For which global risks is the Middle East least prepared?

The Global Risks 2015 report, published in January this year, marked the 10th anniversary of the World Economic Forum’s effort to assess global risks around the world, determine their interdependencies and shed light on good practices to better handle them. Over time it has become an important risk barometer.

Water crises, profound social instability, interstate conflicts and high structural unemployment topped the ranking of the risks the Middle East and North Africa (MENA) region is the most ill-prepared for, according to regional respondents to the Global Risks Perception Survey. In recent years, the region has indeed been hit by a series of diverse and significant shocks, from the Arab Spring, which has left several MENA countries in a fragile social situation, to terrorist attacks, financial crises, droughts and other natural disasters.

Risk management capacity in the region needs significant improvement. The challenge for MENA leaders is to make sure they are not merely reacting to an event that has just happened. Additionally, leaders needs to move beyond the siloed approach that currently prevails, where they focus on one risk at a time and ignore connections between risks that reinforce each other. We see this siloed approach when entities within a government are in charge of only one aspect – medical doctors look at health issues, engineers look at construction, economists look at finance, lawyers focus on legal issues, etc. Leaders must learn to prioritize all the risks on the landscape, and develop solutions that can benefit from economies of scale by reducing exposure and improving preparedness across different categories of risks.

Risk management today calls for a much more proactive and holistic approach. This is a requirement for anyone who wants to measurably improve resilience.

The word resilience itself has become somewhat of a buzzword these days. At its core is a simple and rather intuitive notion: it is the capacity of a country, city or organization to bounce back after a shock. Hundreds of glossy reports proposing concepts and resilience frameworks have been written. They can certainly help MENA leaders appreciate the resilience concept. But way too often, that is where the discussion, mainly semantic, starts and stops.

My experience in the region tells me that what the heads and rulers of MENA states and emirates need are very concrete tools that can help them make more informed decisions to better foresee and measurably reduce the aforementioned risks before they materialize, and quickly recover when they do.

Concrete resilience initiatives in neighbouring countries with shared values constitute important benchmarks that can be replicated, and even improved, across the region. Several of those have been launched in the past two years that are very exciting. Let’s take a closer look at three of those.

The first is the establishment of the premier national resilience fund in the MENA region, led by the Ministry of Interior of the Kingdom of Morocco, in close collaboration with other Ministries and the World Bank as part of a larger integrated risk management strategy. This new Moroccan Resilience Fund (FLCN), which I had the honour of being asked to design, is now selecting investment projects that will reduce exposure of populations and assets.

The initial call for proposals was in February, offering governmental agencies and all municipalities around the country the possibility to apply for co-financing. The eligibility criteria and operation of the Fund are transparent. With already more demand than the Fund can support for this first call, the selection will be based on project quality. This is already considered as very encouraging in Morocco. The fund is currently designed to finance $125 million over the next five years. With a leverage ratio of three to one (the Fund co-finances up to a third of the total project cost to encourage multistakeholder partnerships and reduce operational risks) and the anticipated benefit-cost ratio of the selected investments, the expected benefit it should return will be higher: $1.5 billion, measurably boosting resilience.

This idea of a “resilience fund”, a term I coined in Davos several years ago, is now real and our design replicable in other countries.

The second is the 100 Resilient Cities initiative supported by the Rockefeller Foundation. It provides 100 cities, which are selected over three annual waves, with four key offerings: at least two years of funding for a chief resilience officer; funding for a resilience strategy process; access to a funded, curated platform of tools to implement the city’s resilience initiatives; a global network of cities. The chief resilience officer is an innovative position in city government that ideally reports to the city’s chief executive, and acts as the point person for resilience building and coordination – working transversally across city departments to develop holistic solutions. The hope is that this incubatory period will be sufficient for the city to sustain the position afterwards. Three MENA cities have already been selected in 2013 and 2014: Ashkelon (Israel), Byblos (Lebanon) and Ramallah (Palestine). Several others are competing for this year’s final phase, and what the selected cities do in the coming years will certainly be looked at as benchmarks.

The third is the recent emergence of high-caliber start-ups to provide countries in the MENA region with dedicated big data technology to enhance their resilience. Smart Data Science for instance, which is based in New York, is working with government leaders in Saudi Arabia to collaborate on an innovative digital platform of their risk and ongoing risk management activities. That firm was recently invited to present its technology at the World Bank IMF Spring Meetings in Washington, alongside industry giant Google.

With the right combination of financial solutions, governance, technology and knowledge, resilience can be more than a buzzword. It becomes reality. Several MENA countries are now on this road. The rest of the world is certainly watching.

The World Economic Forum on the Middle East and North Africa 2015 takes place at the Dead Sea, Jordan, from 21-23 May.

Author: Erwann Michel-Kerjan is the Executive Director of the Wharton Business School’s Risk Management Center and member of the Advisory Board of the World Economic Forum’s Global Risks report series.

Image: A boy fills water containers from a faucet amid an acute shortage of clean drinking water in Sanaa, April 24, 2015. REUTERS/Mohamed al-Sayaghi