RMI Final Exam Study Guide How were the 31 global systemic risks determined A survey of more than 700 experts in systemic risk What are the underlying Themes in the global risk report 1 Trust 2 Long term thinking 3 Collaborative Multistakeholder Action 4 Global Governance What three constellations do the global risk report look at 1 Youth 2 Cyberspace 3 Geopolitics What is global risk An occurrence that causes significant negative impact for several countries and industries over a time frame of up to 10 years What is Systemic Risk Breakdowns in an entire system as opposed to breakdowns in individual parts or components A couple of small things happen that produce large failures Resiliency how quickly can you recover from failures that occur Systemic Risks are characterized by Modest tipping points combining indirectly to produce large failures domino effect Risk sharing or contagion as one loss triggers a chain of others Hysteresis or systems being unable to recover equilibrium after a shock Key Economic systemic risks Fiscal Crisis in key economies Key environmental systemic risk Extreme weather natural catastrophes loss of biodiversity water crisis Key geopolitical systemic risks Inability to govern at global level Political collapse of an important nation Organized crime terrorist attacks Key Societal systemic risks Food Crisis pandemics Income disparity Key Technological systemic risks Critical info Large scale cyber attacks Data theft fraud What 3 parameters is risk analyzed under Highest concern qualities Which risks are the worst Likelihood and impact quantitative Interdependencies Systemic How interrelated is it with other risks The Interconnections Map All risks are connected somehow some way Shows which risks are more systemic Very interconnected with other risks Fiscal Crisis Global governance failure Climate Change Causes of Fiscal Crises Losing ability to repay debt Lack of confidence in gov t ability to do things Economy based on consumer spending lost confidence results in less spending High level of government debt More and more of future tax money has to pay debt we have less money to pay for things that we need Result of Fiscal Crises What would happen if a major government could not pay debt Demand more interest on bonds Price of debt goes up Ends up in a big cycle Once one government defaults what is the domino effect going to be Water Crises not just drinkable water but all water Connected to extreme weather Water Security shortage Impact of food availability and prices Not just a third world concern Climate Change Economic Growth vs Climate Change Continue to burn fossil fuels at the rate we are or worry about the effect on the environment Not taking into account the long term Climate Change Vulnerability Who can adapt best Who can best handle extreme weather events Wealthier countries can better adapt to climate change Cost 100B per year for developing countries Time 100 years until poorest countries can adapt as fast as we can today Trends to watch Demographic trends Aging More short focused because we wont live as long Trends to watch Societal Concerns Extremism youth employment gender inequalities Extremism Muslim world republican tea party Uncertainty more extremism Youth employment What jobs available for those graduating Gender are there equal opportunities for men and women Trends to watch Technological Privacy mismanagement of data What happens when everyone s info becomes public Other Trends to Watch Environmental fracking to get oil out of ground Science and Technology 3 D printing self driving vehicles Economic monetary policy Social and political cost of living longer both monetary and psychological What are examples of geopolitical Risks Low level conflicts Geopolitics and systemic sectors Financial Services Healthcare As these systems change the level of geopolitical risk changes with them Youth dissatisfaction politics When the youth are dissatisfied they are often more active politically Demonstrations and violence that get out of hand Youth Professional vs Formal Education Some people might need less formal education and more professional training that doesn t require a degree Too many people getting a formal education not enough getting professional education contributes to unemployment Education vs Training Maybe you shouldn t go to college if you want to be a plumber or something that requires training Youth risks Education and Unemployment ability to get jobs Spain and Greece 50 youth unemployment Support older generations Social security Medicare If youth cant get jobs how can they support older generations Cyber Risks So far cyberspace has proven resilient Haven t seen internet go down for long periods of time Cyber warfare Haven t seen this between nations YET Smart Grid In the past could still have power even when internet went down Now internet problems could lead to more problems water shut down electricity shut down More systemic risk Global Navigation Satellite Systems What happens when emergency systems go down 911 What happens when people get info and share it Snowden Disruptive Technologies What if there is new technologies that Hackers get that cannot be defended against Strategies for managing global risks Risk management process ID Risk Prioritize top risk Undertake risk assessment ID risk management options Design RM strategy Design crisis management strategy Implement the strategy Monitory the Strategy Issues Efficiency vs Having backups You want to be as efficient as possible and make as much money as possible Planning for future problems and risk is a tradeoff that results in less profitability Can spend a lot of money to make the risk very unlikely or can ignore risk and hope it doesn t happen Is it worth it Issues Large scale disasters and managing catastrophic risk Many issues need a private public relationship to manage risk Need both government and individuals to manage risk Natural Hazards Tornados earthquakes etc If one of these things happens and no one is there to see it does it happen If not its just a hazard not a disaster What makes a Natural Disaster Fatalities damage economic effects Deadliest Number of people killed Costliest Amount of insured losses Natural Disasters Examples Hurricane Andrew Wake up call of the amount of damage Hurricanes can cause in the US 35 of top 40 happen in Japan US and Europe costliest In terms of fatalities the locations are very different Lack of overlap coincidence between
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