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The World Economic Forum (WEF) Global Risk Report was released a week ago, in time to generate discussion and provoke debate at the WEF Annual Meeting in Davos.

Among the headlines of the Global Risk Report, as in every annual update, there are two lists of the top five risks for 2019, according to their expected Likelihood and Impact. These lists are based on the WEF Global Risks Perception Survey conducted four months ago, with around a thousand responses from the WEF’s multi-stakeholder communities, professional networks of its Advisory Board, and members of the Institute of Risk Management.

There is a sense about these top five lists, that they are reactive – reflecting what has recently happened, more than being an effective and objective analysis of risk. We know that the most dangerous events are precisely those which one has not recently witnessed and that arrive as something of a surprise.

In 2009, emerging out of the financial crisis, most (70 percent) of the top five entries for Likelihood and Impact were economic. Fiscal failures and the financial crisis were #1 for Impact from 2009 until 2014. Severe income disparity was #1 for Likelihood for three years from 2012 to 2014 but has not been in the top five since. Are we to conclude that severe income disparity has been solved – I don’t think so – or just that the focus has shifted?

Lake Shasta
Lake Shasta, Northern California, during severe drought conditions in 2015

Large-scale involuntary migration was #1 in 2016 and #2 in 2017 but then disappears from the top five. Is that because it is no longer an issue or because it has dropped from the headlines? Surely it only takes a new war, or extended drought, and migration will be reinvigorated. The pressure of migration is latent, just as the potential for extreme hurricanes is latent.

We can even discern the link between a top ranking and a specific event. Water crises were #1 for Impact in 2015 (after the worst year of the Californian drought) and have remained in the top five since.

For 2019, the Global Risk Report’s top five risks for both Likelihood and Impact, are almost identical to those promoted for 2018:

WEF report table
World Economic Forum Global Risks Report 2019: Top 5 risks in terms of likelihood and impact. Source: World Economic Forum

How Should We Interpret These Lists?

Certainly, weapons of mass destruction are correctly prioritized – with the risk increasing as international leaders become more reckless.

The extreme hurricanes and wildfires of 2017, topped up by the hurricanes and wildfires of 2018, have continued to hold the attention. Natural disasters have been in the top five since 2016/2017. And yet nothing has really changed about the probability of extreme weather events or disasters over the past decade. It was simply in 2017, in place of notional risks, the hurricanes and wildfires became actual disasters and hence end up making it into the following year’s Global Risk Report “Likelihood Top Five”. Much the same could be said of cyberattacks: the risk has been there for a while, before the widespread and extremely costly events were realized in 2016 and 2017.

Climate change presents grave risks but over a completely different time horizon to “Extreme Weather Events”. To call it a risk for 2019 is confusing – rather it is a risk for 2049 and even more for 2099. Climate change should be top of a separate list of Action Items for 2019.

For the top five risks in 2019 by Likelihood, that then leaves four risk categories that RMS has risk models for. Maybe risk models could provide a more objective and less reactive perspective than polling – not raising the profile after a recent catastrophe, but like the reinsurance sector, viewing and managing the risk for the long-term, year-by-year.

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Robert Muir-Wood
Robert Muir-Wood
Chief Research Officer, Moody's RMS

Robert Muir-Wood works to enhance approaches to natural catastrophe modeling, identify models for new areas of risk, and explore expanded applications for catastrophe modeling. Robert has more than 25 years of experience developing probabilistic catastrophe models. He was lead author for the 2007 IPCC Fourth Assessment Report and 2011 IPCC Special Report on Extremes, and is Chair of the OECD panel on the Financial Consequences of Large Scale Catastrophes.

He is the author of seven books, most recently: ‘The Cure for Catastrophe: How we can Stop Manufacturing Natural Disasters’. He has also written numerous research papers and articles in scientific and industry publications as well as frequent blogs. He holds a degree in natural sciences and a PhD both from Cambridge University and is a Visiting Professor at the Institute for Risk and Disaster Reduction at University College London.

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