Systemic financial risk
A re-pricing of risk in financial markets was predicted by some observers at the beginning of 2007 but the scale and nature of the systemic financial crisis of 2007-2008 has raised fundamental questions as to the vulnerabilities within the current model of financial markets. Diversification of risk may have strengthened stability in good times, but systemic financial risk remains acute.

Food security
In 2007, prices for many staple foods reached record highs and global food reserves are at a 25-year low, making world food supply vulnerable to an international crisis or natural disaster. Looking ahead, Global Risks 2008 suggests that the drivers of global food insecurity – population growth, lifestyle changes, use of crops to manufacture biofuels and climate change – are likely to sharpen over the coming decade, positioning the world for a potential long-term trend reversal in food prices and leading to a set of complex challenges to global equity.

Supply chain vulnerability
Improvements in technology and global logistics, along with reduced trade barriers, have led to a historic expansion of international and intra-regional trade over the past 20 years. These improvements have generally led to increased efficiency and global prosperity. However, hyper-optimization of supply chains may also increase vulnerabilities to disruption and concentrations of risk. Moreover, these are often not fully understood. Though supply chains can share risk between many parties, they can also cause risks to be aggregated.

Energy
The availability of energy resources is key to the global economy, but guaranteeing a safe, secure and sustainable supply – and doing so in line with global commitments to reduce greenhouse gas emissions – is increasingly problematic. With predictions of a 37 percent increase in oil demand over current levels by 2030, the report sees limited scope for a fall in energy prices over the next decade. This may be good news for oil and gas producers, but it creates an inherent mismatch between those who bear risk and reward, which should be addressed through better dialogue at all levels. “The global economy has demonstrated remarkable resilience to increases in energy prices since 2004. But the limits of resilience may be close to being reached. Over the next two decades the supply of primary fossil fuel will become tighter with the world economy becoming much more vulnerable to price shocks as a result,” said David Nadler, Vice-Chairman, Marsh & McLennan Companies, at the report launch on January 9.

Source: www.weforum.org
Download full report here.