House’s Freedom on the
example, through the use of fake Net report found 30% more countries
accounts to smear or impersonate using fake online grassroots activity in
political opponents), the difficulty 2017 than 2016.37
of correcting misinformation when
it spreads within trusted networks, However, it was during the 2016
global governance challenges and US presidential election that “fake
the danger that some governments news” acquired global prominence,
might use well-intentioned constraints and much of the wave of research
on misinformation to limit freedom of now underway has focused on this
speech. example. According to one study, in
the three months immediately prior
The prevalence and impact of digital to the election, the top 20 false news
wildfires have surged in the five years stories outperformed—in terms of
since we first discussed them. Even shares, reactions and comments—
as the potential social, political and the top 20 stories from major news
geopolitical risks are intensifying, sources.38 Engagement with fake
however, the ways in which widely news stories increased by 53%
shared misinformation can influence compared with the previous three-
human behaviour are still far from month period.39 Another study noted
fully understood. While social media that social media platforms directed
becomes increasingly deeply ingrained 40% of the web traffic that went to
in daily life, mitigating adverse impacts fake news websites, compared with
will require sustained efforts by both only 10% for the top mainstream news
policy-makers and technology leaders, websites.40
and there will need to be a careful
balance struck between regulation and …but its impact is
preventing infringements of individual
difficult to gauge
Studies have found that people have
a hard time distinguishing between
accurate and fake headlines. One
survey in late 2016 presented
respondents with a random selection
of six headlines—three accurate
and three false—and asked them to
rate the accuracy of the headlines
they could recall having seen
before.41 It found that 75% of the
time respondents judged the false

48 The Global Risks Report 2018

headlines to be “somewhat accurate” steps to reduce the financial incentives
or “very accurate”—only slightly lower for the creators of fake news and to
than 83% for the accurate news enhance the transparency of material
headlines.42 However, another study on their platforms. For example,
conducted in 2017 suggests a greater Google announced in November 2016
level of user scepticism about news that it would restrict its AdSense ads
consumed via social media—it found on sites that “misrepresent, misstate,
that while 55% of respondents said or conceal information about the
they consumed news from Facebook, publisher, the publisher’s content,
only 18% said they trusted news from or the primary purpose of the web
Facebook most or all of the time.43 property.”48 Facebook has taken
action against ads on its platform that
Efforts are underway to are “illegal, misleading or deceptive,
which includes fake news”;49 however,
bolster safeguards these restrictions notably do not
prevent users from writing or sharing
Numerous efforts are now underway inaccurate content.50
to limit the prevalence and potential
disruptiveness of online misinformation In September 2017, it was announced
by helping the public to critically that a Russia-based organization
evaluate news sources. Since early spent US$100,000 on advertisements
2016, Facebook has launched a promoting divisive political issues
number of efforts to address false during the US presidential campaign;
news, clickbait, and sensationalism, Facebook said it would provide the
including a partnership with fact- ads to congressional investigators,51
checking organizations and a network and has launched tools to make all
of researchers called the News ads it runs publicly accessible in the
Integrity Initiative.44 An early study future. In October, Twitter announced
by Yale researchers suggests that it would ban RT (formerly Russia
these types of warnings reduce the Today) and Sputnik, two major media
likelihood of stories being shared, organizations, from advertising on
but has only a limited effect on users’ the platform following an internal
perceptions of accuracy when stories investigation and the identification
are shown repeatedly.45 And in 2017 by the US intelligence community
the OECD announced plans to add of these companies as vehicles of
critical thinking about information Russian government interference in
sources to its Global Competency the 2016 presidential election.52 Twitter
tests.46 Programmes to teach students also announced that it is launching an
to evaluate online sources critically are “Advertising Transparency Center” and
a growing trend around new policies that will (1) provide details
the world.47 about all ads carried on its platform,
(2) place clear visual markers on
Amid increasing pressure from political advertisements, (3) disclose
governments and users, technology how political ads are targeted and (4)
companies have also been taking strengthen policies regarding political
REUTERS/Baz Ratner

The Global Risks Report 2018 49

Notes European Commission. 2017. “G20 Leaders’ International Labour Organization (ILO). 2016.
14 31

