Role seen for Swiss in reducing global risks

Food security is set to be a complex challenge for the future Keystone

A downturn in the global economy, oil price rises and food shortages are seen as the most serious global threats in 2008, says the Geneva-based World Economic Forum.

The organisation comments that Switzerland could have a “significant” role to play in helping to reduce their severity.

The WEF, which holds its annual meeting in the Swiss resort of Davos later this month, argues in its Global Risks 2008 report that the current liquidity crunch caused by the subprime mortgage crisis in the United States could spark a US recession.

“The risk essentially is that what we’re seeing in the United States will flow to Britain and continental Europe, where we have asset prices continuing to decline,” the WEF’s Gareth Shepherd told swissinfo.

“This could lead to a reduction ultimately in consumer spending and then hit the real economy. The severity can vary but it’s unlikely… to end well,” he added.

Apart from expressing concerns over rising oil prices, the report highlighted food shortages, an issue that was not only of concern to developing countries but also to the industrialised world.

“It’s the significant rise in the cost of food generally and soft commodities, and of course we have the demand issues with growing populations and changing diets, with people moving to higher protein.

Food and fuel

“We’re also having competition over land between food and fuel, and business leaders really see that issue as something that has both global and local impact where they are doing business,” Shepherd said.

The report argued that policy makers might have to return to thinking about food as a strategic asset, adding that the resilience of the world’s food system would be severely tested in the next few years.

As home to the WEF and its annual Davos meeting, Switzerland could play a role in helping to bring the forces together to try to reduce the severity of the risks, Shepherd said.

“We would interestingly see Switzerland play a significant role as a force for good in terms of risk mitigation…

“There really is a need for collective action for these collective problems and Switzerland has a long and respected history in being able to pull together coalitions of willing businesses, industries or governments to tackle some of these collective problems.”

Shepherd cited the example of the Basel II accord on reducing risks in the banking sector.

Stimulate awareness

The WEF will present the report to global leaders at its Davos summit to stimulate awareness and understanding of the risks.

One of the more tangible ideas that the WEF will be promoting is the idea adopted from the corporate world of risk officer in governments.

“Chief risk officers have been a relatively recent phenomenon, proved in Switzerland with the insurance industry.

“We think that there’s a lot of cross-pollination that could occur with that type of concept implemented in a government setting, so we’re pushing strongly for that.”

swissinfo, Robert Brookes

Key facts

The World Economic Forum, based in Geneva, was founded in 1971 by German-born professor Klaus Schwab. It was first called the European Management Forum.

The WEF is an impartial and not-for-profit foundation tied to no political, partisan or national interests. It is under the supervision of the Swiss government.

In brief

Global Risks 2008, which was published in cooperation with a number of companies including Swiss Re and Zurich Financial Services, will be a focus of discussions by business leaders and public-policy leaders at the WEF’s annual meeting in Davos, which starts on January 23.

It is based on input from more than 100 top business leaders, decision makers, scientists and other leading academics as part of the WEF’s Global Risk Network.

The four emerging issues from the report are financial risk, food security, supply chain vulnerability and energy.