Geopolitical uncertainty higher than ever

This article presents the 10 main geopolitical risks identified by the World Economic Forum’s Global Risks Report for 2015. He believes that geopolitical risks are broader than ever.

January, 21st, 2015, by Mike Scott, in Forbes: “10 risks to be aware of in 2015: Geopolitics returns to centre stage”

A quarter of a century after the fall of the Berlin Wall marked the end of the Cold War , interstate conflict is once again one of the world’s major concerns, according to a survey of almost 900 global experts. The assessment comes from the World Economic Forum’s Global Risks report, which the group has published every year for the last decade. After several years in which the impacts of the financial crisis and environmental issues dominated the risk agenda, geopolitical risks are taking centre stage. The simmering unrest between Ukraine and Russia, the conflict in Syria, and the violent rise of groups such as Boko Haram and Islamic State are creating a climate of insecurity, which is exacerbated by events such as the recent Charlie Hebdo attack in France. There is also growing concern about what effect the plunge in oil prices will have on states dependent on oil for the bulk of their revenues, from Venezuela to Nigeria to Russia. At the same time, the canvas for potential conflicts is much changed from a quarter of a century ago “with rising technological risks, notably cyber-attacks, and new economic realities, which remind us that geopolitical tensions present themselves in a very different world from before”. “Twenty-five years after the fall of the Berlin Wall, the world again faces the risk of major conflict between states,” said Margareta Drzeniek-Hanouz, lead economist at the World Economic Forum, at the launch of the report. “However, today the means to wage such conflict, whether through cyberattack, competition for resources or sanctions and other economic tools, is broader than ever. Addressing all these possible triggers and seeking to return the world to a path of partnership, rather than competition, should be a priority for leaders as we enter 2015.” But at the same time, the report warns, warnings of potential environmental catastrophes have begun to become reality and there are more environmental risks in the lists than economic ones – as reflected in the high concerns about failure of climate change adaptation and looming water crises in this year’s report.

The 10 most likely risks, the WEF says, are interstate risks; extreme weather events; failure of national governance; state collapse or crisis; unemployment or underemployment; natural catastrophes; failure of climate change adaptation; water crises; data fraud or theft; and cyber-attacks. Meanwhile, the risks that will have the biggest impacts are: water crises; the spread of infectious diseases; weapons of mass destruction; interstate conflict; failure of climate-change adaptation; energy price shocks; a breakdown in critical information infrastructure; fiscal crises; unemployment or underemployment; and biodiversity loss and ecosystem collapse. The report also looks at the interconnections between different risks and how they interact with other short- to medium-term trends such as the ageing population, environmental degradation, the increasing polarization of societies and the weakening of international governance. It goes on to identify three “risk constellations” that help to explain the survey findings. The first of these is the interplay between geopolitics and economics. “The interconnections are intensifying because states are making greater use of economic tools, from regional integration and trade treaties to protectionist policies and cross-border investments, to establish relative geopolitical power,” the report says. “This threatens to undermine the logic of global economic co-operation and potentially the entire international rule-based system. Russia’s incursion into Ukraine and China’s attempts to secure for itself territory in the South China Sea, as well as a growing prevalence of cyber-attacks, are examples of this interplay. The next phenomenon is the rate of urbanization in developing countries: the world is in the middle of a major transition from predominantly rural to urban living, with cities growing most rapidly in Asia and Africa. “Without doubt, urbanization has increased social well-being. But when cities develop too rapidly, their vulnerability increases: pandemics; breakdowns of or attacks on power, water or transport systems; and the effects of climate change are all major threats,” said Axel Lehmann, chief risk officer at Zurich Insurance Group. “Our ability to address a range of global risks – including climate change, pandemics, social unrest, cyber threats and infrastructure development – will largely be determined by how well cities are governed,” the report says. Finally, the WEF highlights the importance of the governance of emerging technologies. The pace of technological change is faster than ever, the report points out. “Disciplines such as synthetic biology and artificial intelligence are creating new fundamental capabilities, which offer tremendous potential for solving the world’s most pressing problems. At the same time, they present hard-to-foresee risks. Oversight mechanisms need to more effectively balance likely benefits and commercial demands with a deeper consideration of ethical questions and medium to long-term risks – ranging from economics to environmental and societal.” While the risk environment has grown increasingly complex, governments, businesses and citizens are not sufficiently prepared to deal with it, the report says. The increasingly interconnected nature of global economies and societies means that greater co-operation is going to be needed to tackle the risks we face – but revelations over cyber-espionage, data fraud and leaks have undermined the trust that is needed between the different actors. “While increased interdependencies have brought the world closer together, the Global Risks report series emphasizes the other side of the coin: as people’s lives are becoming more complex and more difficult to manage, businesses, governments and individuals alike are being forced to decide upon courses of action in an environment clouded by multiple layers of uncertainty,” the report concludes. “Against this backdrop, the need to collaborate and learn from each other is clearer than ever.”