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Global risks report 2011

  1. 1. Global Risks2011SixthofEdition NetworkAn initiative the Risk ResponseWorld Economic Forumin collaboration with:Marsh & McLennan CompaniesSwiss Reinsurance CompanyWharton Center for Risk Management,University of PennsylvaniaZurich Financial ServicesWorld Economic ForumJanuary 2011
  2. 2. The information in this report, or on which this report is based, has been obtained from sources thatthe authors believe to be reliable and accurate. However, it has not been independently verified andno representation or warranty, express or implied, is made as to the accuracy or completeness of anyinformation obtained from third parties. In addition, the statements in this report may provide currentexpectations of future events based on certain assumptions and include any statement that does notdirectly 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 reportoperate in a continually changing environment and new risks emerge continually. Readers are cautionednot to place undue reliance on these statements. The companies contributing to this report undertakeno obligation to publicly revise or update any statements, whether as a result of new information, futureevents or otherwise and they shall in no event be liable for any loss or damage arising in connection withthe use of the information in this report.World Economic Forum91-93 route de la CapiteCH-1223 Cologny/GenevaSwitzerlandTel.: +41 (0)22 869 1212Fax: +41 (0)22 786 2744E-mail:© 2011 World Economic ForumAll rights reserved.No part of this publication may be reproduced or transmittedin any form or by any means, including photocopying and recording,or by any information storage and retrieval system.ISBN: 92-95044-47-9978-92-95044-47-0REF: 050111
  3. 3. Figure 1 | Global Risks Landscape 2011:Perception data from the World Economic Forum’s Global Risks Survey Economic Risks Environmental Risks Geopolitical Risks Asset price collapse Air pollution Corruption Extreme commodity price volatility Biodiversity loss Fragile states Extreme consumer price volatility Climate change Geopolitical conflict Extreme energy price volatility Earthquakes and volcanic eruptions Global governance failures Fiscal crises Flooding Illicit trade Global imbalances and currency volatility Ocean governance Organized crime Infrastructure fragility Storms and cyclones Space security Liquidity/credit crunch Terrorism Regulatory failures Societal Risks Weapons of mass destruction Retrenchment from globalization Slowing Chinese economy (<6%) Chronic diseases Demographic challenges Technological Risks Economic disparity Critical information infrastructure Food security breakdown Infectious diseases Online data and information security Migration Threats from new technologies Water security
  4. 4. Figure 2 | Risks Interconnection Map (RIM) 2011
  5. 5. ContentsPreface 4Executive summary 6Cross-cutting global risks Economic disparity and global governance failures 10Risks in focus 1 The macroeconomic imbalances nexus 14Risks in focus 2 The illegal economy nexus 22Risks in focus 3 The water-food-energy nexus 28Risks to watch 36Conclusion 41Appendix 1 Definitions and methodology 42Appendix 2 Survey data overview 2011 44Appendix 3 Common global risk response strategies 48Appendix 4 Guide to online global risks 2011 resources 50References and further reading 51Acknowledgements 52Project team 56 Global Risks 2011 | 3
  6. 6. Preface This report aims to enhance understanding of how a comprehensive set of global risks are evolving, how their interaction impacts a variety of stakeholders, and what trade-offs are involved in managing them. Global Risks 2011, Sixth Edition is a useful tool for policy-makers, CEOs, senior executives and thought leaders around the world. It aims to equip institutions to understand and respond to global risks and to embrace change as a source of innovation. Most importantly, I hope that focusing on the critical connections between key global risks, stakeholders and decision-makers will inspire all to engage collectively in efforts to improve the global system’s overall resilience.Since 2006 the World Economic Forum’s Global Risksreport has provided a unique and timely analysis of At the World Economic Forum Annual Meetingthe risks that are shaping the global environment. 2011 in Davos-Klosters, the Forum will go beyondUnderscored by an unprecedented pace of change, its current global risk work in launching the Riskstakeholders from across business, government and Response Network (RRN). The RRN will build on thecivil society face a new imperative in understanding understanding embodied in Global Risks 2011, Sixthand managing emerging risks. Edition to provide a platform for our Partners and constituents to collaborate in multistakeholder effortsGlobal Risks 2011, Sixth Edition provides a high- to shape a more secure, innovative and resilient future.level overview of 37 selected global risks as seenby members of the World Economic Forum’s Global I hope you find the report both informative andAgenda Councils and supported by a survey of 580 provocative.leaders and decision-makers around the world. Thereport also benefits from the expertise and thoughtleadership of the World Economic Forum’s GlobalRisk Partners: Marsh & McLennan Companies, SwissReinsurance Company, Wharton Center for RiskManagement, University of Pennsylvania, and ZurichFinancial Services. Klaus Schwab Founder and Executive Chairman World Economic Forum4 | Global Risks 2011
  7. 7. The World Economic Forum’s Risk Response NetworkGlobal Risks 2011, Sixth Edition is a flagship product of the World Economic Forum’s new Risk ResponseNetwork (RRN).The RRN is a unique platform for global decision-makers to better understand, manage and respond tocomplex and interdependent risks. It will bring a rigorous approach to understanding the complexity ofrisks that face corporate, government and civil society leaders, and will provide tools enabling them tobetter mitigate risks and capture associated opportunities. It will combine:• The most compelling insights, drawn from the World Economic Forum’s communities and contributors, including active expert groups such as our Network of Global Agenda Councils and a formal network of the world’s top universities and private sector content providers;• The most relevant global decision-makers, brought together through a community of Risk Officers from top corporations, governments and international organizations;• The most suitable tools and services, including analytic tools and risk management processes to enable decision-makers to better understand key risks in depth and in context, to respond to them proactively and mobilize quickly and efficiently in times of crisis.This report lays the foundations for the RRN by highlighting three ways for leaders to improve theirresponse to complex and interdependent risks:• Proactively address the causes, rather than the symptoms, of global risk, identifying effective points of intervention in underlying structures and systems – in particular with respect to global governance failures and economic disparities;• Devise coordinated response strategies to address the existence of difficult trade-offs and the threat of unintended consequences caused in part by increased interconnectedness;• Take a longer-term approach to assessment and response, particularly when seeking to manage global risks that emerge over decades rather than months or years.The RRN will build on these insights over the coming months by launching a series of initiatives andworkstreams focused on a variety of global risks highlighted in this Report. We hope that you will findGlobal Risks 2011, Sixth Edition to be thought-provoking. But, more importantly, we hope many of you willjoin the World Economic Forum’s initiative to collectively better understand and respond to the new worldof risk. Global Risks 2011 | 5
