Look closer at global risks

As a former member of the WEF’s Global Agenda Council on Catastrophic Risk and current member of the Institutional Governance Council, I have always paid close attention to the annually released Global Risk Report. In comparison with other risk-focused research reports, this report identifies various global risks on a macro level that are perceived to have a heavy impact on economics and society, as well as the connections between those different risks – which is hard to achieve through research conducted by any individual country or business. While existing objectively, risks are also constructed subjectively. For the purpose of the Global Risk Report, the WEF carries out the significant Global Risks Perception Survey (GRPS) of top experts and high-level leaders from different countries. If future conditions permit, a risks perception survey of ordinary people, and relevant comparative study, may be further conducted on the basis of the existing survey, which could provide us with more insights into risk profile.

As for future growth in China and around the world, there are three types of risks that are of particular concern. The first type of risk is the recently emerging “de-globalisation”. Over the past 30 years, the world has witnessed an economic boom benefiting from the globalisation dividend. Since the outbreak of the global financial crisis, however, “de-leveraging” in the financial field is evolving into “de-globalisation” in the economic and political fields as a whole, bringing a particularly enormous influence to China. 

The share of Chinese products in overseas markets has been substantially squeezed under the pressure of new trade protectionism. Meanwhile, Chinese state-owned and private enterprises have been repeatedly frustrated in their efforts to advance the development strategy of “going global”. “De-globalisation” presents a critical test of the viability and wisdom in the development of export-oriented economies like China.

The second type of risk is social risk contagion. A problem challenging governments around the world at present is the general decline in public satisfaction with administrations, due to their failure to meet the increasing expectations of the public. A perception on certain issues can spread from one country to another rapidly by virtue of the new media. In this course, social risks are often magnified or misinformed, with higher levels of uncertainty. A typical example of this phenomenon is the Arab Spring. The spread of social risks in such a way continues to pose severe challenges for those governments.

The third type of major risk is governance crises. The problems the Chinese people are more concerned about right now, such as food safety, environmental degradation and corruption, are relevant to the overall governance mechanism of the country. Since the reform and open-door policy was launched in China, the government has placed more of an emphasis on economic development and subsequently achieved tremendous growth.

Nevertheless, the government has played a relatively weak role in supervision and regulation. As there are still many problems concerning environmental pollution, and safety in production and product quality in China, we must be on high alert to avoid the dilemma of “either de-regulative disorder or regulative rigidity” by ensuring the harmonious coexistence between market vitality and social order. 

In the latest round of government institutional reforms, the shift in government functions has been considered for the first time on a more macro level of national public governance, involving government, market and society. Additionally, the national regulation mechanism needs to be completely restructured from the strategic perspective. 

The same issues also exist worldwide. For instance, the global governance system to address climate change and financial crises is yet far from perfect, and requires joint efforts by all countries.

Risk, as determined by its characteristics, may result in governance failure. Therefore, we hope more people will pay attention to risks, keep a close eye on the release of the WEF’s Global Risk Report and go through it carefully. Perhaps this would be a good beginning in addressing risk management failure.

 

Xue Lan is professor and dean at the School of Public Policy and Management, Tsinghua University, and a member of the World Economic Forum’s Global Agenda Council on Institutional Governance Systems.