By Thierry Malleret and Erwann Michel-Kerjan
Le Figaro

Monday 13 November 2006

The Congressional elections just concluded last week in the United States, resulting in a re-equilibration of political forces with a new Democratic majority in the House of Representatives and the Senate, illustrate the vital importance of security issues that had been central to the debates. That is understandable for a country that, since 2001, considers itself at war. There is no doubt that issues of security - in the largest sense - will also figure at the heart of the French presidential campaign.

Thus has the question of terrorism registered as a decisive element of internal politics, although the threat is fundamentally global. In that, this new fundamentalist-inspired terrorism perfectly illustrates the emergence of risks we describe as global: phenomena that neither anyone nor any single entity can control alone, that have the ability to strike anywhere at any time and to spread with epidemic speed. They can potentially provoke large scale destabilization and inflict catastrophic economic losses.

The list of these global risks today covers a multitude of domains and continues to lengthen: from the economy and geopolitics to problems of governance by way of environment, science, and technology questions. We could thus draw up a sad inventory à la Prévert.... To cite only a few that have recently hit the front pages, let us mention a series of exceptional natural catastrophes, the take-off in the price of oil, the emergence of new nuclear threats, multiple legal and regulatory constraints in a world open to competing markets, critical infrastructures' heightened vulnerabilities liable to paralyze whole sectors of activity, the risks of pandemics, the uncertainties linked to climate change, and many others besides ... Moreover, through domino effects, these risks mutually reinforce each other and often end up creating a "snowball" effect.

To a very great extent, these large-scale events are, in fact, a product of globalization: they are characterized by strong interdependence and generate complex equilibria between political and market decisions, as well as heightened levels of uncertainty. That makes five to ten year strategic decisions particularly difficult since "time is accelerating." For example, as the fantastic development of transportation systems has allowed the establishment of first-quality global distribution chains capable of producing and delivering in record time throughout the world, that development has also reinforced the global aspect of these risks by allowing them to propagate at tenfold speed. Thus, like capital, the H5N1 virus travels first as well as economy class: the morning in China, a few hours flight later, stopping over in London or Paris, to end up that evening in New York.

The vise seems to be tightening from all sides. On the global warming front, who is offering to welcome the tens of millions of refugees in search of a new country the day - not so far off - when half of Bangladesh will find itself under water? On the military front, what will happen the day when Iran and/or North Korea command nuclear weapons? The geo-strategic and economic chessboard of these regions - and the planet - will be profoundly changed by it.

How do we relearn how to lead in such a world? For decision-makers, politicians or company heads, these global risks in fact constitute a sort of paradox. On the one hand, the necessity of harnessing oneself to the task and managing them in a decisive manner imposes itself on everyone, since they already disrupt a broad spectrum of activities. On the other hand, the temptation to put off decisions to tomorrow is strong in the face of what promises to be a Sisyphean labor. Thus, it is tempting to do nothing and pass the baton to the next term's office-holder or board of directors. The Stern report on climate change, which came out this week, constitutes an obvious example: how to measure the necessity of investing massively now for an uncertain return in the future? This problem presents itself in an acute form for most global risks.

The American 2006 midterm elections will have thus illuminated an essential element of the twenty-first century: managing this new strategic issue in an extraordinarily complex world that is evolving with unprecedented speed.

The Global Risk Network was born of this necessity to act in concert and so that those who hold the highest level of decision-making power may do so in collaboration, to share the costs and the benefits. To assist them in this new environment, these questions have already been put on the agenda for the next World Economic Forum, in January 2007 in Davos. That will be three months away from the French presidential election.

Thierry Malleret is Director of the Global Risk Network (GRN) at the World Economic Forum. He has just published Risques: perception, évaluation, gestion" ["Risks: Perception, Evaluation, Management"] (Maxima). Erwann Michel-Kerjan is managing director of the Center for Risk Management at the University of Pennsylvania's Wharton Business School and a researcher associated with Paris's école polytechnique. A member of GRN, he is co-author of Traité des nouveaux risques" ["Treatment of New Risks"] (Gallimard).