The World Economic
Forum launched its Risk Response Network in Davos, Switzerland at the end of January
2011 to convene leading experts in managing risk from various sectors of
society. The Network's first Global Risks Meeting included more than 80 experts
and decision-makers who gathered to discuss ways to better manage, respond to,
prepare for and seize opportunities related to global risks. Some issues and
trends covered during the meeting included:
Natural disasters - The earthquake and subsequent tsunami in
Japan were front and center. Japan's preparation of its citizens led to an
effective and immediate evacuation that spared numerous additional lives and
illustrated the need for all governments to properly prepare for natural
disasters.
Most governments
have crisis management procedures under various scenarios, but some may lack the
capacity to react in the moment. Proper planning for a nimble and quick
response that includes assessing a situation, identifying required resources,
and developing appropriate actions will prove to be invaluable when disaster
strikes.
The need for
transparency and for clear and scientifically based communication was also
evident when the nuclear power plant was damaged. This level of disaster
preparedness requires a framework and a process to evaluate and communicate
data in a timely manner.
After
initial response and recovery are complete, the community or country must then
rebuild. The Risk Response Network recognizes the importance of emotional
rebuilding that must be adequately addressed and supported along with the
physical and economic rebuilding.
Supply chain and transport risk - Global trade depends on a reliable web of interrelated
transportation and supply chain systems. However, most supply chains are more of
a compilation of smaller supply chains that may intersect at various points and
times. Regardless, the effects in one region of the world can have a ripple
effect across the global web of supply chains.
Risk is a
shared responsibility and collaboration between governments and industries - and across
regions -
is needed. More effective coordination of communication pathways and knowledge
sharing could help improve response mechanisms if a major disaster or disruption
occurs. Two questions that should be addressed are: where are risks most
vulnerable? How can we make systems more resilient?
Resource scarcity - Expert members of the Risk Response Network believe
the availability of natural resources is possibly the most critical factor in world
markets and trade issues. We have seen political riots over food shortages - and related
trade actions -
in recent years. As competition for increasingly limited resources heightens,
we will likely see more geopolitical conflict and social migration.
Resource scarcity
is linked to numerous issues including: geopolitics, climate change,
urbanization, waste and technology. Developing multi-stakeholder partnerships
through strong governance frameworks will be important in adapting to and managing
resource constraints.
Cyberspace - Recent phenomena like the emergence of WikiLeaks
as a source for sensitive information, worm attacks such as the Stuxnet virus
and the role of the internet in political uprisings and regime changes in the
Middle East demonstrate both the power and vulnerability of information
technology. Information is pervasive, uncontrollable and scantly protected.
These conditions warrant comprehensive and effective risk identification and
mitigation measures and strategies.
Users and
operators will benefit from continuing education on cyber risks (and ways to protect
against them as four megatrends advance: big data, cloud computing, pervasive
devices and the personalization of IT.
Risk
Response Network also discussed reputational risk and organizational risk. The experts
agreed that risk management approaches must be aligned with an organization's strategic
missions. The organization must also create a culture of risk awareness that would
include allowing decision makers to have reliable access to real-time data.
Above all of
these risks and factors are concerns about U.S.-China relations, cyber warfare,
debt and sovereign risk, and weaknesses in the international monetary system.
These concerns could pose significant risks if people's confidence in the
system is minimized. The recent collapse of the financial market and commodity
volatility illustrate the need for stronger and more effective global
governance. Bodies such as the International Monetary Fund and development banks
should operate under a framework of rules, policies, systems and enforcement mechanisms.
Question to consider
Does the
global cotton industry have frameworks, processes and systems in place to
respond to the risks mentioned above?
