Food resource a key risk, says global risks report

News | 8 January 2013

Global-Risks-cover

Severe income disparity is, according to the World Economic Forum’s Global Risks 2013 report, the risk most likely to manifest itself over the next 10 years and the one likely to hit the hardest – if it occurred – is systemic financial failure. The report’s  findings, launched at a London press briefing on 8 January 2013, are gloomier than they were 12 months ago and note that the world is more at risk as "persistent economic weakness saps our ability to tackle environmental challenges". 

A forum of over 1,000 experts from industry, government academia and civil society around the world reviewed a landscape of 50 global risks and declared the world more complacent and reluctant to deal with climate change challenges despite recent extreme weather events. 

The report, now in its eighth year,  identifies risk mitigation measures such as improving information sharing between governments and businesses, harmonising legislative standards and building a common  risk assessment framework to improve the resilience and visibility of supply chains. 

Oliver Wyman group chief executive, John Drzik warned journalists that  "two storms environmental and economic are on a collision course." He added: "If we don't allocate the resources needed to mitigate the rising risk from severe weather events, global prosperity for future generations could be threatened. Political leaders, business leaders and scientists need to come together to manage these complex risks.”

Since 2007, the annual Global Risks report has suggested the creation of a country risk officer which, said Drzik, “could help form a national coalition to share information and frameworks to grapple with cross border risks”. Most risks, he added, “do require international co-ooperation.”

David Cole, group chief risk officer at reinsurers Swiss Re (one of the report’s advisers) made the point to journalists that extreme weather conditions disrupt food supplies and that “risking commodity prices as a result of floods or droughts cause nations to basically hoard their own food supplies in some cases and create acute conditions among those who require imports to survive.”

 He continued: “We see food security independently as a critical risk, but also intersecting significantly with other big risks in the system around commodity price volatility, extreme weather events and water security.”  He concluded: “This is all tied in with the general economic exposure governments have and the ability to respond to some of this because of the debt position they are in.” 

TFR asked the advisory panel for its thoughts on the environmental impact of emerging economy demand for commodities. Cole made the point that this was also a developed economy issue and that “it is important for us to realise that as populations grow, some of the pressures we see such as climate change and food security will continue to develop in a way that requires us to be proactive”.

After the press briefing, TFR asked Drzik how concerns about resource nationalism was affecting foreign direct investors in infrastructure and commodities production – with Argentina’s expropriation of Spanish-Argentine oil firm YPF being a recent example.

 He said that the availability of insurance and other risk transfer products could help companies separate the risks they understood and were happy to take – such as building an oil exploration platform – from the risk of country nationalism. “I think this is something companies would take advantage of because their insights into country nationalism are not as good as that into the risks they want to bear, so they want to find ways of transferring it. I think providers of a product around that would pick up a good business.” 

 The report can be downloaded from http://reports.weforum.org/global-risks-2013/

 And a video of the panel session can be viewed here http://www.livestream.com/worldeconomicforum

 

 

 

 

 

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