Declaration: Shaping an Interconnected World”. Press “Guy Ryder Announces Global Youth Initiative”.
Release, Hamburg, 8 July 2017. http://europa.eu/ Press Release, New York, 1 February 2016. http://
rapid/press-release_STATEMENT-17-1960_en.htm www.ilo.org/global/about-the-ilo/newsroom/news/
The Pharmaceutical Journal. 2017. “Chief Medical 15
Peterson, S. S. 2016. “Walking the Line between WCMS_447516/lang--en/index.htm
Officer Warns Antibiotic Resistance Could Signal ‘End
Antimicrobial Access and Excess”. UNICEF Connect. 32
European Commission. 2015. “EU Youth Guarantee:
of Modern Medicine’”. The Pharmaceutical Journal.
10 November 2016. https://blogs.unicef.org/blog/ Questions and Answers”. Fact Sheet, Brussels, 4
17 October 2017. http://www.pharmaceutical-journal.
walking-the-line-between-antimicrobial-access-and- February 2015. http://europa.eu/rapid/press-release_
excess/ MEMO-15-4102_en.htm
warns-antibiotic-resistance-could-signal-end-of- 16
World Health Organization (WHO). 2017. 33
Dolado, J. J., ed. 2015. No Country for Young
Antibacterial Agents in Clinical Development: An People? Youth Labour Market Problems in Europe.
World Bank. 2017. “Drug-Resistant Infections: A
Analysis of the Antibacterial Clinical Development London: CEPR Press. http://voxeu.org/sites/default/
Threat to Our Economic Future”. Washington, DC:
Pipeline, Including Tuberculosis. Geneva: WHO. files/file/No_Country_Young_People_VoxEU.pdf, pp.
World Bank. http://www.worldbank.org/en/topic/
http://www.who.int/medicines/areas/rational_use/ 132–34.
antibacterial_agents_clinical_development/en/ 34
Google’s programme launched in 2016 with a goal of
our-economic-future 17
The Pew Charitable Trusts. 2016. A Scientific training 1 million people, but the target was increased
The Review on Antimicrobial Resistance. 2015.
Roadmap for Antibiotic Discovery. Philadelphia and to 10 million in 2017. IBM’s programme is larger still,
Securing New Drugs for Future Generations: The
Washington, DC: The Pew Charitable Trusts. http:// aiming to train 25 million people, initially in Egypt,
Pipeline of Antibiotics. The Review on Antimicrobial
www.pewtrusts.org/en/research-and-analysis/ Kenya, Morocco, Nigeria and South Africa.
Resistance, chaired by Jim O’Neill. Report
reports/2016/05/a-scientific-roadmap-for-antibiotic- 35
Jacobs, R. 2017. “Germany’s Apprenticeship
commissioned by the UK Prime Minister. May
discovery, pp. 1–2. Scheme Success May Be Hard to Replicate”.
2015. https://amr-review.org/sites/default/files/ 18
World Health Organization (WHO). 2017. “WHO Financial Times. 21 April 2017. https://www.ft.com/
Publishes List of Bacteria for Which New Antibiotics content/1a82e8e0-04cf-11e7-aa5b-6bb07f5c8e12
Are Urgently Needed”. Press Release, Geneva, 27 36
Sandbu, M. 2017. “A Policy for Centrists Who Care
February 2017. http://www.who.int/mediacentre/news/ about the Left-Behind”. Financial Times. 2 November
McNeill, R., D. J. Nelson, and Y. Abutaleb. 2916,
releases/2017/bacteria-antibiotics-needed/en/ 2017. https://www.ft.com/content/d9eca590-bf05-
“‘Superbug’ Scourge Spreads as U.S. Fails to Track 19
CARB-X. 2017. CARB-X Annual Report 2016-2017. 11e7-b8a3-38a6e068f464
Rising Human Toll”. Reuters. 7 September 2016.
Boston: CARB-X. http://www.carb-x.org/files/2016_ 37
Thirty of 65 countries surveyed in 2017, compared to
CARB-X-Annual_Report.pdf, p. 2. 23 in 2016. See Freedom House. 2017. “Freedom on
usa-uncounted-surveillance/ 20
Ibid, p. 4. the Net 2017: Manipulating Social Media to Undermine
The Review on Antimicrobial Resistance. 2016. 21
Longitude Prize. “The Challenge: Reduce the Use of Democracy”. https://freedomhouse.org/report/
Tackling Drug-Resistant Infections Globally: Final
Antibiotics”. https://longitudeprize.org/challenge freedom-net/freedom-net-2017
Report and Recommendations. The Review on 22
The Pew Charitable Trusts. 2016. Op cit., p. 12. 38
Silverman, C. 2016. “This Analysis Shows How
Antimicrobial Resistance, chaired by Jim O’Neill.
For information about NovoBiotic, see https://www. Viral Fake Election News Stories Outperformed Real
Report commissioned by the UK Prime Minister.
novobiotic.com/ News on Facebook”. BuzzFeed News. 16 November
May 2016. https://amr-review.org/sites/default/ 23
Mullin, E. 2017. “Edible CRISPR Could Replace 2016. https://www.buzzfeed.com/craigsilverman/
files/160525_Final%20paper_with%20cover.pdf, p. 1.
Antibiotics”. MIT Technology Review. 17 April 2017. viral-fake-election-news-outperformed-real-news-on-
Center for Disease Dynamics, Economics and Policy.
https://www.technologyreview.com/s/604126/edible- facebook?utm_term=.ffl44oMY1q#.ekqAAlbogq
ResistanceMap. https://resistancemap.cddep.org/
crispr-could-replace-antibiotics/ 39
About.php, accessed November 2017. 24
In the United States, youth unemployment has 40
Allcott, H. and M. Gentzkow. 2017. “Social Media
See Wellcome Trust. 2017. “Global Pledges to Speed
declined significantly since the crisis, but a 2016 study and Fake News in the 2016 Election”. Journal of
Up Action on Superbugs”. Press Release, 13 October
suggests that 95% of US net job growth between Economic Perspectives 31 (2): 211–236. Document1
2017. https://wellcome.ac.uk/news/global-pledges-
2005 and 2015 comprised temporary or unstable 41
Silverman, C. and J. Singer-Vine. 2017. “Most
jobs. See Katz, L. F. and A. B. Kreuger. 2016. “The Americans Who See Fake News Believe It, New
World Health Organization (WHO). 2014.
Rise and Nature of Alternative Work Arrangements in Survey Says”. BuzzFeed News. 7 December 2017.
Antimicrobial Resistance: Global Report on
the United States, 1995–2015”. Working Paper #603, https://www.buzzfeed.com/craigsilverman/fake-news-
Surveillance. Geneva: WHO. http://apps.who.int/iris/
Princeton University, Industrial Relations Section. survey?utm_term=.tr022QWPGx#.rj5ZZD280O
September 2016. http://dataspace.princeton.edu/ 42
pdf, p. xi.
jspui/bitstream/88435/dsp01zs25xb933/3/603.pdf 43
Silverman, C. 2017. “People Read News on
Reardon, S. 2017. “Resistance to Last-Ditch 25
Global Shapers Community. 2017. Shapers Facebook But They Don’t Really Trust It, A Survey
Antibiotic Has Spread Farther than Anticipated”. Nature
Survey, online data presentation. http://www. Found”. BuzzFeed News. 19 January 2017. https://
News. 12 June 2017. https://www.nature.com/news/
shaperssurvey2017.org/ www.buzzfeed.com/craigsilverman/people-be-reading-
resistance-to-last-ditch-antibiotic-has-spread-farther- 26
ILO (International Labour Organization). 2016. “Youth but-not-trusting-news-on-facebook?utm_term=.
Unemployment Challenge Worsening in Africa”. Press hxYqqmbnQL#.yt8DDzPQ1W
World Health Organization (WHO). 2017.
Release, Abidjan, 24 August 2016. http://www.ilo.org/ 44
Silverman, C. 2016. “Facebook Is Turning to Fact-
“Antimicrobial Resistance: Report by the Secretariat”.
addisababa/media-centre/pr/WCMS_514566/lang-- Checkers to Fight Fake News”. BuzzFeed News.
Seventieth World Health Assembly, Provisional Agenda
en/index.htm 15 December 2016. https://www.buzzfeed.com/
Item 12.2. 10 April 2017. http://apps.who.int/gb/ 27
World Bank Data: Population ages 0–14 (% of total) craigsilverman/facebook-and-fact-checkers-fight-fake-
ebwha/pdf_files/WHA70/A70_12-en.pdf, p. 2.
https://data.worldbank.org/indicator/SP.POP.0014. news?utm_term=.efQzzlDoka#.qg3ddQbW4y
The Review on Antimicrobial Resistance. 2015.
TO.ZS and WHO Global Health Observatory data 45
Pennycook, G., T. D. Cannon, and D. G. Rand.
Antimicrobials in Agriculture and the Environment:
repository: Population Data by country (Recent years): 2017. “Prior Exposure Increases Perceived Accuracy
Reducing Unnecessary Use and Waste. The Review
Population Median Age http://apps.who.int/gho/data/ of Fake News”. 26 August 2017. Updated 11
on Antimicrobial Resistance, chaired by Jim O’Neill.
view.main.POP2040?lang=en December 2017. https://papers.ssrn.com/sol3/papers.
Report commissioned by the UK Prime Minister. 28
United Nations Department of Economic and Social cfm?abstract_id=2958246
December 2015. https://ec.europa.eu/health/amr/
Affairs (UN DESA). International Migration. http:// 46
Siddique, H. 2017. “Teach Schoolchildren How
www.un.org/en/development/desa/population/theme/ to Spot Fake News, Says OECD”. The Guardian.
international-migration/ 17 March 2017. https://www.theguardian.com/
Dall, C. 2016. “FDA: Antibiotic Use in Food 29
Diop, M. 2017. “Africa Can Enjoy Leapfrog media/2017/mar/18/teach-schoolchildren-spot-fake-
Animals Continues to Rise”. CIDRAP, University
Development”. The World Bank Group. 11 October news-says-oecd
of Minnesota, CIDRAP News & Perspectives. 22
2017. http://www.worldbank.org/en/news/
December 2016. http://www.cidrap.umn.edu/news-
continues-rise 30
Sapleton, K. 2017. “China Now Produces Twice as
Van Boeckel, T. P., C. Brower, M. Gilbert, B. T.
Many Graduates a Year as the US”. World Economic
Grenfell, S. A. Levin, T. P. Robinson, A. Teillant, and R.
Forum Agenda. 13 April 2017. https://www.weforum.
Laxminarayan. “Global Trends in Antimicrobial Use in
Food Animals”. Proceedings of the National Academy
of Sciences of the United States of America 112 (18).
Holcombe, M. 2017. “Reading, Writing, Fighting
Fake News”. CNN. 29 March 2017. http://edition.cnn.
trnd/index.html; CNN. 2017. Czech Republic Tackles
Spread of Fake News. Video. http://edition.cnn.com/
fake-news-soares-pkg.cnn; Roden, L. 2017. “Swedish
Kids to Learn Computer Coding and How to Spot
Fake News in Primary School”. The Local. 13 March
2017. https://www.thelocal.se/20170313/swedish-
news-in-primary-school; Smith, N. 2017. “Schoolkids
in Taiwan Will Now Be Taught How to Identify Fake
News”. Time. 7 April 2017. http://time.com/4730440/
taiwan-fake-news-education/; and Horowitz, J. 2017.
“In Italian Schools, Reading, Writing and Recognizing
Fake News”. The New York Times 18 October 2017.
Love, J. and K. Cook. 2016. “Google, Facebook,
Move To Restrict Ads on Fake News Sites”. Reuters.
14 November 2016. http://www.reuters.com/article/
Pierson, D. 2016. “Facebook Bans Fake News from
Its Advertising Network—But Not Its News Feed”.
Los Angeles Times. 15 November 2016. http://www.
Solon, O. 2017. “Facebook Says Likely Russia-
Based Group Paid for Political Ads during US Election”.
The Guardian. 7 September 2017. https://www.
Twitter PublicPolicy. 2017. “Announcement: RT
and Sputnik Advertising”. Twitter Blog. 26 October
2017. https://blog.twitter.com/official/en_us/topics/
Falck, B. 2017. “New Transparency for Ads on
Twitter”. Twitter Blog. 24 October 2017. https://blog.
Risk Reassessment

