Speed reading: Global Risks Report for 2008
moneyrelations :: Jan.14.2008
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Right off the heels of my risk concerns for the BRIC series, the World Economic Forum published their Global Risks Report for 2008.
Since I’m a citizen of the world, I decided to be more… worldly, and take a stab at reading this.
Want to know what are the emerging risks for the decade ahead? Show others how well-read and concerned you are about the state of the world?
Or at the very least fake it.
I have summarized the 4 emerging risks discussed in this report for your speed reading pleasure.
Systemic financial risk
Surprise, surprise, the (possible) U.S. recession is a concern. Can other nations propel the global economy ahead?
A recession in the United States cannot be excluded in the year ahead, and economists are divided on whether domestic-led growth in Asian markets can drive the global economy. In Europe, the impact of economic uncertainty may be highly divergent.
Food security
No, this doesn’t mean putting a padlock on your refrigerator when people come over to shop in your kitchen.
Food security is about “ensuring supply at a price which allows economic activity and well-being to flourish”.
Truth be told, I just buy whatever is on sale, so I have no brand loyalty. And if I do notice that the prices went up, I’d just naturally think they were gouging me.
However, here’s what really happened:
In 2007, prices for many staple foods reached record levels. The price of corn in late 2007 was 50% higher than 12 months previously. The price of wheat was double. Global food reserves are at their lowest in 25 years and, as a result, world food supply is vulnerable to an international crisis or natural disaster.
This might explain why your grocery budget isn’t going as far as it used to.
Hyper-optimization and supply chain vulnerability
It’s amazing what people can nag about. With globalization, we’ve apparently gotten too good at outsourcing abroad. Now we’re worried what happens if a global supply chain is disrupted.
All kidding aside, it’s a valid risk. We’ve seen natural disasters strike without warning. Furthermore, how are business continuity plans handled in different organizations spread around the world?
Energy
Energy continues to be a hot topic these days. Few pundits see a decline in energy prices for the next decade as global demand is on the rise.
The International Energy Agency has predicted a 37% rise in demand for oil to 116 million barrels per day (bpd) by 2030, but investment in exploration has fallen and many experts suggest that oil production is unlikely to exceed 100 million bpd.
So, the search is on for cleaner energy alternatives to offset any likelihood of future price shocks due to a tightening of energy supply for whatever reason.
If you’ve read this far then I’m surprised good for you.
Sometimes these aren’t the sexiest of topics but it never hurts to open your eyes to what is going on in the world.
In the news ::
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That was actually really interesting. I had no idea why we were coming home with two bags of groceries instead of four and still spending just as much money. I thought maybe we had started buying more junk food or something (we have a list when we shop, but there IS a tendency to just chuck what you feel like eating into the basket as you pass it in the isle). Plus dairy products have gone through the roof, and we spend a lot on milk, butter, sour cream, cheese and yogurt.
Global Food Reserves is just a cool little title isn’t it? Very Star Trek or something…I’ve heard it somewhere before.
I may just be naive or possibly completely uniformed, but I always thought that having a global trade system and economy would make the world LESS susceptible to the variations in any one nation’s economy. That it would sort of be like any really large system, relatively inert until the presence of some sort of catastrophic failure pushes it off balance.
No, you’re not uninformed because that’s what I thought about diversification as well. However, we depend that different nations have similar risk management standards. If you have multiple sources, that just adds to the headache?
And let’s face it, risk management is very hard to understand. We have an Enterprise Risk Management framework at my organization and my eyes just glaze over. Too esoteric for me.
Okay, I can’t wiggle my way out of this. I don’t understand this one much either.
Times are getting harder and harder. I completely agree with the risks you stated. My father and I were joking that Jamaicans abroad in the US are gonna run back home after the recession. Wouldn’t that be something?
Risk – My favorite Game! Is it just me or does someone always run into the board and mess up the game?
Hey! Don’t be so surprised we made it to the end of your article…
Anyway, the US credit disaster is really having an impact here in Japan. Please fix it!
@ Leon
I think Buffett said that in one’s lifetime, expect to go through 6-7 recessions. I think Forrest Gump said, $hit happens. Things just go through cycles, I’d just see this as a buying opportunity.
@ Dax
That would be me
I used to play it with my big brothers. Fun times. Kind of miss the innocence with all these console games. Oh well, I still have my Cabbage Patch Kids.
@ Expat
Hah, I don’t think Japan needs my help “fixing”
Thanks for visiting, guys
You are correct, it’s not sexy… but it needs to be said Too many people don’t realize that we are in the midst of a full-fledged crisis. I thought this was a fantastic post!
Thanks for the feedback, Bryan!
I’m happy to hear that what I’m learning is of benefit to my readers as well!