Income disparity, extreme weather top risks over the next decade

Income disparity is the risk seen as most likely to have an impact on the world going into 2014, while extreme weather events were also a top concern, according to a new report from the World Economic Forum.

 The report assesses 31 global risks with a 10-year outlook, in five categories including economic, environmental, political, societal and technological. The risks were measured based on likelihood and potential impact.

Among those, the growing wealth gap was seen as the most likely risk to have an impact, followed by extreme weather events, unemployment and underemployment, climate change and cyber attacks.

In terms of what will have the greatest impact over the next decade, fiscal crises were said to be most potentially impactful. Climate change and water crises also ranked high, followed by unemployment and underemployment, and critical information infrastructure breakdown.

“Each risk considered in this report holds the potential for failure on a global scale; however, it is their interconnected nature that makes their negative implications so pronounced as together they can have an augmented effect,” Jennifer Blanke, chief economist at the World Economic Forum commented in a statement. “It is vitally important that stakeholders work together to address and adapt to the presence of global risks in our world today.”

The report was developed with expert contributions from Marsh & McLennan Companies, Swiss Re, Zurich Insurance Group, the Oxford Martin School (University of Oxford), the National University of Singapore and the Wharton Risk Management and Decision Processes Center (University of Pennsylvania).

It includes a more in-depth analysis of youth unemployment, also suggests that issue could have an impact on political and social stability, along with economic development.

“Many young people today face an uphill battle,” David Cole, group chief risk officer of Swiss Re commented in a statement.

“As a result of the financial crisis and globalisation, the younger generation in the mature markets struggle with ever fewer job opportunities and the need to support an ageing population. While in the emerging markets there are more jobs to be had, the workforce does not yet possess the broad based skill-sets necessary to satisfy demand.

It’s vital we sit down with young people now and begin planning solutions aimed at creating fit-for-purpose  educational systems, functional job-markets, efficient skills exchanges and the sustainable future we all depend on!”

The report also lists four key threats that could each impact global stability in the next five to 10 years:

Emerging market uncertainties, whereby the world’s major emerging markets become unstable as a result of social, political or economic pressure

Commercial and political frictions between countries, where trade and investment become increasingly used as a proxy for geopolitical power, with increased flashpoints as a result

Proliferation of low-level conflict, caused by technological change and reluctance of major powers to intervene, which could easily spill over into full-scale warfare

Slow progress on global challenges, where persisting deadlock in global governance institutions leads to failure to adequately address environmental and developmental challenges that are truly global in nature

“A more fractured geopolitical environment threatens to impede progress in industries which are critical to global development, such as financial services, healthcare and energy,” John Drzik, president of Global Risk and Specialties at Marsh noted in a statement. “The world needs more coordinated governance to prevent slow-burning, systemic risks from developing into full-blown crises.”