One of the aims of the Global Risks Report is to encourage individuals and
organizations to think critically and creatively about how they can respond to
a rapidly evolving risks landscape. With that in mind, in the Risk
Reassessment section we invite selected risk experts to share their insights
about developments in our understanding of risk. In this year’s report, Roland
Kupers writes about resilience in complex systems, while Michele Wucker
calls for organizations to pay more attention to cognitive bias in their risk
management processes.
Resilience in complex organizations

systems that has been driving a is systemic risks that require the new
By Roland Kupers
slow-motion revolution in science tools.
over the past 35 years or so. In
2013 the World Economic Forum The RAI work led to nine resilience
In a deeply interconnected world,
published a comprehensive overview lenses, grouped into the following
stresses and shocks propagate
in Perspectives on a Hyperconnected three categories to provide the agenda
across systems in ways that evade
World, describing the impact of for a fat-tail risk conversation:
forecasting. Climate change is
complexity for policy and business. –– “Structural resilience” considers
linked to the Syrian civil war, which
The conclusion is not that policy- the systemic dynamics within the
is connected to heightened concern
makers and managers must become organization itself.
over immigration, which precipitated
complexity experts. But a level –– “Integrative resilience” underlines
Brexit. Lehman Brothers was an
of complexity literacy is crucial to complex interconnections with the
investable company, until suddenly
navigate the modern age. external context.
it wasn’t and it catalysed a global
–– “Transformative resilience”
financial crisis. None of these links are
Nine resilience lenses responds to the fact that
causal in a strict sense, nor could they
mitigating some risks requires
reasonably be assigned a probability,
At the World Economic Forum’s transformation.
but they nevertheless clearly
form a web of cascading events. annual meeting in 2012, prominent
Organizations increasingly recognize companies began to take note of Structural resilience
how rapidly and often unexpectedly resilience. Peter Voser, at the time
such events unfold. Since the 2008 Shell’s CEO, asked nine of his This category encompasses
financial crisis, the terms “black colleagues from across sectors what redundancy, modularity and requisite
swans” and “fat tails” have become a the impact of considering resilience diversity. The focus of structural
familiar part of the risk conversation. would be on their business, on their resilience is on bouncing back faster
Yet we don’t always fully spell out the clients and on their risk management. from a disturbance. Redundancy is
consequences. This led to the creation of the possibly the most familiar resilience
Resilience Action Initiative (RAI), which strategy, but like the spare tyre on a
in turn resulted in a set of resilience car, it is the most expensive approach,
Standard risk management tools
tools and approaches informed by because it requires non-performing
assume that the risks follow a
assets. System modularity builds
normalized distribution, mainly complexity theory but grounded in
resilience only if the modules are
because this provides easy-to- practice. One critical application is
loosely coupled: separate them too
understand narratives. But fat tail risks enterprise resilience: the capacity of
much and you no longer have a
are not normal distributions. The only a company or other organization to
system, couple them too tightly and
way to maintain the traditional tools adapt and prosper in the face of high- you lose the adaptive capacity. As
is to neglect and wish away the fat impact, low-probability risks. in nature, diversity is a key resilience
tails. Simply denying the existence strategy. For organizations, however,
of black swans is hardly a way to Working on the RAI project, we this requires addressing the hard
deal with them. This approach may broke resilience into a set of lenses question of which diversity is fit for
be approximately right most times, that could be applied across an purpose for this problem at this time.
but in principle it is wrong. The organization’s operations. We used That is what is meant by “requisite
consequences of being so wrong the resilience lenses to examine the diversity”.
can impact an enterprise, perhaps systemic risks and evaluate mitigation
catastrophically. Fortunately there strategies. These lenses were then
is an alternative, which consists tested and tuned for applicability
of applying a resilience lens where with the risk managers of the RAI
complexity prevails and traditional risk companies. The new resilience tools
management is insufficient. are intended to be used in addition
to traditional risk management tools,
Resilience is, in fact, a property of not instead of them. Organizations
complex systems. And complexity will continue to face normalized risks,
is the science of interconnected which require the traditional tools. It

