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Globalisation Raises Globalised Risks - Study

Date: 27-Jan-06
Country: SWITZERLAND
Author: Thomas Atkins

As an example, it cited a bird flu pandemic, which it said was currently the biggest threat facing the planet.

The study, released at the WEF's annual meeting in Davos, said travel, trade and interconnected markets meant that disasters in one part of the globe could set dominoes falling elsewhere.

It urged governments and companies to strengthen their preparations and monitoring.

There was, it said, a potential "perfect storm" emerging from disease, natural disasters, terrorism, oil shocks and from the long-term effects of climate change.

"In many ways, 2005 was a wake-up call," said the study, recalling the effects of the Asian tsunami, Hurricane Katrina, suicide bomb attacks in London and the Pakistan earthquake.

Prepared by insurance and consultancy group Marsh & McLennan, investment bank Merrill Lynch and reinsurer Swiss Re with the WEF, the study warned businesses and political leaders to beware of "rapid and unexpected contagion" between countries and industries.

"The interplay of multiple global risks and their combined ripple effects can create potentially disastrous perfect storms," the study said.

Although global threats are rising, disaster-preparation plans suffer from a number of shortcomings, one of the biggest being psychological perceptions of risk, said Christian Mumenthaler, chief risk officer at Swiss Re.

"As long as the risk hasn't happened, then the risk is zero. Once it has happened, then enormous amounts of resources are devoted to it," he told a news conference.

LITANY OF THREATS

The study went beyond the pressing risks -- disease, oil, and terror -- to list of long-term risks such as global warming, a drop in biodiversity or even "space weather", where a solar flare could disrupt power grids and electronic devices.

Mumenthaler urged creation of better monitoring networks and international institutions to make risk-preparedness a matter for the highest levels of management by adding a chief risk officer to their boards.

"We must invest the limited resources we have," he said. "That is clearly not what is done today."

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