  8. 8. Executive summaryThe world is in no position to face major, Two cross-cutting global risksnew shocks. The financial crisis has Two risks are especially significant given their highreduced global economic resilience, degrees of impact and interconnectedness. Economic disparity2 and global governance3 failures bothwhile increasing geopolitical tension and influence the evolution of many other global risks andheightened social concerns suggest inhibit our capacity to respond effectively to them.that both governments and societies In this way, the global risk context in 2011 is defined byare less able than ever to cope with a 21st century paradox: as the world grows together, itglobal challenges. Yet, as this report is also growing apart.shows, we face ever-greater concerns Globalization has generated sustained economicregarding global risks, the prospect of growth for a generation. It has shrunk and reshaped the world, making it far more interconnected andrapid contagion through increasingly interdependent. But the benefits of globalization seemconnected systems and the threat of unevenly spread – a minority is seen to have harvesteddisastrous impacts. a disproportionate amount of the fruits. Although growth of the new champions is rebalancing economic power between countries, there is evidence thatIn this context, Global Risks 2011, Sixth economic disparity within countries is growing.Edition reveals insights stemming from Issues of economic disparity and equity at both thean unparalleled effort on the part of the national and the international levels are becomingWorld Economic Forum to analyse the increasingly important. Politically, there are signs ofglobal risk landscape in the coming resurgent nationalism and populism as well as social fragmentation. There is also a growing divergencedecade.1 of opinion between countries on how to promote sustainable, inclusive growth. To meet these challenges, improved global governance is essential. But this is another 21st century paradox: the conditions that make improved global governance so crucial – divergent interests, conflicting incentives and differing norms and values – are also the ones that make its realization so difficult, complex and messy. As a result, we see failures such as the Doha Development Round of the World Trade Organization (WTO) and the lack of international agreement at the Copenhagen Conference on climate change. The G20 is seen as the most hopeful development in global governance but its efficiency in this regard has not been proven.1 For more information see Appendix 2.2 Wealth and income disparities, both within countries and between countries3 Weak or inadequate global institutions, agreements or networks6 | Global Risks 2011
  9. 9. Executive summaryThree important risks in focus Five risks to watchBeyond these two cross-cutting global risks, three Five risks have been designated as “risks to watch”,important clusters of risks have emerged in this year’s as survey respondents assessed them with highanalysis: levels of variance and low levels of confidence while experts4 consider they may have severe, unexpectedThe “macroeconomic imbalances” nexus: A or underappreciated consequences:cluster of economic risks including macroeconomicimbalances and currency volatility, fiscal crises and • Cyber-security issues ranging from the growingasset price collapse arise from the tension between prevalence of cyber theft to the little-understoodthe increasing wealth and influence of emerging possibility of all-out cyber warfareeconomies and high levels of debt in advancedeconomies. Savings and trade imbalances within and • Demographic challenges adding to fiscalbetween countries are increasingly unsustainable while pressures in advanced economies and creatingunfunded liabilities create extreme long-term pressure severe risks to social stability in emergingon fiscal positions. One way out of these imbalances economieswould be coordinated global action but this is • Resource security issues causing extremechallenging given the conflicting interests of different volatility and sustained increases over the long runstates. in energy and commodity prices, if supply is no longer able to keep up with demandThe “illegal economy” nexus: This nexus examinesa cluster of risks including state fragility, illicit trade, • Retrenchment from globalization through populistorganized crime and corruption. A networked world, responses to economic disparities, if emerginggovernance failures and economic disparity create economies do not take up a leadership roleopportunities for such illegal activities to flourish. In • Weapons of mass destruction, especially2009, the value of illicit trade around the globe was the possibility of renewed nuclear proliferationestimated at US $1.3 trillion and growing. These risks, between stateswhile creating huge costs for legitimate economicactivities, also weaken states, threatening developmentopportunities, undermining the rule of law and keepingcountries trapped in cycles of poverty and instability. Effective risk response is not only about proactivelyInternational cooperation – both on the supply side reducing the downsides associated with global risks;and on the demand side – is urgently needed. it is also about seizing the opportunities for innovation and growth that may arise. Throughout this report, aThe “water-food-energy” nexus: A rapidly rising series of risk response strategies are explored that canglobal population and growing prosperity are putting help stakeholders achieve both goals.unsustainable pressures on resources. Demand forwater, food and energy is expected to rise by 30-50%in the next two decades, while economic disparitiesincentivize short-term responses in production andconsumption that undermine long-term sustainability.Shortages could cause social and political instability,geopolitical conflict and irreparable environmentaldamage. Any strategy that focuses on one part ofthe water-food-energy nexus without consideringits interconnections risks serious unintendedconsequences.4 Unless otherwise noted, in this report “experts” refers to the Global Agenda Council members and other contributors who areacknowledged at the end of this report. They provided input through various means, including participating in the Global Risks Survey,taking part in workshops, reviewing the report and providing individual advice and counsel. Global Risks 2011 | 7
  10. 10. Cross-cutting global risksEconomic disparity and globalgovernance failures
  11. 11. Cross-cutting global risks: Economic disparity and global governance failuresEconomic disparity and global governance failures Stakeholders also expressed concerns over evidenceemerged from the Forum’s Global Risks Survey 2010 of rising economic disparity within countries, inas the two most highly connected risks and were advanced and emerging economies alike. Economicperceived as both very likely and of high impact (see analysis by the OECD and others suggests that realFigure 1, Global Risks Landscape, and Figure 2, income growth of the top income quintiles of theRisks Interconnection Map, at the beginning of the populations in Finland, Sweden, the United Kingdom,report). They influence the context in which global risks Germany, Italy, and the USA was twice as large asevolve and occur in two critical ways: first, they can that of the bottom quintiles between the mid-1980sexacerbate both the likelihood and impact of other to mid-2000s.5 Income inequality as measured by therisks; second, they can inhibit effective risk response. Gini Index over the past decade has also increased rapidly in emerging economies such as India, China, or Indonesia. While such studies are subject toEconomic disparity methodological criticisms and there is disagreement over the findings, the risk of rising economic disparity,and social fragmentation even in terms of perception alone, is concerning.Definition: Wealth and income disparities, both within countries Many factors may have contributed to this trendand