Introduction
Human life consists of making choices, which also involve weighing benefits and risks. Every nation, every corporate organization, every institution and every individual always seem to avoid risky situation and as such, their tasks are to minimize or evade risk as much as possible. According to Beck, risk is the modern approach employed in seeing in prior the forthcoming consequences of human action and controlling them. These consequences are the unintended results of radicalized modernization (Beck, 1999). Dynamisms in the structure and composition of the human society have meant that humans confront new challenges which hitherto did not exist.
Main body
Terrorism, global warming, population explosion, food crisis, technology and looming nuclear war are all consequences of human action which pose a major threat to their survival. As such, these are the risks humans are faced with. The negative concept of risk has been the focus of many individuals. For corporate strategists, the negative concept of risk affect how they prioritize, allocate resources and opportunity cost. Risk also directs political mobilization and such, a very powerful tool which has made traditional political categories to be irrelevant.
Risk was defined in the public consciousness especially with the mentioned geopolitical and environmental crises relayed through the media which showed that the highly industrialized societies are manufacturing risks which they are finding difficult to control. Within the networked society, compounded risk has emerged to be the new meta-norm.
The human perception of time has also been dramatically changed due to risk concept. The past as the determinant of the present has now been displaced by the onrushing future. The most positive response to these changes was the international risk management whose onset was in insurance and financial system. These were meant to be counteractive measures for future events which had not yet happened. The altered perception was demonstrated by the change from corporate to scene based planning.
The planners belief that a secure and prosperous future, even if illusive, can actually be detected actualized is reflected in how fast individuals are accepting chaos and systems theories as tools of management. Risks are real; they are not just abstract entities. The managers mind sets were reshaped to contextual thinking from a fixed norm of calculability consequently by the risk calculus. Corporations also use the risk calculus as a speculative tool to enhance their financial statements.
Unparalleled opportunities have been created by volatility and turbulence while at the same time; managers have upgraded their strategic process using chaos and systems theories. The true goal of visioning has however been overlooked by many practitioners. The overall redirection of the corporation and risk and opportunity management can be made to be consistent. Because risk presupposes decision, international risk management consultancies have prospered.
The financial market’s liquidity crisis to concerns over food security has portended a series of risk issues which has made global attention to be focused on how fragile the global system is. For effective control of the private and public sectors, risk and risk management awareness is increasingly being viewed as vital. There has been a growing uncertainty over the future, both short term and long term. There is uncertainty on how the global economy will respond to the expanding liquidity crunch of the previous years. Geopolitically, the tensions between Russia and the United States together with the situation in Iraq, Afghanistan and Iran all puts the world in a risk situation as uncertainties about their future conditions and relations continue to escalate.
The consequence of this uncertainty is that no proper action can be taken in dealing with other less immediate global risks. Should the global economy weaken, for instance, the need to mitigate climate change may be in danger even though the political, investment and economic decisions which determine the course of the future climatic condition may be made within the next three years. The prevailing currents of uncertainty may derail significant management of globalization in order to ascertain its long-term sustainability. The global capacity to tackle future challenges may be weakened by inaction on long term risks. The most important question in global risk management under the conditions of global stress is the question of who owns the risk. Without the collective understanding of ownership, it will be extremely difficult to achieve the trade-offs which could be very vital in the mitigation of global risk sustainably and without prejudice.
Transforming aspirations to actions will not be possible without clarity on whoever is responsible for the management of global risk. The market mechanism for risk management will not succeed in improving the response to global conditions in the face of inevitable global events if frameworks are not laid which integrate ownership of risk with mitigation responsibility. In the absence of political and business communities’ leadership on all of these issues, risk events will be the determinants of global future. As such, the power to anticipate, manage and reduce risks will not stand.
Global risks may be looked at from different perspectives. There are numerous emerging issues that are shaping the landscape of global risk. Such include the role of energy, supply chains, systemic financial risk and food security. With regard to the role of energy, the surfacing of a range of risks related with energy are outlined and possibility of whether the world can proceed towards a secure and sustainable energy status considered. On supply chains, the issue under investigation is the concealed set of vulnerabilities within the global economy which may disrupt the supply chain. When it comes to systemic financial risk, the present market turmoil is put within the historical context and how transformations in the global financial system may require humans to reconsider their thoughts on their expectations and comprehension of future systemic risks. Finally, with regard to food security, an analysis is made of whether the world is at a position to tackle the numerous trade-offs generated by the emerging food economy.
These four emerging issues are important to world economy’s functioning and global society’s well being. The risks associated with them cannot be ignored but can be understood better and managed. The most severe and immediate is systemic financial risk. An exceptional period of stability and economic growth has been experienced in the last ten years due to conducive financial conditions. However, with the likely consequences of the liquidity crunches of two thousand and seven remaining unsolved, the future looks more and more uncertain than it was some years back.
Economic uncertainty in Europe may be varied since the United Kingdom’s financial sector’s role utterly makes it vulnerable to financial turmoil, while some central and Eastern European economies may increasingly be unsustainable due to large current account deficit. Should there be a wide spread in the disruption of the financial market, major European’s economies may be brought to scrutiny especially with the resilience of the export led growth.
One of the major risks of the twenty first century is food security since it is tied with other issues like the scarcity of water, climatic change and energy security.
The world is being driven into a period of sustained and volatile high prices with the long and short term drivers like the increasing use of food crops as fuels, population increase and changing lifestyles. This may pose serious consequences especially for those communities that are considered vulnerable. Increased vulnerability of the global system to risks may be concealed by the extended supply chains which has aided the integration of global economy within the last twenty years.
Conclusion
Global risks are not restricted to borders of nations and hence is impossible to manage through the use or actions of a single sector. An integrative approach which involves all governmental and non governmental organizations, civil society, intellectuals, industries and other sectors of the society is required in the governance of systemic global risks. Change is always accompanied by risk. Being the only unchanging aspect in the universe besides being an integral part of life, the willingness and the capability to take and accept risk is important for any development in the economy and introduction of new technologies. Many of the risks, especially those that come with emerging technologies, always come with new opportunities and benefits. Enabling societies to reap the benefits and advantages from change while reducing the negative consequences of the risks associated with it is the main challenge of better risk governance.
Among the institutions which have been established in the management of global risk is the International Risk Governance Council whose aim is to facilitate the comprehension and management of global risks which are bound to arise and negatively impact on the economy, environment, human health, safety and the general human society. The work of International Risk Governance Council includes coming up with concepts which may aid in the governance of risk, providing recommendations for risk governance for major decision makers and anticipating major issues related with risk. Such institutions believe that workable decision making with regard to risk can only be made with improvements in the governance of risk. This may also result in maximizing trust within the structure and processes upon which they are established.
Reference
Beck, Ulrich. (1999). World Risk Society, Polity, Cambridge, UK, p.72-90.