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?