54 The Global Risks Report 2018

Integrative resilience Transformative resilience This is obviously important for
coming up with new ideas, but the
This second category also consists of This category emphasizes that purpose here is subtly different.
three lenses: multi-scale interactions, resilience is not simply about being Building capacity for change in an
thresholds and social cohesion. able to return to the starting point organization requires the capacity
These elements mainly focus on after a shock. In some cases the to explore the edges of the system.
the context of the organization organization needs to proactively This implies having people with the
and its interconnections. The idea change or it will end up being changed time and resources to go outside
of systems operating at multiple by external circumstances. The first the usual organizational boundaries,
scales is perhaps the most abstract, lens is distributed or polycentric into possibly uncomfortable territory.
but also one of the most essential. Learning faster than competitors
governance. Centralizing authority
It is perhaps most obvious in the confers long-term advantage—having
may seem efficient, but it often
geographic structure of individuals, a purposeful system for such enquiry
comes at the expense of resilience.
families, neighbourhoods, cities, builds resilience.
Elinor Ostrom, winner of the Nobel
provinces and countries. The health
of the connections at and between Memorial Prize for Economics, has
described how the use of multiple It is not the case that measures
each scale is a potent contributor to
and overlapping levels of governance to deal with systemic risk simply
the resilience of a system. Thresholds
builds essential adaptive capacity add up to the sum of these nine
are familiar, but also neglected. The
in an organization. The second lenses. The interconnected nature
past of every organization shows
discontinuities, but its future plans transformative lens is foresight, of the underlying system precludes
are always smooth. The fact that which is not the same as forecasting. this. However, considering
threshold effects generally cannot Systemic effects generally cannot these nine aspects will provide a
be forecast does not mean they be extrapolated from past data, but comprehensive—and, crucially, a
should be ignored. Finally, social require different techniques to engage practical— method for mitigating
cohesion—such as the social capital with the uncertainty of multiple futures. those risks. It is essential, however,
an organization has to fall back on in Shell’s scenario practice is an example for this to be a separate and distinct
times of crisis— is a strong source of of a foresight system that has been process from the standard processes
resilience. applied over the past 50 years for the used for dealing with normalized risks.
purpose of structuring conversations
about futures. The final lens is Roland Kupers is an adviser on
experimentation and innovation. Complexity, Resilience and Energy
Transition and a fellow at Oxford

The Global Risks Report 2018 55

Cognitive bias and risk management

By Michele Wucker Adjusting for bias in our Hyperbolic discounting leads some
decision-makers to prioritize short-
risk assessments term goals that end up hurting long-
term value. Examples include putting
Risk management starts with Our brains play tricks that make some
off crucial investments or kicking
identifying and estimating the risks appear to be more or less likely
the can down the road on tough
probability and impact of a given than they are in reality. Being aware
but necessary budget decisions
threat. We can then decide whether of the blinders that make it harder to
in companies or governments.
a risk falls within our tolerance limits recognize obvious risks allows leaders
Structures such as short-term
and how to react to reduce the risk to counteract them, helping to prevent
quarterly earnings cycles or relatively
or at least our exposure to it. Time crises or at least mitigate the damage
short political terms create perverse
and again, however, individuals and caused.
incentives that magnify the hyperbolic
organizations stumble during this
discounting bias.
process—for example, failing to In deliberative situations such as
respond to obvious but neglected a meeting of a corporate board or
When members of a decision-making
high-impact “grey rhino” risks while a legislative body, anchoring and
group are too homogeneous it can
scrambling to identify “black swan” confirmation biases can distort
hamper their ability to recognize and
events that, by definition, are not perceptions by assigning more
react appropriately to risk. Among
predictable. weight to information and views
other things, too little diversity can
presented early on. Leaders can offset
heighten confirmation bias and make
New technologies and advances these distortions by changing their
it more difficult for individuals to speak
in data science have improved our processes to ensure that there are
out about risks for fear of disrupting
ability to identify trends, assess risks diverse voices around the table and
consensus. Cultural factors can also
and generate early warnings. But if by encouraging structured debate and
play a role. One approach for any
business and policy decision-makers constructive dissent. In other words,
organization that needs more robust
are to take full advantage of these new they can make it easier to consider a
inputs is for leaders to solicit opinions
tools, we need a firmer handle on the range of points of view that ultimately
ahead of meetings, or to anonymize
reasons why people are more likely to strengthens the choices they make.
key inputs required during meetings—
react to some risks and ignore others.
for example, by asking people to put
This behavioural element is crucial to One of the most pervasive cognitive
their ideas on slips of paper and then
managing risks effectively—to both blinders is the availability bias, which
considering them all in a group.
recognizing the risks that confront us leads decision-makers to rely on
and then translating that knowledge examples and evidence that come
into effective action. immediately to mind. This draws
people’s attention to emotionally
salient events ahead of objectively
more likely and impactful events.

56 The Global Risks Report 2018

From box-ticking to Global risks require action across From signals to action
multiple organizations, which
reflective action means that often one of the risk-
Organizations across the private and
management challenges at this level
Organizations often act decisively public sectors need to take a fresh
is the absence of the same kind of
to counter risk only once a major look at how and why individuals and
levers and hierarchies that facilitate
breach, such as a safety catastrophe groups assess and act on risks in the
decision-making and implementation
or hacking event, forces them to. Part way they do. We cannot ignore the
within single organizations. Steeper
of this is because humans discount cognitive and behavioural factors in
obstacles to collective action
the likelihood of worst-case scenarios risk management if we are to avoid
heighten the challenge of getting
happening, which can blind us to both black swans and grey rhinos.
varied stakeholders and networks to
obvious dangers. Individuals and organizations must
coordinate in responding to global
work to overcome biases, make better
Too often boards and C-suites decisions, create warning-signal
approach risk analysis as a standalone systems and act cohesively when red
There are encouraging developments
activity to be ticked off a list, but then flags are raised.
on this front. All kinds of actors are
fall short on mitigating the risks that
already thinking in new ways about
their analysis has identified. Think of Increasingly rich data resources give
who can do what to solve global
an employee derailing cybersecurity us better tools to anticipate problems
problems. After the US federal
plans by inadvertently clicking on a and to track our progress in dealing
government pulled out of the Paris
phishing email because not enough with them. But decision-makers need
Agreement on climate change,
was done to spread risk awareness to work hard to help to ensure that all
for example, more than 2,300
from the C-suite to the wider of this information leads to effective
businesses, cities, states and other
organization. To prevent this kind of action. That means developing better
non-federal actors pledged to honour
breach, risk management needs to listening strategies, like those of CEOs
a commitment to cut emissions.
come out of its silo and become as who actively canvass the views of
Organizations such as the World
much an organic part of operations as millennials as important intelligence
Economic Forum bring together global
budgeting and project management. on market trends and the future policy
public- and private-sector actors to
Organizations must do better in environment that businesses will face.
share ideas and catalyse action. The
educating teams on risk awareness. It also means developing ways of
creation in some countries of new
But they also need to make sure their encouraging and rewarding decision-
types of corporations, which include
cultures encourage employees to feel makers who take difficult, long-term
social and environmental impact
that they can speak out and be taken decisions. Finally, it means better
in their bottom-line calculations, is
seriously enough for problems to be tracking of outcomes and metrics to
re-shaping the role of businesses in
dealt with. hold businesses and governments
confronting global risks head-on.
accountable for their promises.

