How have global risks evolved?

The Global Risks report – published by the World Economic Forum since 2006  and in a strategic partnership with Zurich Insurance Group as one of the main content provider since 2008 – was established as a 10-year collaboration to identify and assess threats and challenges on the near horizon, so leaders and policy-makers could develop a more effective mitigation of global risks. This year’s report, Global Risks 2015, will be released by the World Economic Forum on January 15.

While this annual report was never intended as a crystal ball, it has picked up many undercurrents that have later bubbled to the surface. The tables here outline the top five risks in terms of likelihood and impact for each year from 2007 to 2014 (risks weren’t ranked in 2006). Here are some examples of concerns that have come to pass:

In the 2007 report, a half a year before subprime mortgage delinquencies gained speed, the collapse of asset prices was identified as one of the top five global risks in terms of both likelihood and impact. The collapse of asset prices resulted in a recession that was the worst since the Great Depression, with U.S. gross domestic product falling more than 5% from its pre-recession peak, 8.8 million jobs lost and $19.2 trillion of household wealth up in smoke, according to the U.S. Treasury. Globally, gross world production slowed to 3% in 2008 from 5.1% in 2007. The effects hit hardest the following year, when the global economy contracted 0.6%.

The ripple effects of the downturn were noted from the 2007 report onward, warning repeatedly of the further risks that fiscal crises posed to the global economy. Those warnings intensified from 2009 on, with fiscal crises joining the top five global risks each year, with potential impact estimated around $1 trillion. The fiscal crises in Greece, Ireland and Portugal led to a combined €273 billion of bailouts by the European Union and International Monetary Fund between 2010 and 2011.

Oil price spikes were top global risks in 2007 and 2008, and indeed, oil prices went from $60 a barrel in early 2007 to nearly $100 by the end of the year, rising to $145 by July 2008 (a high not reached again since) and then falling below $40 by the end of that year.

One factor in oil prices was demand from China’s booming economy. The risk of China’s economy cooling, a top risk from 2007 to 2010, hasn’t happened to the degree feared—under 6% growth. A potential “hard landing” for China was calculated at a potential $1 trillion in lost global GDP because of that country’s importance in the world economy. Instead, as the 2010 report notes, China successfully navigated the financial crisis and global recession, easing its GDP growth from double digits to a more sustainable 7.7%.

Flooding was a top risk in 2011, which sadly turned out to be the year of massive floods in Thailand and Australia and 100-year floods in North America. Storms and cyclones also were a top risk that year, which saw Hurricane Irene wreak $7.3 billion in damage in much of the Caribbean and U.S. East Coast. Floods and extreme weather are a continuous problem, occurring in some part of the world every year. However, the fact that these ranked as the top two risks in terms of likelihood in the 2011 report shows awareness of their potential to disrupt supply chains and affect the global economy, not to mention the immediate human and financial toll.

The 2007 report’s experts tuned in early to the drumbeat of cyber threats. Breakdown of critical information infrastructure led the list of likely risks in 2007, three years before the Stuxnet virus became publically known in 2010. The threat reappeared in 2014, and months later some U.S. utilities reported suspected cyber attacks, which managed to be isolated. Cyber attacks also rose in importance in Global Risks 2012 and 2014. In fact, targeted attacks rose 42% in 2012 from the previous year, according to Symantec. The toll, in terms of number of breaches and cost, has continued to grow each year.

As the report’s 10th edition is released, a look over the preceding years shows the evolution not only of specific challenges but also of broad categories of risks. Economic risks that dominated through 2010 gave way to environmental concerns from 2011, especially in terms of likelihood. Technological risks have resurged. The expert consensus that has been such an uncanny canary in the coalmine can help us better prepare to meet these rising risks.

The 2015 edition of the Global Risks Report will be published on January 15th.

This article is published in collaboration with Zurich. Publication does not imply endorsement of views by the World Economic Forum.

To keep up with Forum:Agenda subscribe to our weekly newsletter.

Author: Catherine Bolgar is a contributing writer for Zurich.

Image: NOAA’s GOES-13 and GOES-15 satellite image from March 31, 2014 and released on April 1, 2014 shows the low pressure systems in the eastern Pacific Ocean, over the United States’ Heartland, and in the eastern Atlantic Ocean. REUTERS.