A Global Risk Network briefing

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Reporting back on Economic Risks at the Davos
Annual Meeting 2008

• A Global Risk Network briefing

24-28 January 2008, Davos, Switzerland
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What is the Davos Annual Meeting?

• Over 2,000 leaders from business, politics,
  academia, the media and civil society gathered in
  Davos, in 240 public and 700 private sessions.
• The companies represented have a combined
  turnover of US10 trillion nearly a quarter of
  global GDP.

• More than 30 sessions were partially or wholly
  focussed on risks, covering over 100 hours of
  discussion.
• Davos is known for Deepening Dialogue Sharing
  insights, and Improbable conversations (strength
  of weak ties).
• Davos is about debate and dissent as much as
  agreement and assent.

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Key Risk Themes of Davos 2008

• The liquidity crisis signals the end of an
  historic era of credit expansion
• It is now a question of whether the hard
  landing will be hard or soft, Ken
  Rogoff, Harvard University.
• with impacts that are compounded by increasing
  interdependency ...
• Interdependence is the defining issue of
  the 21st Century,
  Tony Blair, Prime Minister of the United Kingdom
  1997-07.
• Risk conflation and interconnectedness make
  the world increasingly
  vulnerable to the cascading nature of risk
  events.
• and a fundamental disconnect between risk and
  mitigation
• even though some tactical gains have been made
  in specific areas of risk - such as collaboration
  in dealing with financial crises (FSF, Basel II),
  co-operation on terrorism, and improved
  preparedness for a major pandemic outbreak.

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What are the key Global Risks (10yr horizon)?

• Our Definition
• - Non-business risks that affect business (i.e.
  not operational, project or financial risk)
• Can be strategic, exogenous and systemic
• Are highly interdependent (i.e. do not manifest
  in isolation and can result in runaway
  conflation)
• - Characterised by uncertainty, sharp
  discontinuities, non-linearity (power law
  distributions), and lack of proportionality
• - Cant be predicted (but can be managed)

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How are Global Risks correlated?
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How will the financial crisis play out in 2008?
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How will Chinas relationships with the EU and
the US evolve?
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Will high oil prices change the world?
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Will rising commodity prices lead to global
inflation?
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