A panel of experts at the World Economic Forum (WEF) highlighted the importance of long-term thinking in a changing risk environment. According to the organisation’s Global Risks 2014 report, top risks are largely socio-economic and environmental in nature, including income disparity, global governance failure and extreme weather risks.
Jennifer Blanke, chief economist and senior director of global competitiveness and benchmarking at the WEF says: “for any approach for dealing with these risks it’s very important to think beyond the next quarter or the next election cycle. There needs to be a long-term plan.”
Short-term measures taken by governments—including some regulatory regimes and measures to slow migration— could negatively impact the long term ability of societies to face their greatest threats.
John Drzik, president of global risk and specialties at Marsh, explains: “our capacity to resolve global problems is weakening. We see this having an impact on the business community in key sectors for global economic development. As an example, banks are repatriating trillions of dollars and exiting markets in part due to the volcanisation of domestic regulators, fencing their banks’ capital into their own country. This could impede the provision of credit and longer-term economic health.”
A trend towards short-term investing, coupled with a weak job market and crippling student debt, is leaving an entire generation of young people unable to build a financial base or contribute to the economy, according to Swiss Re group chief risk officer David Cole.
He says: “what’s happening in the short term is in some ways a response to the acute financial crisis. Some of the developed markets are retreating into their bunkers and trying to close the door behind them. Instead of facilitating a more appropriate migration of skills and individuals, the short term reaction is to shut that down. That’s why I think this train wreck will continue until such time as governments and business learn that we need to think long-term and facilitate migration and high-quality education.”
Extreme weather events ranked second on the list, drawing attention for their increased severity and link to global warming. Drzik linked the gap between insured and economic losses to increased pressures on governments to intervene after catastrophes, a trend he believes builds fiscal pressure. He calls for governments to look at long term risks and adapt rather than wait for a catastrophic event to occur.
Zurich Insurance Group chief risk officer Axel Lehmann was optimistic, saying: “our companies have been around for many years, so something must be working in terms of long-term thinking. When you look at the financial services industry—for example, the reinsurance industry—we live for the long term."
Lehmann adds, "Planning is everything. Plans are nothing”
Global Economic Forum, risk, environmental risk, socioeconmic risk