The International Futures Programme’s project on “Future Global Shocks” originated in 2009 with a series of consultations among partners focusing on follow-up work to the decade-long research into risk management.

Extremely disruptive events, such as earthquakes, volcanoes, financial crises and political revolutions destabilise critical systems of supply, producing economic spillovers that reach far beyond their geographical point of origin. While such extreme events have been relatively rare in the past, they seem poised to occur with greater frequency in the future. Global interconnections accompanying economic integration enable some risks to propagate rapidly around the world. What do governments and multinational businesses need to do to prepare for the ripple effects of such events and to limit their negative consequences? The OECD International Futures Programme has completed an 18-month study on future global shocks, which took stock of the challenges in assessing, preventing and responding to several potential global risks. The working definition of “Global Shock” and several of the most important enabling drivers are presented here.

To assess the probability and consequence of future global shocks a better understanding is needed about where contagion effects and amplification are likely to occur. First, risk managers must identify the hubs of critical systems and resources, which if disrupted could trigger a series of adverse knock-on effects. They also need to investigate how dependency on a single or few critical resources or systems may create unexpected vulnerabilities to endogenous or exogenous shocks. In addition, risk managers should adopt a broader view of risk, beyond visible direct threats, and expand their situation awareness to include trends and events that take place in far away locations and identify components in critical systems that may amplify risks. This chapter focuses on the potential for global shocks resulting from the threats covered in the project’s case studies on pandemics, financial crises, cyber risks and geomagnetic storms. It draws general conclusions regarding the need to increase access to data and information resources in order to establish or reinforce systemic risk assessments.

Most systems that involve multiple interactions by humans and their various activities are inherently complex. These systems are at the heart of future global shocks and, as a result, merit the increased attention of policy makers. Advances in information and communication technology have enhanced the capacity of a new generation of mapping and modelling tools to demystify complex systems, by helping to anticipate, prevent and mitigate adverse extreme events. This chapter describes the need for and utility of such tools as risk maps and threat models to improve situation awareness and support decision making at the planning and operational levels. Mapping and modelling techniques applied to complex systems have made important progress, but their accuracy and predictive power face limitations, some of which could be improved upon with changes to public policy. Even with greater access to data and information, they will require continued refinement to translate results into actionable and effective policies and interventions.

Large scale disasters provide some indication of the hardship and suffering societies could encounter due to future global shocks. When many countries are simultaneously managing their own crises, however, the capacity to lend resources to neighbours is severely diminished. Effective emergency management for future global shocks entails an even higher order of co-operation than that needed to cope with national level disasters, and should be built on enhanced upstream preparation and downstream co-ordinated interventions. Policy makers need to address capacity gaps in surveillance and monitoring capabilities, readily available countermeasures and automatic back-up systems. In addition to these gaps, and in some cases at their heart, is a lack of appropriately trained human capital to manage external and internal risks that could destabilise systems and create widespread negative spillovers. This chapter considers the global capacity to conduct surveillance of potential global shocks, to activate early warning systems, and the challenge of providing incentives for the production of countermeasures and robust or diversified critical systems.

Measured at the macro level, many if not most countries have been reaping the economic benefits of global economic integration, but there is a tendency to turn a blind eye to new vulnerabilities that result. Complex systems in the modern risk landscape contain various vulnerabilities to shocks that can result in rapid and widespread negative spillovers. Such broad exposure draws attention to the need for strategic preparation and international co-operation to support prevention and surveillance. This chapter considers elements of a strategic blueprint to better manage the known and unknown vulnerabilities that could produce global shocks. The key elements of the strategy include strengthening governance capacities through international institutions and norms, and building societal resilience. Each of these elements involves various components such as enhancing governance through the use of publicprivate partnerships, adapting risk communication to modern society and the use of new technologies, and improving the capacity of insurance solutions to enable rapid recovery.