World Economic Forum's Global Risks 2009 | Summary and Q&A

TL;DR

Global Risk Report 2009 highlights risks such as fiscal crisis, hard landing in China, asset price falls, resource-related risks, and lack of governance. Trust in financial institutions, risk models, time horizon, and interconnectedness are key insights from the report.

Key Insights

• ✳️ Risk governance, asking the right questions, and positioning risk management functions strategically are vital in mitigating risks effectively.
• 🪡 Risk models have limitations, and a broader perspective is needed, including stress testing and scenario analyses.
• 🍉 Time horizons for assessing risks should be longer to account for long-term impacts and avoid overemphasis on short-term incentives.
• ✳️ Interconnectedness of risks across different sectors and countries requires multilateral and coordinated responses.
• 🌱 Trust can be restored through transparent and credible policy actions, accountability, and specific execution plans.
• ☠️ There is a risk of fiscal crisis affecting current account imbalances and foreign exchange rates.
• 🌐 Climate change is a major risk with significant economic and social impacts that require global investment and public-private partnerships.

Transcript

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Questions & Answers

Q: How can trust be restored in financial institutions, regulators, and politicians?

Trust can be restored through transparent and credible policy actions, specifying plans, executing them, and following up with actions rather than just making announcements. This requires coordination and accountability.

Q: Is there a risk of a current account crisis or balance of payment crisis in developed countries with large current account deficits?

There is a risk of current account imbalances exacerbating fiscal crises in developed countries. Crowding out other economies dependent on international borrowing can also be a consequence of large borrowing by advanced economies.

Q: Will the financial crisis lead to a consolidation of financial institutions, and is this a sensible outcome?

The report does not make predictions about the future state of financial institutions. Consolidation may occur naturally due to the ongoing crisis, but it is not the focus of the report.

Q: Are there new liability risks arising from the financial turmoil?

Liability risks may emerge due to litigation resulting from the financial crisis. However, the report focuses on the broader concept of liability risks and the trend of shifting responsibility from individuals to courts.

Q: How can supply chain risks be addressed? Should governments intervene to boost supply chains?

Supply chain risks are mainly a private sector issue, but specific areas such as vaccine supply could require public sector involvement. Analyzing supply chains, diversifying them, and promoting international cooperation can help mitigate risks.

Summary & Key Takeaways

• The Global Risk Report 2009 focuses on risks in various areas including fiscal crisis, hard landing in China, asset price falls, resource-related risks, and lack of governance.

• The report emphasizes the importance of risk governance and asking the right questions to mitigate risks effectively.

• It highlights the limitations of risk models and the need for a broader perspective, as well as the importance of considering longer time horizons when assessing risks.

• The report also emphasizes the interconnectedness of risks and the need for international coordination to address them effectively.