between countries, threaten social and political stability as within countries, including the erosion of employmentwell as economic development. culture, the decline of organized labour, and failures of education systems to keep pace with the increasingThe Global Risks Survey identified economic disparity demands of the one of the most important risks in the comingdecade. The Forum’s Global Agenda Council survey Economic disparities are also seen as contributing toalso supports this finding, having ranked economic a broader process of global social fragmentation.disparity as the second most important trend in terms Globalization has led to different groups withinof impact on the business community and as the most countries having divergent economic interests,underestimated trend in terms of its impact. undermining a sense of broader national solidarity. At the same time, transnational associations areEconomic disparity is tightly interconnected with becoming more important in individual and groupcorruption, demographic challenges, fragile states, identity, enabled by the internationalization of mediaglobal imbalances and asset-price collapse. and communication. Traditional forms of associationRespondents perceived economic disparity as have been eroded. Trust in institutions seems to haveinfluencing chronic diseases, infectious diseases, dropped.illicit trade, migration, food (in)security, terrorism andweapons of mass destruction. They saw economic In part, it may be that vertically-integrated nationaldisparity as influenced by climate-change related risks societies are being replaced by more fluid,and global governance failures. The data indicate that transnational societies. This naturally offers a rangeeconomic disparity and geopolitical conflict reinforce of opportunities for cross-cultural communicationone another. and community-forming unhindered by geography. However, it also creates tensions within countries thatEconomic disparity plays out between and within lead to global risks, and undermines governments’countries. Ease of communication has made political capacity to respond to local manifestations ofinequalities between countries more visible. Despite those risks.robust growth in some emerging economies, manycountries remain trapped in a cycle of poverty withtremendous implications ranging from lack of accessto basic social infrastructure such as good education,healthcare and sanitation to political fragility of thestate.5 OECD (2008), Growing Unequal? Income Distribution and Poverty in OECD Countries10 | Global Risks 2011
  12. 12. Cross-cutting global risks: Economic disparity and global governance failuresGlobal governance failures It is uncertain whether global governance will muddle along with an increasingly ill-fitting institutional framework, whether we will find the capacity and willDefinition: Weak or inadequate global institutions, agreements to embrace more agile structures enabled by globalor networks, combined with competing national and political networks and new forms of collaboration, or whetherinterests, impede attempts to cooperate on addressing global the idea of coordinated global governance will berisks. discarded entirely.While risks are increasingly globalized and Effective global governance is also held back byinterconnected, global governance capacities are ineffective decision-making structures at the nationalhighly fragmented. Global governance failures level. Arguably, technological and social shiftscreate and exacerbate systemic global risks, Survey have weakened the ability of leaders to implementresults showed strong interconnections between internationally agreed commitments which areglobal governance failures and regulatory failures, unpalatable in the short-term, as the cost of mobilizingcorruption and economic disparity, with retrenchment interest groups has fallen. The difficulties in achievingfrom globalization and global governance failures being an international climate change agreement, asseen as mutually reinforcing. well as resistance to internationally coordinatedGlobal governance failures cited by experts include: macroeconomic policy measures, are cases in point.UN climate change negotiations; the uncompleted A counterbalance would be a well-informed andDoha Development Round of trade negotiations; lack well-mobilized global public opinion sharing normsof progress on some of the Millennium Development and values of global citizenship, but this is not yet fullyGoals; the stalling of United Nations’ Security Council developed.reform; and challenges to frameworks designed toprevent the proliferation of the capability of nuclearweapons. There is a growing sense of paralysis inresponding to global challenges. The WashingtonConsensus is no longer accepted as the baseline Recognizing the importance of globalmodel for economic development, but neither has it governance failures, the World Economicbeen replaced by an alternative set of unified values. Forum in 2009 launched the Global RedesignThe United States’ National Intelligence Council Initiative. Its purpose has been to stimulateand the European Union’s Institute for Security a strategic thought process among allStudies recently concluded that current governance stakeholders about ways in which internationalframeworks will be unable to keep pace with looming institutions and arrangements should and couldglobal challenges unless extensive reforms are be adapted to contemporary challenges.implemented. Increasingly, emerging economiesfeel that unfairly they have insufficient influence in A series of specific proposals on how someinternational institutions as they are currently designed. of the gaps and failures in internationalYet there is uncertainty over the ability and willingness cooperation might begin to be addressed wasof rising powers to shoulder a greater share of global presented for initial discussion with seniorresponsibilities, as well as reluctance on the part of representatives of about 50 governments andestablished powers to recognize the limits of their ownpower. 20 international organizations at a special summit in Doha, Qatar, on 30-31 May 2010. The proposals are also available at: Global Risks 2011 | 11
  13. 13. Global Risks 2011 | 12
  14. 14. Risks in focus 1 The macroeconomic imbalances nexus
  15. 15. Risks in focus 1: The macroeconomic imbalances nexusRisk description These imbalances lead to two primary risks. First, they lead to slow growth, increasing accumulation of debt and fiscal pressures create risks of sovereign defaultsand impacts in certain advanced economies which could also affect banking systems worldwide (and vice-versa). Second, such weakness creates the risk of excessive capitalThis cluster of three economic risks – global flows to emerging markets, increasing the bubble riskimbalances and currency volatility, fiscal crises and potentially leading to asset price collapse. Whileand asset price collapse – is characterized by both global imbalances will continue to imply a net flow ofinternal imbalances (within countries) and external capital from surplus to deficit countries, these risksimbalances (between countries). arise when increases in gross flows of capital from advanced to emerging economies are not matched byInternal imbalances are produced by many factors, the commensurate ability of economies to absorb suchincluding government policies and private sector flows productively.behavior and are influenced by the stage of economicdevelopment. Fiscal imbalances in advanced Figure 3 shows how these risks are linked graphically,economies have widened because of government and Table 1 provides a non-exhaustive list of the directprofligacy. They were exacerbated by the impact of the and indirect impacts of these risks to crisis. First, many governments were forcedto set aside large packages to bailout failing banks These risks link strongly to other global risks. Forand stabilize the financial system. Second, and more