Michele Wucker is the author of The

Gray Rhino: How to Recognize and
Act on the Obvious Dangers We
Ignore and a 2009 Young Global
Leader of the World Economic Forum.

The Global Risks Report 2018 57

Appendix A: Descriptions of Global Risks and Trends 2018
Global Risks
A “global risk” is defined as an uncertain event or condition that, if it occurs, can cause
significant negative impact for several countries or industries within the next 10 years.

To ensure legibility, the names of the global risks have been abbreviated in the figures
throughout the report. The portion of the full name used in the abbreviation is in bold.

Global Risk Description

Unsustainably overpriced assets such as commodities, housing, shares, etc.

Asset bubbles in a major economy
in a major economy or region
Deflation in a major economy Prolonged near-zero inflation or deflation in a major economy or region
Failure of a major financial Collapse of a financial institution and/or malfunctioning of a financial system
mechanism or institution that impacts the global economy
Failure to adequately invest in, upgrade and/or secure infrastructure networks
Failure/shortfall of critical
(e.g. energy, transportation and communications), leading to pressure or a
breakdown with system-wide implications
Excessive debt burdens that generate sovereign debt crises and/or liquidity

Fiscal crises in key economies

High structural unemployment or A sustained high level of unemployment or underutilization of the productive
underemployment capacity of the employed population
Large-scale activities outside the legal framework such as illicit financial
Illicit trade (e.g. illicit financial
flows, tax evasion, human trafficking, counterfeiting and/or organized crime
flows, tax evasion, human
that undermine social interactions, regional or international collaboration, and
trafficking, organized crime, etc.)
global growth
Severe energy price shock Significant energy price increases or decreases that place further economic
(increase or decrease) pressures on highly energy-dependent industries and consumers
Unmanageable increases in the general price levels of goods and services in
Unmanageable inflation
key economies

Extreme weather events (e.g. Major property, infrastructure and/or environmental damage as well as loss of
floods, storms, etc.) human life caused by extreme weather events
The failure of governments and businesses to enforce or enact effective
Failure of climate-change
measures to mitigate climate change, protect populations and help
mitigation and adaptation
businesses impacted by climate change to adapt

Major biodiversity loss and Irreversible consequences for the environment, resulting in severely depleted
ecosystem collapse (terrestrial or resources for humankind as well as industries
Major natural disasters (e.g. Major property, infrastructure and/or environmental damage as well as loss
earthquake, tsunami, volcanic of human life caused by geophysical disasters such as earthquakes, volcanic
eruption, geomagnetic storms) activity, landslides, tsunamis, or geomagnetic storms
Man-made environmental Failure to prevent major man-made damage and disasters, including
damage and disasters (e.g. oil environmental crime, causing harm to human lives and health, infrastructure,
spills, radioactive contamination, property, economic activity and the environment

60 The Global Risks Report 2018

Failure of national governance Inability to govern a nation of geopolitical importance as a result of weak rule
(e.g. failure of rule of law, of law, corruption or political deadlock
corruption, political deadlock, etc.)
Failure of regional or global Inability of regional or global institutions to resolve issues of economic,
governance geopolitical or environmental importance
A bilateral or multilateral dispute between states that escalates into economic
Interstate conflict with regional

(e.g. trade/currency wars, resource nationalization), military, cyber, societal or

other conflict
Individuals or non-state groups with political or religious goals that
Large-scale terrorist attacks
successfully inflict large-scale human or material damage
State collapse or crisis (e.g. civil State collapse of geopolitical importance due to internal violence, regional or
conflict, military coup, failed states, global instability, military coup, civil conflict, failed states, etc.
The deployment of nuclear, chemical, biological and radiological technologies
Weapons of mass destruction and materials, creating international crises and potential for significant

Poorly planned cities, urban sprawl and associated infrastructure that create
Failure of urban planning
social, environmental and health challenges
Inadequate, unaffordable, or unreliable access to appropriate quantities and
Food crises
quality of food and nutrition on a major scale
Large-scale involuntary migration induced by conflict, disasters,
Large-scale involuntary migration
environmental or economic reasons

Major social movements or protests (e.g. street riots, social unrest, etc.)
Profound social instability that disrupt political or social stability, negatively impacting populations and
economic activity
Bacteria, viruses, parasites or fungi that cause uncontrolled spread of
Rapid and massive spread of infectious diseases (for instance as a result of resistance to antibiotics,
infectious diseases antivirals and other treatments) leading to widespread fatalities and economic
A significant decline in the available quality and quantity of fresh water,
Water crises
resulting in harmful effects on human health and/or economic activity

Intended or unintended adverse consequences of technological advances

Adverse consequences of
such as artificial intelligence, geo-engineering and synthetic biology causing
technological advances
human, environmental and economic damage

Breakdown of critical information Cyber dependency that increases vulnerability to outage of critical information
infrastructure and networks infrastructure (e.g. internet, satellites, etc.) and networks, causing widespread
(Critical information infrastructure disruption
Large-scale cyberattacks or malware causing large economic damages,
Large-scale cyberattacks
geopolitical tensions or widespread loss of trust in the internet
Massive incident of data fraud/ Wrongful exploitation of private or official data that takes place on an
theft unprecedented scale

The Global Risks Report 2018 61

A “trend” is defined as a long-term pattern that is currently evolving and that could contribute to amplifying global risks and/
or altering the relationship between them.

Trend Description

Ageing population Ageing populations in developed and developing countries driven by declining fertility
and decrease of middle- and old-age mortality
Changing landscape of Changing landscape of global or regional institutions (e.g. UN, IMF, NATO, etc.),
international governance agreements or networks
Changing climate Change of climate, which is attributed directly or indirectly to human activity, that alters
the composition of the global atmosphere, in addition to natural climate variability
Degrading environment Deterioration in the quality of air, soil and water from ambient concentrations of
pollutants and other activities and processes
Growing middle class in Growing share of population reaching middle-class income levels in emerging
emerging economies economies
Increasing national sentiment Increasing national sentiment among populations and political leaders affecting
countries’ national and international political and economic positions
Increasing polarization of Inability to reach agreement on key issues within countries because of diverging or
societies extreme values, political or religious views
Rising chronic diseases Increasing rates of non-communicable diseases, also known as “chronic diseases”,
leading to rising costs of long-term treatment and threatening recent societal gains in
life expectancy and quality
Rising cyber dependency Rise of cyber dependency due to increasing digital interconnection of people, things
and organizations
Rising geographic mobility Increasing mobility of people and things due to quicker and better-performing means of
transport and lowered regulatory barriers
Rising income and wealth Increasing socioeconomic gap between rich and poor in major countries or regions
Shifting power Shifting power from state to non-state actors and individuals, from global to regional
levels, and from developed to emerging market and developing economies
Rising urbanization Rising number of people living in urban areas resulting in physical growth of cities

