Businesses have had to deal with increased uncertainty since the global financial crisis swept the world economy. Companies that are able to navigate the potential risks in the business landscape will have an advantage over their competitors. In Global Risks 2010 — A Global Risk Network Report published on Jan 14, the World Economic Forum outlined six key risk areas:

1 Further falls in asset prices
The level of corporate bankruptcies, particularly among small and medium-sized enterprises, remains high. Credit card default rates, which are highly correlated with unemployment, are already at historic levels.

2 Chinese growth slowing to below 6%
Much of China’s domestic impulses are derived from high credit growth, which entails an increased risk of misallocation of capital and renewed bubbles in financial asset prices and real estate.

3 Fiscal crises
In response to the financial crisis, many countries are at risk of over-extending unsustainable levels of debt, which, in turn, will exert strong upward pressure on real interest rates. In the final instance, unsustainable debt levels could lead to full-fledged sovereign debt crises.

4 Global governance gaps
This is highly related to other risks even though weak or inadequate institutions or agreements have been identified in almost all of the risks covered. Economic and environmental risks are the areas where there has been a marked increase in the perception of interdependencies.

5 Chronic diseases
As a consequence of profound socio-demographical transitions, changing physical and dietary habits, chronic diseases including cancer, diabetes and cardiovascular disease are continuing to spread rapidly, driving up health costs while reducing productivity and economic growth.

6 Underinvestment in infrastructure
Multiple studies across the world repeatedly highlighted that vast segments of water, energy or transport infrastructure are structurally deficient or functionally obsolete, requiring considerable annual investments to avoid catastrophic failure.




This article appeared in Manager@work, the monthly management pullout of The Edge Malaysia, Issue 794, Feb 22-28, 2010.