example, fiscal pressures in advanced economiesimportantly, many governments provided large fiscal will accelerate the ongoing power shift towards Asia,stimuli to mitigate the recessionary impact of the crisis. increasing the risk of geopolitical tensions. All three risks could also exacerbate global governance failuresThe combination of bailout and stimulus packages as countries resort to zero-sum calculations and short-resulted in burgeoning deficits and expanding debt- term, populist ratios, particularly in advanced economies.Achieving fiscal consolidation while avoiding hamperingthe fragile recovery is a short-term challenge. Howeverin the long-term, a key fiscal challenge will befinancing the unfunded liabilities of current and futuregenerations (see discussion below and Risk to WatchDemographic Challenges).Related to this point, external imbalances betweencountries are also of concern. At the heart of globalimbalances is a mismatch between saving andinvestment. Deficit countries do not save enoughrelative to their investments, and surplus countries donot invest enough given their high savings. In principle,external imbalances are not bad. Capital will tend toflow to the most profitable use; in a globalized system,that includes cross-border capital flows. As long asthe recipients of such flows put them to productiveuse (i.e. as long as the resulting investments generaterevenue that is high enough to serve and amortizethe debt incurred) no major problem arises.6 Externalimbalances become a problem if they contribute to anunsustainable accumulation of debt or, for countriesthat actively control their exchange rates, if they lead toan unsustainable accumulation of foreign reserves.6 Some prominent economists, including US Federal Reserve Chairman Ben Bernanke, have argued that global imbalances contributedmaterially to the recent global financial crisis by lowering the cost of debt and encouraging investors to search for higher yields in riskierassets such as the US housing market.14 | Global Risks 2011
  16. 16. Risks in focus 1: The macroeconomic imbalances nexus Figure 1 System diagram for risks associated with the macroeconomic imbalances nexus Figure 3Source: World Economic Forum Table 1 Impact of risks related to macroeconomic imbalances (non-exhaustive) Table 1 Impacts Direct Impacts Indirect Impacts Impact on • Advanced economies: Tough budget • Lack of political will to address other governments decisions in balancing stimulus and austerity; global challenges such as climate debt defaults, rescheduling or rescue change • Emerging economies: Increased need to explore currency adjustment Impact on society / • Advanced economies: Low growth in • Welfare increases in China in the populations face of severe austerity; inability to meet longer term as a result of greater entitlement commitments reliance on domestic consumption once rebalancing takes place • Emerging economies: Social adjustments through shift towards domestic demand rather than exports (need for redistribution and social security schemes to boost consumption and lower savings) Impact on business • Protectionist (trade and financial) pressures • Realignment of business models as global adjustments and retrenchment • Threat of collapse of banking system along from globalization shift demand with government finance; uncertainty patternsSource: World Economic Forum Global Risks 2011 | 15
  17. 17. Risks in focus 1: The macroeconomic imbalances nexusMajor trends and As Figure 4 shows, global imbalances increased significantly between 1996 and 2009. While the financial crisis acted to reduce these somewhat fromuncertainties recent highs, the IMF and others expect them to increase again in the future. Running sustained and large current account deficits requires capital inflows on the part of deficit countries. This implies an increase in public debt when accompanied by fiscal deficits. Figure 5 shows the long-run trends for government debt for G7 economies, including recent increases. 4.0 Figure 4 Global current account imbalances 1996-2009 3.0 2.0 Discrepancy % of World GDP Oil exporters 1.0 China and East Asia Germany + Japan 0 ROW -1.0 US -2.0 -3.0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Source: IMF World Economic Forum Outlook, April 2010 Figure 5 Average government debt ratios in G7 Economies,1950-2010 (PPP-weighted) 120 100 80 % of GDP 60 40 20 0 Gross Debt 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Net DebtSource: Long-Term Trends in Public Finances in the G-7 Economies, IMF Staff Position Note SPN/10/13, 1 September 201016 | Global Risks 2011
  18. 18. Risks in focus 1: The macroeconomic imbalances nexusThere is a high degree of risk and uncertainty regarding However, some economists argue that the standardhow much debt can be borne by the public sector, debt-to-GDP ratios reported widely by officialparticularly in advanced economies, before the debt agencies fail to measure a country’s true long-termburden seriously impacts economic growth through fiscal prospects. A more accurate measure of fiscalincreasing borrowing costs, politically unacceptable outlook is to factor in future liabilities not countedamortization payments, and the subsequent need for as current debt by calculating the net present valuefiscal austerity. Based on a sample of 44 countries over (NPV) of all future obligations relative to the NPV ofa period of 200 years Kenneth Rogoff and Carmen all future income streams. Figure 6 summarizes suchReinhart have found that there are distinct debt-to- an IMF calculation for selected countries, with theGDP thresholds where debt growth becomes non- average of the sample representing an NPV of 444%linear. Specifically, for public debt held by advanced of GDP. While there are large uncertainties in theseand emerging economies they found this threshold calculations, such analysis suggests that the impactto be approximately 90%.7 After this threshold, the of uncounted future liabilities is very large, and that theburden of debt reduces median GDP growth by roughly impact of age-related liabilities will dwarf short-termone percentage point and average GDP growth by issues such as the cost of fiscal stimulus.considerably more. Depending on which measures ofdebt are used, US public debt is either fast approachingor even just past this threshold, while many Europeancountries are well beyond it. Further, if current spendingand income trends continue, IMF analysis indicates thatnet government debt for G7 economies could rapidlyincrease to unprecedented levels. Figure 6 Net present value of the impact on fiscal imbalance deficits of the financial crisis and ageing-related spending for selected countries 800 700 600 NPV % of GDP 500 400 300 200 100 0 Aging JAP ITA TUR MEX FRA GER GBR Avergage AUS USA ESP KOR CAN CrisisSource: Fiscal Implications of the Global Economic and Financial Crisis, IMF Staff Position Note, SPN/09/13, 9 June 20097 Reinhart, Carmen M. and Kenneth S. Rogoff (2010), “Growth in a Time of Debt”, NBER Working Paper No. 15639, January 2010 Global Risks 2011 | 17
