Page 142 - Risk Management in current scenario

Failure in one economy or fallout in one political system or devastation
from hurricane in US or terrorist attack in one part of the world will have
adverse effect on the financial system of the world. These events are likely
to impact adversely the stock market of other economies, fall in currency
value, rising inflation, imbalance in exports and imports lead-ing to
crumbling of financial system round the world.

The World Economic Forum have identified following top five global risks
in terms of likelihood and in terms of impact in the year 2015:

Likelihood impact
1. Interstate conflicts with regional consequences (geopolitical risk)
2. Extreme weather events (environmental risk)
3. Failure of national governance (geopolitical risk)

4. State collapse or crisis (geopolitical risk)
5. High structural unemployment or underemployment (economic risk)

Severity of impact
1. Water crisis (societal risk)
2. Rapid and mass spread of infectious disease (societal risk)

3. Weapons of mass destruction ( geopolitical risk)
4. Failure of climate-change adaption (environmental risk)

It was reported that the top global risks in terms of likelihood and
potential impact over coming 10 years are interstate conflicts with
regional consequences as number one global risks in terms of likelihood
and fourth most serious risk in terms of impact. With the increasing
geopolitics influencing global economy, geopolitical risks account for three
of the five most likely, and two of the most potential impactful risks.

It is important to note that environmental risk is getting more prominent
than economic risk. This is particularly because of negative assessment

140 | Risk Management in Current Scenario