62 The Global Risks Report 2018

Appendix B: Global Risks Perception Survey and Methodology

The Global Risks Perception Survey Changes from Previous –– Political or economic
(GRPS), discussed in the chapter confrontations/frictions between
“Fractures, Fears and Failures”, is the Editions major powers
World Economic Forum’s source of –– State-on-state military conflict or
original data harnessing the expertise Building on the adjustments made to incursion
of the Forum’s extensive network of the Global Risks Landscape for the –– Regional conflicts drawing in major
business, government, civil society and 2017 edition of the report, this year we power(s)
thought leaders. The survey was also have adjusted the likelihood scale –– Loss of confidence in collective
conducted from 28 August to 1 to a 1–5 scale and used a more security alliances
November 2017 among the World meaningful scale to assess likelihood, –– Erosion of multilateral trading rules
Economic Forum’s multistakeholder with a particular probability attached to and agreements
communities, members of the Institute each: –– Erosion of global policy
of Risk Management and the –– Selecting “very unlikely” means coordination on climate change
professional networks of our Advisory that you believe the event has a
Board Members. The results of the probability of occurring within the Respondents could then choose
GRPS are used to draw the Global next 10 years of less than 20%. “significantly increase”, “somewhat
Risks Landscape, Interconnections –– Selecting “unlikely” means that you increase”, “no change”, “somewhat
Map, and Trends Map presented, and believe the event has a probability decrease” or “significantly decrease”.
to provide additional evidence used in of occurring within the next 10
the Global Risks Report. years of between 21% and 40%.
–– Selecting “somewhat likely” means
Both the GRPS and the report adopt that you believe the event has a Methodology
the following definitions of global risk probability of occurring within the
and trend: next 10 years of between 41% and Instead of applying an overall threshold
–– Global risk: A “global risk” is an 60%. for the completion rate, we set specific
uncertain event or condition that, if –– Selecting “likely” means that you validity criteria for each question.
it occurs, can cause significant believe the event has a probability –– Section 1 “The World in 2018”:
negative impact for several of occurring within the next 10 Question 1.01: Only respondents
countries or industries within the years of between 61% and 80%. who assessed at least three of the
next 10 years. –– Selecting “very likely” means that six risks listed in this question were
–– Trend: A “trend” is defined as a you believe the event has a considered (999 respondents met
long-term pattern that is currently probability of occurring within the the criterion).
evolving and that could contribute next 10 years of more than 81%. –– Section 2 “Assessment of Global
to amplifying global risks and/or Risks”: The answers from the 871
altering the relationship between In addition, the 2017–2018 edition of the respondents who assessed the
them. GRPS contained a new section about impact and likelihood of at least
the expected evolution in 2018 of one risk (the answer “no opinion” is
additional global risks that are more considered a valid answer) were
specific and current than the broader used to compute the results.
risks covered in the core module. The –– Section 3 “Global Risk
survey asked the following: “Do you Interconnections”: The answers
think that in 2018 the risks presented by from the 719 respondents who
the following issues will increase or selected at least one valid pair of
decrease compared to 2017?” risks were used in the

The Global Risks Report 2018 63

Figure B.1: Survey Sample Composition
International organizations
Gender Expertise Organization type

26.94% Business
Male Technology
70.36% 21.68% Academia
27.93% Geopolitics Other NGO
25.10% Other 11.42%
11.70% 5.64%



Age distribution
Europe 0.27%

North America
East Asia and the Pacific

Middle East and

4.88% 19.00% 33.64% 25.46% 11.21% 5.80%
North Africa
<30 30–39 40–49 50–59 60–69 >70
Latin America
and the Caribbean
South Asia
Sub-Saharan Africa 3.34%
Source: World Economic Forum Global Risks Perception Survey 2017–2018
Note: Reported shares are based on the number of participants who responded to biographical questions (Age: 758 responses, Gender: 759 responses,
Expertise: 761 responses, Organization type: 762 response, Region: 749 responses)

likelihoodi likelihoodi,n
–– Section 4 “Assessments of occurring globally within the next 10 Ni N1i
Trends”: The answers from the 684 years and about its negative impact for 1
likelihoodi likelihoodi,n
respondents who selected at least several countries or industries within Ni
one combination of an important the next 10 years. For the first question,
trend and at least one associated the possible answers ranged from
risk were used in the computation. “very unlikely” to “very likely”. These five 1
choices were turned into a 1–5 scale (1 impacti = impacti,n
Ni N2i
Figure B1 presents some key = very unlikely, 5 = very likely). For the 1
impacti = impacti,n
descriptive statistics and information question on impact, respondents could Ni
about the profiles of the respondents. select one of five choices: “minimal”, where Ni is the number of respondents
“minor”, “moderate”, “severe”, or for risk i, and likelihoodi,n and impacti,n
“catastrophic”. These five alternatives are, respectively, the likelihood
∑Nn=1 pairij,n
The World in 2018 were turned into a 1–5 scale (1 = impactinterconnection
assigned byij =respondent
pairmax n to
minimal, 5 = catastrophic). risk i. The likelihood is measured
∑Nn=1 pairij,n
on a
For each considered risk, the share for scale interconnection
of 1–5 and the ij =impact on a scale
each answer (“significantly increase”, Respondents could choose “no of 1–5. Ni is the number of respondents
“somewhat increase”, “no change”, opinion” if they felt unable to provide an for risk i who assessed both the
“somewhat decrease” or “significantly
pairmax = max ( pairij,n )
informed answer, and they could also likelihood and impact of N that specific
decrease”) was obtained by dividing leave the question completely blank. risk (the answers ij of respondents
n=1 who
the number of respondents having
pairmax = max ( pairij,n )
For each risk, partial responses—those left one of the two questions blank
selected that answer by the total assessing only the likelihood of were not taken into
ij account).
number of answers. occurrence or only its impact—were
dropped.1 A simple average for both 1
% concerni = c
The Global Risks likelihood and impact for each of the 30 N N i,n
global risks was calculated on this 1
Landscape 2018 (Figure I) basis. % concerni =

Respondents were asked to assess the Formally, for any given risk i, its Nr
likelihood and global impact of each of likelihood and impact—denoted 1
the 30 risks. For each risk, they were % likelihoodir = l
respectively likelihoodi and impacti— Nr Nr i,n
asked about the likelihood of the risk n=1
are: 1
% likelihoodir = li,n

