2012 might be a year of massive uncertainty and risk. The World Economic Forum has come up with a warning of what we can expect. It makes unsettling reading.
The report warns that chronic fiscal imbalances constitute the biggest, likeliest economic risk, followed by income inequality. It cites greenhouse gases and environmental risk, terrorism and corruption creating geopolitical risks, water and food crises creating big societal risks and cyber attacks creating technological risks. Furthermore, every risk is related. When one risk is realized, others become more likely. For example, a constellation of global risks related to cybercrime and systems disruption could amplify traditional security concerns, such as the breakdown of diplomatic conflict resolution and terrorism. This cascade could eventually undermine global governance. In past years the biggest impact risks involved the severity of the recession. But this year the biggest impact risks look forward to the next crisis.
The paper also looks at how the Japanese tsunami tsunami set off a domino chain of risks, from financial to operational. The issue with Fukushima for example created a raft of supply chain issues and business interruption. Interrupted energy supplies resulted in people losing their jobs and created all sorts of human resources issues. The list goes on.
The Eurasia Group presents its list of risks which include greater likelihood of Middle East conflict, more European troubles, more trouble in Pakistan, Egypt and North Korea and a hard landing in China.
Whether any of these are right remains to be seen. But it does suggest that 20112 will be a challenging and difficult year.
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