  19. 19. Risks in focus 1: The macroeconomic imbalances nexusGiven the magnitude of uncovered future liabilities, the In the second scenario, emerging markets experienceIMF and Bank of International Settlements analysis an asset price collapse. Loose monetary policy andimplies that without significant adjustments in the slow growth in advanced economies, together withmedium-term, almost all advanced economies face high growth in emerging markets, is already attractingserious threats to fiscal solvency in the long-run.8 increasing gross capital flows to emerging economiesThis suggests that countries will have to embark and decoupling their stock markets from those ofon major fiscal consolidation exercises, increasing advanced economies. This could result in assettaxes or reducing spending, in order to cover the gap bubbles as rising equity markets leak into real estatebetween expected future liabilities and expected future prices. Although some emerging markets are trying toincome. Experts argued that there is a distinct risk that restrain these capital inflows, it would be difficult for allpoliticians will not be able to muster the necessary will emerging markets simultaneously to resist the upwardto prevent severe financial market turbulences and, pressure on their currencies. Such asset bubbles,ultimately, protect their countries against default. driven as they are by excess liquidity rather than increases in underlying value, could result in severeIn light of the pressures of such fiscal and crashes, damaging both emerging markets and themacroeconomic imbalances, discussions with world economy as a whole.experts highlighted three non-exclusive and negativescenarios whereby this cluster of risks produces The final scenario, although regarded by many assevere challenges to the global financial and economic unlikely, is a repeat of the “stagflation” of the 1970ssystems and beyond. in advanced economies. This scenario sees loose monetary policy proving unable to stimulate economicIn the first scenario, a combination of recessionary activity, while supply-side restrictions for commoditiespressures and lack of market confidence in the short- and energy arise because of geopolitical conflict in theterm and unfunded social obligations in the long-term Middle East, or merely an outpacing of global supplycould drive both fiscal and banking crises in selected by robust growth in the emerging world, leading toadvanced economies. In some countries, crises in a loss of confidence in the ability of central bankspublic finances will mean a fall in value of government in advanced economies and emerging countries tobonds, taking with them the value of assets invested control financial institutions. For countries with a higherproportion of private lending, as the threat of sovereigndefault rises, capital will flee banks that are seento ultimately be reliant on public rescues. In eitherevent, the direct impacts of fiscal crises are likely tobe compounded by credit and banking crises withadverse systemic implications for the global financialsystem.See also IMF Country Report No. 10/248, 12 July 2010, Gokhale J, (2009) “Measuring the Unfunded Obligations of European Countries”,8National Centre for Policy Analysis and Kotlikoff, L (2010), “A Hidden Fiscal Crisis?”, Finance and Development, September 201018 | Global Risks 2011
  20. 20. Risks in focus 1: The macroeconomic imbalances nexusLevers and Strengthening financial systems Weak financial systems are a likely source oftrade-offs risk in both advanced and emerging economies; strengthening regulation and institutions in general is a key point of intervention. Many proposals have been made in this regard, including the Basel IIIRecognizing trade-offs in managing provisions, and implementation is now seen as of most importance. Possibilities for strengthening the globalglobal imbalances financial system through regulation include:Lack of agreement on how to reduce global • Better surveillance of the financial sector, includingimbalances makes it difficult to create joint all systemically relevant playersresponsibility at the international level. Diverginginterests in the short-term are driven by both political • Tighter capital and liquidity ratios for all bankingand economic factors. While advanced economies see institutions (including non-banks), with highercontinuing imbalances as economically unsustainable, ratios for systemically relevant institutionsemerging economies running trade surpluses fear thatadjustments involving currency appreciation would hurt • Risk retention for securitization (so-called “skin inemployment in export sectors and potentially threaten the game”)social stability. • Improved transparency and counterparty risk management in “over-the-counter” derivativePolitical leaders in advanced economies are under marketsincreasing pressure to seek short-term solutions – butuncoordinated actions, such as simultaneous currency As outlined in the Forum’s Financial Developmentdepreciation by multiple countries, could create new Report 2010, strengthening financial systems inrisks. For all countries to attempt to devalue their emerging economies by developing capital marketscurrencies at the same time would only have negative and improving access to retail financial services couldimpacts. increase both domestic confidence and investmentThere are three primary levers through which the risks opportunities, both of which could stimulatedescribed above could be addressed. consumption and help to offset global imbalances as well as reduce the risk of asset bubbles.Strengthening global coordination Facilitating domestic transitions Although unlikely, experts consider that the G20 andIMF could play a key role in developing a stronger towards balanced economies policy framework to discourage the build-up of While deficit countries will necessarily be required tounsustainable imbalances. Renewed leadership on take on far-reaching price and cost adjustments topromoting international exchange rate coordination is enhance the competitiveness of their exports, surplusparticularly important to avoid currency wars. countries need to address weaknesses in private domestic consumption. This would not only increaseHowever, even more powerful would be cooperation the welfare of surplus societies, but also facilitate theon meaningful growth policies that change the necessary adjustments in deficit countries by raisingincentives for the use of income in both deficit and their exports.surplus countries. Both price and income adjustmentsare required to reduce imbalances, and successful Most importantly, advanced economies urgently needadjustment must include debtor and creditor (or deficit to recognize the rising challenge of fiscal stress causedand surplus) countries. by unfunded liabilities linked to ageing societies. To shift dependence from government-provided social insurance to private savings for pensions and healthcare services, states will require a combination of careful reform, financial innovation, and private sector solutions to gradually but significantly reduce the burden on public finances and offset the risk of future fiscal crises. Global Risks 2011 | 19
  21. 21. Risks in focus 2 The illegal economy nexus
  22. 22. Risks in focus 2:The illegal economy nexusRisk description Similarly, while global governance failures have created a growing space for illegal activities, these activities have, in turn, tended to undermine efficient globaland impacts governance. Although this nexus of risks is often seen as moreIllicit trade, organized crime and corruption are pervasive in emerging economies, a significantchronic risks that are perceived as highly likely to occur proportion of the demand for illicit goods is generatedand of medium impact. As a highly interconnected in advanced economies. Illegal networks also usenexus representing the illegal economy, however, the international banking and real estate systems toexperts see these risks as of central importance to facilitate their financial management, laundering moneythe global risk landscape. As Figure 7 illustrates, and hiding profits from tax authorities.both survey data and experts suggest that this nexusheavily influences three other important global risks The impacts of this nexus of risks can also spread– fragile states, terrorism and geopolitical conflict– far beyond emerging economies. For example, illicitwhich, in turn, have a significant and negative impact trade of intellectual property-protected goods reduceson global stability. incentives for innovation and investment. Trade in counterfeit medicines risks human health globally.There is a feedback loop between this nexus and Security risks arising from fragile states – terrorism andeconomic disparity. Economic disparity provides an geopolitical conflict – may have broad consequences.enabling environment for illicit trade, corruption