64 The Global Risks Report 2018

% Cij = ci,n
The Global Risks trends.” The information thereby Variable pairij,n is 1 when respondent n
obtained was used to construct the selected the pair of risks i and j as part
Interconnections Risks-Trend Interconnections Map of his/her selection. Otherwise, it is 0.
2018. The value of the interconnection
Map 2018 (Figure III) determines the thickness of each
and the Risks-Trends In both cases, a tally was made of the connecting line in the graph, with the
number of times each pair was cited. most frequently cited pair having the
Interconnections Map This value was then divided by the thickest line.
2018 (Figure II) count of the most frequently cited pair.
As a final step, the square root of this In the Global Risks Landscape and the
To draw the Global Risks ratio was taken to dampen N11i the long-tail Risks-Trends Interconnections Map,
1 Ni the size of each risk is scaled according
Interconnections Map 2018 (Figure III), effect (i.e.
likelihood 1 strong
a fewi very links, and
likelihoodi Ni likelihoodi,ni,n to the degree of weight of that node in
survey respondents were asked the many weak ones) Nand
i n=1 to make the
differences more apparent across the the system. Moreover, in the Risks-
following question: “Global risks are not
weakest connections. Out of the 435 Trends Interconnections Map, the size
isolated and it is important to assess
possible pairs of risks, 56 or 20% were of the trend represents the perception
their interconnections. In your view,
not cited. Similarly, out N22i of the possible
of its importance in shaping global
which are the most strongly connected
377 trend-risk 1 Ni
combinations, development (answer to the first part of
global risks? Please select three to six impacti = 1 impacti,n35 or 9%
were notimpactcited.i =Formally,
N impact
thei,nintensity of the question on trend, as explained
pairs of global risks.” Ni i n=1
the interconnectionn=1 between risks i and above); the biggest trend is the one
j (or between trend i and risk j), denoted considered to be the most important in
Similarly, for the Risks-Trends shaping global development.
Interconnections Map 2018 (Figure II), interconnectionij, corresponds to:
respondents had to identify up to three ∑NN pairij,n The placement of the nodes in the
trends that they consider important in interconnectionij = ∑n=1 ij,n Risks-Trends Interconnections Map
interconnectionij = pairmax
shaping the global agenda in the next pairmax
was computed using ForceAtlas2, a
10 years and the three risks that are force-directed network layout algorithm
driven by each of those trends. The two with implemented in Gephi software, which
questions read: “Which are the three minimizes edge lengths and edge
most important trends that will shape crossings by running a physical particle
(( ))
global development in the next 10 pairmax = max pairij,n
pairmax = max
ij n=1pairij,n simulation.2
ij n=1
years?” and “For each of the three
trends identified in the previous where N is the number of respondents.
question, select up to three global risks
that are most strongly driven by these N
% concern =1 c
% concerni =i N c i,n
N n=1 i,n

If a respondent answered “no opinion” for likelihood or impact, his or her assessment of the other dimension (impact or likelihood, respectively), was retained.
Jacomy, M., T. Venturini, S. Heymann, and M. Bastian. 2014. “ForceAtlas2: A Continuous GraphNr Layout Algorithm for Handy Network Visualization Designed for the Gephi
Software”. PLoS ONE 9 (6): e98679. doi:10.1371/journal.pone.0098679 1 Nr
% likelihood = 1 l
% likelihoodirir= Nr li,ni,n
Nr n=1
The Global Risks Report 2018 65
The lead author of The Global Risks
Report 2018 is Aengus Collins.

At the World Economic Forum a debt

of gratitude is owed to Professor
Klaus Schwab (Founder and Executive
Chairman), Børge Brende (President),
Richard Samans (Head of the
Centre for the Global Agenda) and
Margareta Drzeniek Hanouz (Head of
the System Initiative on Shaping the
Future of Economic Progress), under
whose guidance this report has been
produced. Lee Howell (Head of Global
Programming) has been an important
source of insight and advice.

Katharine Shaw has played an

indispensable role in the creation of
this report. Thanks also go to Ciara
Porawski and the other members of
the Global Risks Report 2018 team:
Oliver Cann, Thierry Geiger, Alem
Tedeneke, Jean-François Trinh Tan
and Stéphanie Verin. In addition, the
following colleagues were particularly
instrumental in shaping and writing
elements of the report: Ushang
Damachi, Emily Farnworth, Derek
O’Halloran, Philip Shetler-Jones and
Jahda Swanborough.

66 The Global Risks Report 2018

We would like to thank our Strategic Advisory Board: Rolf Alter (Hertie We are grateful to the following
Partners, Marsh & McLennan School of Governance), Sharan individuals from our Strategic Partners
Companies (MMC) and Zurich Burrow (International Trade Union and Academic Advisors.
Insurance Group. On the steering Confederation), Winnie Byanyima
board of the Global Risks Report, (Oxfam International), Howard Marsh & McLennan Companies:
Richard Samans of the World Kunreuther (Wharton Risk Center), Paul Beswick, David Bidmead, Leslie
Economic Forum is joined by John Marie-Valentine Florin (International Chacko, Simon Cooper, John A.
Drzik (President, Global Risk and Risk Governance Council), Al Gore Craig, Bruno Dotti, Alanna Gibson,
Digital at Marsh) and Alison Martin (Generation Investment Management), Jason Groves, Rick Guzzo, Bruce
(Group Chief Risk Officer at Zurich Steven Kou (National University of Hamory, Claus Herbolzheimer, Julian
Insurance Group). Particular gratitude Singapore), Julian Laird (Oxford Macey-Dare, Matt McCabe, Leah
is due also to Richard Smith- Martin School), Pascal Lamy Pollacksmith, Maurizio Quintavalle,
Bingham (Director of the Global Risk (Jacques Delors Institute), Ursula Stephen Szaraz, Rachel Wheeler and
Center at MMC) and John Scott von der Leyen (Federal Minister Alex Wittenberg.
(Zurich Insurance Group) for their of Defence of Germany), Maleeha
contributions throughout the planning Lodhi (Ambassador and Permanent Zurich Insurance Group: Paige
and drafting of the report. Representative of Pakistan to the Adams, David Anderson, Lori Bailey,
United Nations), Gary Marchant Francis Bouchard, Valerie Butt, Laura
We are also grateful to our three (Arizona State University), Robert Castellano, Rosanna Cubelli, Daniel
Academic Advisers: the National Muggah (Igarapé Institute), Moisés Eherer, Antony Elliott, Karl Gray,
University of Singapore, Oxford Martin Naím (Carnegie Endowment for Gero Gunkel, Jean-Pierre Krause,
School at the University of Oxford International Peace), Naomi Oreskes Stefan Kroepfl, Manuel Lewin, Marc
and the Wharton Risk Management (Harvard University), Jonathan Liew, Guy Miller, Pavel Osipyants,
and Decision Processes Center at the Ostry (International Monetary Fund), Gregory Renand, Juerg Schmid, Silvia
University of Pennsylvania. Daniel Ralph (Cambridge Centre Signoretti, David Swaden and Nick
for Risk Studies), Nouriel Roubini Wildgoose.
The report has greatly benefited from (New York University), John Scott
the dedication and guidance of the (Zurich Insurance Group), Shi Peijun National University of Singapore:
members of the Global Risks Report (Beijing Normal University), Richard Kok Kwang Phoon and Chorh Chuan
Smith-Bingham (Marsh & McLennan Tan.
Companies) and Ngaire Woods
(University of Oxford). Oxford Martin School: Steven

Wharton: Jeffrey Czajkowski.