and And as Table 2 below shows, corruption in bothorganized crime to grow in advanced and emerging emerging and advanced economies is a low-intensityeconomies. In turn, the proceeds reinforce the power of transaction cost that stifles growth, distorts marketsthe privileged, while undermining economic development and undermines the rule of raising the costs of doing legitimate business, therebyincreasing inequalities both within and between countries. Table 2 Impact of risks related to the illegal economy nexus (non-exhaustive) Table 1 Impacts Direct Impacts Indirect Impacts Impact on • Weakened institutions/undermining and • Decreased regional investments governments corruption of the rule of law • Shift of power to disruptive groups • Erosion of civil service function/capture of state institutions by corruption • Lack of continuity in policies affecting business • Small tax base/loss of revenue • Exodus of capital • Threats to political stability Impact on society / • Erosion of trust in public institutions • Reduction in tourism populations • Potential for draconian responses that limit • Destruction of biosphere through economic opportunity (stricter migration unregulated activities policies) • Criminalization/marginalization of • Brain drain / skill depletion from emigration segments of the population Impact on business • Increased transaction costs • Higher costs of capital • Lost legitimate sales • Pressure to participate in corrupt practices through perceived • Deterred/appropriated investments competitive disadvantage • Exposure to threats, bribes and reduced security of personnelSource: World Economic Forum22 | Global Risks 2011
  23. 23. Risks in focus 2:The illegal economy nexus Figure 1 System diagram for risks associated with the illegal economy nexus Figure 7Source: World Economic ForumMajor trends and The potential for this nexus of risks to cause contagion has arguably been demonstrated recently in Kyrgyzstan. Members of the Forum’s Global Agenda Councilsuncertainties argue that the undermining of state leadership and economic growth by corrupt officials and organized crime contributed significantly to social tensionsThe negative effects of corruption, illicit trade, which erupted in violent conflict in June 2010, causingorganized crime and fragility are easy to characterize widespread destruction, hundreds of civilian deaths andbut extremely difficult to quantify. The opaqueness of the displacement of 400,000 ethnic Uzbeks.this nexus of risks has resulted in too little attentionand too few resources devoted to mitigating it, and Table 1 Figure 3 Rough estimated market size of illicit the significance of this nexus of risks has increased goods based on public sources considerably in recent years – in part because of global (in USD billion)governance failures, as informal networks engage inlegal and regulatory arbitrage. Counterfeit pharmaceutical drugs: 200Illicit trade is now thought to represent between 7 and Prostitution: 19010% of the global economy – in some countries, illicit Marijuana: 140trade is the major source of income. Table 3 below isone example of attempts to judge the market size of Counterfeit electronics: 100illicit trade of different goods based on public sources. Cocaine: 80It must be stressed that these numbers are extremely Opium and heroin: 60rough estimates and are the subject of significantdebate; the Forum’s Global Agenda Council on Illicit Web video piracy: 60Trade is currently developing a methodology to track Software piracy: 50effectively the global impact of these activities. Cigarette smuggling: 50It should be noted that even when flows of illicit Human trafficking: 30goods and criminal activity are small relative to globalmarkets, they can have an outsized effect on fragile Environmental crimes and natural resources trade: 20states as the real value of such activity can dwarf Logging: 5national salaries and government budgets. Art and cultural artefacts: 5 Small arms: 1 Source: Havocscope and experts Global Risks 2011 | 23
  24. 24. Risks in focus 2:The illegal economy nexusLevers and Increase the transparency of international financial and trade flowstrade-offs The global financial system allows the profits of illicit trade, organized crime and corruption to be transferred and hidden. This protects participants,Recognizing trade-offs in responding deprives governments of tax revenue and shifts taxto the illegal econnomy nexus burdens from capital onto wages and consumption. Ensuring transparency of financial flows would reduceWhy has so little progress been made in mitigating opportunities for money to be laundered or transferredthis nexus of risks? One reason is that structures out of emerging economies, as well as enabling morewhich enable illicit activities also benefit many people effective law enforcement.who would not consider themselves as engaging incriminal behaviour; for example, secrecy jurisdictions The Task Force on Financial Integrity & Economicallow individuals and corporations to avoid tax. Development recommends five steps to achievingIncreasing transparency and reducing illicit trade would greater transparency to ensure that financial flows canundoubtedly involve increased costs and lower profits be tracked, verified and taxed:for many businesses. Similarly, there are large costsin shifting populations who currently rely on producing • Requiring beneficial ownership to be a matter ofgoods for illicit markets (such as poppy-farmers in public record, to reveal the true owners of capitalAfghanistan) to other, legal activities. • Requiring multinational companies to undertake country-by-country reporting of all sales, profitsHowever, if global leaders appreciate the importance and taxesof this issue as a collective challenge, a number ofmeasures could be employed. • Requiring all trade pricing to be conducted under the OECD arms-length principle and with pricing Figure 1 declarations and online data available to customsImprove global coordination with authorities, to curtail trade mispricing that avoids taxes and dutiesstronger multilateral frameworks • Implementing global automatic tax informationStronger links between international civil society and legal exchange for all non-resident individuals,institutions in advanced economies would assist activists corporations and trustsand law enforcement in emerging economies in tracking • Harmonizing anti-money laundering laws globallyand halting flows of illicit capital out of fragile states. This to standardize the predicate offences for moneywas exemplified in the recent ruling by France’s Supreme laundering, reduce legal arbitrage and ensureCourt allowing a judicial inquiry into complaints of alleged enforcement can proceed across differentcorruption and the removal of government assets filed jurisdictionsagainst three African heads of state. Transparency in physical movement of goods similarlyReducing variation in regulation and enforcement needs to be increased, to track the movementcapacity would inhibit the capacity of illicit activities of products that may constitute illicit trade or beto shift to the least-vigilant jurisdictions. National laws associated with organized crime and corruption. Morecontaining extraterritorial provisions to hold companies responsible monitoring of supply chains could have aliable for corruption, such as the US Foreign Corrupt large impact.Practices Act and the United Kingdom Anti-BriberyBill, offer a potential illustration example of howregulations could be extended and harmonized acrossjurisdictions.24 | Global Risks 2011
  25. 25. Risks in focus 2:The illegal economy nexusIncreased demand side intervention Reducing economic disparity Experts argue that a greater understanding of the Economic disparity is an enabling environment forhuman and economic impact of engaging in illicit trade this nexus, as it provides the incentive for individualswould reduce demand for illicit goods in advanced to supply and consume the outputs of illicit trade,economies. This implies a focus on education, ethics organized crime and and the construction of new norms. Reducing economic disparities is a major challenge;Similarly, rather than viewing it as an end in itself to it must be faced at a structural level. An empiricallyreduce illicit trade, organized crime and corruption, reliable long-term strategy is to invest in universalthis goal could be reframed as a means to support education, equipping populations with the knowledgeeconomic growth and human security. Such a and skills to contribute fully to economic activity.reframing could shift priorities and behaviour while Similarly, investments that attempt to correct fordriving greater cooperation among institutions. structural unemployment should be investigated.For certain elements of illicit trade, there may be a casefor reducing the profits on offer to organized crimeby bringing trade within the framework of the law, asproposed recently in California with the legalization ofmarijuana.For the corporate sector, reframing corruption from anissue of compliance to an issue of risk could increasevigilance in monitoring legal or reputational exposure.This requires a more precise assessment of the costsof this nexus to businesses and government taxbases.9 The Forum is convening private sector actorsthrough its Partnering Against Corruption Initiative toclarify the business impacts of corruption and developcollective solutions with government and civil society.9 See for example Transparency International, the International Chamber of Commerce, the UN Global Compact and the World EconomicForum (2008) Clean Business is Good Business: The Business Case against Corruption Global Risks 2011 | 25
  26. 26. Risks in focus 3 The water-food-energy nexus
  27. 27. Risks in focus 3:The water-food-energy nexusRisk description Governance failures in terms of managing shared resources – such as trans-boundary water and energy sources and food trade agreements – create tensionsand impacts that can lead to conflict, as seen recently in Yemen. Economic disparity also often exacerbates this nexus of risks as governments and consumers seek short-Water security, food security and energy security term, unsustainable solutions to economic hardshipare chronic impediments to economic growth and such as growing high-value, water-intensive exportsocial stability. Figure 8 shows their interrelatedness: crops in water-deprived production requires water and energy; waterextraction and distribution requires energy; and energy It is at the local level that most opportunities can beproduction requires water. Food prices are also highly found for improving resource efficiency and managingsensitive to the cost of energy inputs through fertilizers, trade-offs between energy, water and food production.irrigation, transport and processing. However, at the global and regional levels there are few initiatives to raise awareness, share leading practicesEconomic growth and population growth are common and motivate consumers in an integrated approach.drivers for all three risks, especially as improvingliving conditions in emerging economies results in Table 4 shows a non-exhaustive list of some of themore resource-intensive consumption patterns. direct and indirect impacts stemming from this nexus.Environmental pressures also drive resource insecurity– from climate shifts to extreme weather events thatalter rainfall and affect crop production. Table 4 Impacts of risks related to the water-food-energy nexus (non-exhaustive) Table 1 Impacts Direct Impacts Indirect Impacts Impact on • Stagnation in economic development • Increased social costs linked to governments employment and income loss as • Political unrest agriculture is negatively effected • Cost of emergency food relief • National security risks/conflict over • Significantly reduced agricultural yields natural resources • Threats to energy security Impact on society / • Increased levels of hunger and poverty • Migration pressures populations • Increased environmental degradation • Irreparably damaged water sources • Severe food and water shortages • Loss of livelihoods • Social unrest • Food price spikes Impact on business • Export constraints • Lost investment opportunities • Increased resource prices • Commodity price volatility as shortages ripple through global markets • Energy and water restrictionsSource: World Economic Forum28 | Global Risks 2011
  28. 28. Risks in focus 3:The water-food-energy nexus Figure 1 System diagram for risks associated with the water-food-energy nexus Figure 8Source: World Economic ForumMajor trends and Energy Agency (IEA) forecasts that the world economy will demand at least 40% more energy by 2030; producing this energy will draw heavily on freshwateruncertainties resources. For such increased demand for water, food and energy to be realized, significant and perhaps radical changes in water use will be required as well asAgriculture is the dominant water user, consuming new sources for food and energy production exploited.more than 70% of total global water demand.Industrially produced meat is especially water- For food production, supply-related challenges may limitintensive, requiring up to 20,000 litres of water to the ability of farmers to meet growth in demand. Already,produce a kilogram, compared to approximately 1,200 major grain-producing areas – in China, India and thelitres to produce a kilogram of grain. Both population United States, for example – depend on unsustainablegrowth and increasing meat consumption in emerging mining of groundwater. In some regions, such aseconomies will therefore have a tremendous impact on North Africa and Australia, climate-related changes ofresource needs. precipitation have already critically reduced the levels of freshwater supply. In northeast China, one of theAs Figure 9 shows, over the next 10 years, the world country’s main grain-producing regions, climate changepopulation is expected to rise from the current 6.83 could increase drought losses by over 50% by 2030.10billion to approximately 7.7 billion, with most of thegrowth in emerging economies. The United Nations Climate change is likely to be exacerbated by meetingFood and Agriculture Organization (FAO) projects a the growing demand for energy. Over 75% of the50% increase in demand for food by 2030, and the global increase in energy use from 2007-2030 isInternational Food Policy Research Instituted (IFRI) expected to be met through fossil fuels, especiallyexpects a 30% increase in demand for water, with coal, and an estimated 77% of the power stationsother estimates rising to over 40%. The International required to meet demand are yet to be built. The Economics of Climate Adaptation (ECA) Working Group (2009) Shaping Climate Resilient Development: A Framework for Decision-10Making Global Risks 2011 | 29
  29. 29. Risks in focus 3:The water-food-energy nexus Figure 1 World Population 1960-2050 Figure 9 10 9 8 1000 million people 7 6 5 4 3 2 1 0 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Developed countries Developing countriesSource: World Economic Forum Water Initiative, edited by D. Waughray (2010). Water Security: The Water-Food-Energy-Climate Nexus,based on United Nations Population Division, UN-DESA, UN Revision 200830 | Global Risks 2011