The Global Risks Report 2018 67

We extend our appreciation to the State of the Vatican), David Scharia Sariolghalam, Philip Shetler-Jones,
authors of the two articles in the (United Nations Security Council Andrew Snyder-Beattie and Justin
Risk Reassessment section of Counter Terrorism Committee), John Wood. Finally, the Future Shocks
the report. Roland Kupers is an Scott (Zurich Insurance Group), series leans heavily on the work of
adviser on complexity, resilience Carsten Schrehardt (Federal Ministry the participants in the Global Risks
and energy transition; a fellow at of Defence of Germany), Lutfey Siddiqi Workshop that took place in Geneva
Oxford University; and the co-author (LSE Systemic Risk Centre/NUS on 6 October 2017, listed above.
of Complexity and the Art of Public Risks Management Institute), Richard
Policy, The Essence of Scenarios and Smith-Bingham (Marsh &McLennan In addition to those mentioned
Turbulence: A Corporate Perspective Companies), Michael Sparrow (World above, we extend our thanks to
on Collaborating for Resilience. Climate Research Programme), Eskil all the following for their time and
Michele Wucker is the author of Gray Ullberg (George Mason University), help: David Aikman, Gauhar Anwar,
Rhino: How to Recognize and Act on Marcy Vigoda (United Nations Office Arjun Appadurai, Marisol Argueta,
the Obvious Dangers We Ignore and for the Coordination of Humanitarian Silja Baller, Jennifer Beckman, Paul
a 2009 Young Global Leader of the Affairs), Farida Vis (University of Beecher, Micael Bermudez, Matthew
World Economic Forum. Sheffield), Lisa Walker (Ecosphere+), Blake, Roberto Bocca, Kimberley
Carolyn Williams (Institute of Risk Botwright, Dominik Breitinger,
We would also like to thank the Management), Benjamin Zeeb Sebastian Buckup, Marcus Burke,
respondents who completed the (Project for Democratic Union) and Denise Burnet, Ilan Chabay, Alice
Global Risks Perception Survey. Wenjian Zhang (World Meteorological Charles, Bing Chomprasob, Claudio
Thanks also go to the participants Organization). Cocorocchia, Gemma Corrigan,
in our Global Risks Workshop in Roberto Crotti, Richard Danziger,
Geneva on 6 October 2017: Alison This year’s new Future Shocks series Nico Daswani, Nico Daswani, Attilio
Bewick (Nestlé), Walter Bohmayr has been possible only because of the di Battista, Mariette di Christina, Sean
(Boston Consulting Group), Marie- generosity of many people with their Doherty, Lisa Dreier, Michael Drexler,
Valentine Florin (International Risks time and ideas. Special thanks are Mirek Dusek, John Dutton, Jonathan
Governance Council), Guillaume due to the following individuals and Eckart, Jaci Eisenberg, Malik Faraoun,
Grosso (Gavi, the Vaccine Alliance), groups, whose suggestions strongly Liam Foran, Lorin Fries, Arkadiusz
Nneka Henry (International Trade shaped a number of the shocks: A Garbacz, Antonia Gawel, David
Center), Michael Ineichen (International Tangled Web (Joelle Jenny); The Death Gleicher, Fernando Gomez, Richard
Service for Human Rights), Julian of Trade (The Global Future Council on Grieveson, Rigas Hadzilacos, Stefan
Laird (Oxford Martin School), Katell International Trade and Investment); Hall, Mike Hanley, Alice Hazelton,
LeGoulven (UNICEF), Timothy Democracy Buckles (Daniel Drezner, William Hoffmann, Daniel Hund,
Less (Nova Europa), Rupert Lewis Paul Scharre); Precision Extinction Carlo Jaegers, Maroun Kairouz, Elsie
(Government Office for Science), (Jahda Swanborough); Inequality Kanza, Akanksha Khatri, Akanksha
Nathanial Matthews (Global Resilience Ingested (Kamal Sinclair, Christopher Khatri, Nikolai Khlystov, Marina
Partnership), Marie McAuliffe Zember, Mike Evans); War without Krommenacker, Joey Lake, Tarika Lall,
(International Organization for Rules (Ian Bremmer) and Walled Off Martina Larkin, Till Leopold, Helena
Migration), Tim Noonan (International (Tim Noonan). Thanks also go to the Leurent, Mariah Levin, Silvia Magnoni,
Trade Union Confederation), Kok- following for their inputs: Abdelmalek Alan Marcus, Paul McNamara, Jesse
Kwang Phoon (National University Alaoui, Andrea Bandelli, Katinka McWaters, Espen Mehlum, Viraj
of Singapore), Janez Potocnik Barysch, Ian Brunswick, Nicholas Mehta, Liana Melchenko, Stephan
(International Resource Panel), Davis, Rajeeb Dey, Anne Marie Mergenthaler, Adrian Monck, Jane
Jean-Marc Rickli (Geneva Centre for Engtoft Larsen, Yoichi Funabashi, Ed Morley, Marie Sophie Müller, Robin
Security Policy), Caroline Roberts Gerstner, Daniel Gómez Gaviria, Marc Niblett, Robert O’Daly, Taylor Owen,
(University of Lausanne), Johann Goodman, Jean-Marie Guéhenno, Michele Petruzziello, Ortwin Renn,
Roduit (Institute of Biomedical Ethics Diane Hoskins, Mahmoud Jibril, Lynn Lucien Rieben, Christian Rodriguez
and History of Medicine, University of Kuok, Katell Le Goulven, Mike Mazarr, Chifelle, Richard Rothenberg, Karen
Zurich), James Rogers (Henry Jackson Gareth Mitchell, Ryan Morhard, Joe Saez, Olivier Schwab, Elaine Smith,
Society), Eric Salobir (Secretariat of Palca, Thomas Philbeck, Mahmood Paul Smyke, Timothy Snyder,

68 The Global Risks Report 2018

Vesselina Stefanova Ratcheva, Jim
Riordan, Masao Takahashi, Helen
Thompson, Jessica Toscani, Terri
Toyota, Victoria Tuomisto, Maria
Elena Varas, Lisa Ventura, Harsh Vijay
Singh, Regula Waltenspuel, Dominic
Waughray, Bruce Weinelt, Duncan
Weldon, Olivier Woeffray, Karen Wong,
Justin Wood, Kira Youdina and Saadia

We would like to remember our

colleague Jean-Luc Vez, 1957-2017,
who contributed greatly to the Global
Risks Report over the years and who
will be sorely missed.

Thanks also go to all those involved

in the design and production of this
year’s report. At the World Economic
Forum: David Bustamante, Ruslan
Gaynutdinov, Kamal Kimaoui, Arturo
Rago and Mara Sandoval. And our
external collaborators: Hope Steele
(editing); Moritz Stefaner (data
visualization); Patrik Svensson (front
cover and Future Shocks artwork);
Neil Weinberg (charts and graphics)
and Andrew Wright (writing and

The Global Risks Report 2018 69

The World Economic Forum,
committed to improving the
state of the world, is the
International Organization for
Public-Private Cooperation.

The Forum engages the

foremost political, business and
other leaders of society to shape
global, regional and industry

World Economic Forum

91–93 route de la Capite
CH-1223 Cologny/Geneva
Tel.: +41 (0) 22 869 1212
Fax: +41 (0) 22 786 2744