  30. 30. Risks in focus 3:The water-food-energy nexusLevers and Integrated and multistakeholder resource planning trade-offs The challenges associated with managing trade- offs of food, energy and water resources rest with governments. Experts argue that meeting thoseRecognizing trade-offs in the challenges is undermined by the existence ofwater-food-energy nexus separate administrative structures and policies for agriculture, water, energy and urban planning. TheTough trade-offs will increasingly be needed between development of high-level commissions that cut acrossenergy, food and water in terms of resource allocation government departments, stakeholders and countryand planning. The key challenge is to incorporate the representatives could improve public-sector-ledcomplex interconnections of this nexus of risks into governance, planning and information flows.response strategies that are integrated and take intoaccount the many relevant stakeholders. The Forum A recent example of a regionally-focused, integratedis working on such an approach with its innovative approach is the Mekong River Commission’s Strategicinitiative WRG Phase 2, run in partnership with the Environmental Assessment. This document examinesWater Resources Group (See page 33: The Forum’s the cumulative risks and opportunities of hydropowerWater Initiative: Focusing on the Water-Food-Energy projects in five separate countries. It explicitlyNexus). considers the links between energy generation, water availability and food production, including second-andUnintended consequences abound. For example, third-order impacts to ecosystems, social systems andbecause of policy incentives designed to reduce economic development over a 15 year perspective.vehicle emissions, by 2030 the IEA predicts that atleast 5% of global road transport will be powered The Forum’s New Vision for Agriculture initiative,by biofuel – over 3.2 million barrels per day. which is now being piloted through national-levelHowever, producing those fuels could consume partnerships in Tanzania and Vietnam, has developedbetween 20-100% of the total quantity of water now a framework for multi-stakeholder collaboration toused worldwide for agriculture. This is clearly an accelerate sustainable agricultural growth. In thisunsustainable trade-off. Another example is shale gas model, the government’s national agriculture strategyextraction, which promises access to new reserves of provides the framework for focusing expertise andfossil fuels, but is highly water-intensive and may pose investments from diverse stakeholders to acceleratea risk to water quality. sustainable agricultural growth, thus multiplying efforts and reducing risk for all involved.Few governments are developing energy policy witha goal of not only enabling economic growth andreducing carbon emissions, but also ensuring waterefficiency; the nature of this nexus, however, meanspursuing multiple goals will become a necessity. Trade-offs between the three resources, as well as trade-offs between users in the form of resource rationing,will become an increasingly important issue, as willmanaging these trade-offs through a combination ofmarket mechanisms and regulation.However, beware of false dichotomies. It is notnecessary to trade biodiversity for economic growth,for example. Such trade-offs exist primarily whenpolicy-makers and resource-users act in a short-term, reactive and hurried fashion. To avoid theseunnecessary trade-offs and tackle the necessaryones, the Forum has identified a number of responsestrategies for further exploration. Global Risks 2011 | 31
  31. 31. Risks in focus 3:The water-food-energy nexusRegionally-focused infrastructure Community-level empowerment development and implementationMultistakeholder coordination on regional infrastructure Experts argued that policies which aim to manage food,investment could significantly enhance resilience energy or water resources are in many cases well-with regard to food, water and energy security. For designed; many of the barriers to sustainable resourceexample, by investing in regional electricity grids, Gulf use relate to implementation. As an example, lack ofCooperation Council countries increased the reliability sanitary facilities impacts water security through theof their power supply. Experience shows that countries contamination of local water sources. However it maywith adequate levels of infrastructure, coupled with not be enough simply to build sanitation facilities withoutinstitutions which ensure that the scarcity value of also addressing social norms on open defecation; towater is reflected, can be extraordinarily adaptive.11 ensure that such facilities are used requires implementing cultural shifts as well infrastructure investment. Overcoming such barriers means engaging, empoweringMarket-led resource pricing and incentivizing local actors at the community level to ensure that those actually using core resources are alsoResource pricing has a large role to play in managing the guardians of their sustainable consumption.demand for food, water and energy. Prices are keptartificially low by government subsidies or otherregulation in many countries, thereby increasing Technological and financial demand. However, even if they were allowed torise through market mechanisms, prices would not innovation for managing the nexusaccount for many of the negative externalities created Further research and investment in transformativeby water, food and energy consumption. Both the technologies and risk management tools that addresscost of local impacts (such as the long-run social the nexus as a whole are needed. Ensuring that suchand environmental costs of resource exploitation) tools are locally appropriate and broadly adopted is keyand global impacts (such as contribution to climate to their success. Many efficiency improvements requirechange through carbon emissions) should ideally be new operational management models and accessincluded in resource pricing. Without accurate pricing to information. Innovations such as synthetic proteinto reflect the full cost of resource use, it is likely that manufacturing, drip irrigation, and hybridization of cropsunsustainable decisions regarding resource use will to make them salt resistant could potentially maintaincontinue. food security while simultaneously achieving waterHowever raising the price of water has significant and energy efficiency, but require investment for bothand negative social impacts in many regions. To development and implementation.account for these, market mechanisms must be Innovative financial risk management initiatives alsomanaged progressively so as not to endanger social look promising, such as the development of “safetystability by disadvantaging poor consumers; the net” payments for Vietnamese rice farmers if yields fallhuman cost of higher resource prices should be below expected levels due to pests, diseases or weatherrecognized by stakeholders and solved with careful events such as droughts, floods and typhoons. In theplanning. Further, increased resource prices will past, damages to agriculture due to weather or pestsinevitably impact economic growth, as higher prices have resulted in losses of up to 5% of Vietnamese GDP;are passed on to consumers. Experts suggest that thanks to multi-stakeholder collaboration betweendespite such challenges, efforts to create properly- agricultural banks, insurers and the national government,costed systems are critical to the future sustainability this scheme addresses multiple risks to help ensure foodof global prosperity, as the cost of severe shortages security on a national level, protecting the livelihoodsbecause of irreparable damage to water and food of farmers and thus increasing the overall resilience ofsources would far exceed the costs incurred through food production in the country. However, most of theseproactive resource management. In regions such as instruments remain focused on a particular target suchthe Middle East and North Africa, market prices may as yield or weather risk, and as such do not addressalso attract private investment in infrastructure that can regional risk management across sectors, or the ultimatebetter preserve the scarce resources currently being risk of food supply. The interconnected nature of thedepleted. challenge suggests that further work in integrating technical and financial solutions is needed.11 In southeast Australia, for example, a 70% reduction in water availability has had big effects on the composition of agriculture, butlittle impact on the overall economic value of agriculture.32 | Global Risks 2011