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Preparing for the Pitfalls of InterconnectivityPremium

Goldin, Ian

 

Publisher: Estudios y Ediciones IESE

Original document: Preparing for the Pitfalls of Interconnectivity

Year: 2012

Language: English

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Recent decades of globalization have created a more interconnected, interdependent and complex world than ever witnessed before. While policy makers have focused on facilitating integration, the implications of growing interdependence have been largely ignored. Global integration has brought many benefits, but it has also created fragility by producing new kinds of systemic risks. This article provides an understanding of these new 21st century systemic risks and the challenges they pose. The 2008-09 financial crisis is used to illustrate the failure of even sophisticated global institutions to manage the underlying forces of systemic risk, which has been amplified by our growing interdependence. At the same time, technological change has greatly increased the power of individuals to destabilize powerful systems. Urgent reform of global governance structures and institutions is essential to improve the mitigation and management of such global risks. Likewise, significant changes in risk management and risk culture are required to ensure businesses are better prepared. This article suggests the first steps to take.

Tools and Frameworks:
Lists five steps for business managers to take without delay to deal with the systemic risks generated by the globalization of financial markets and facilitated by rapid technological innovation.

Examples Cited:
The 2008-09 financial crisis, denial-of-service attacks, cyber warfare, pandemics, ecology, climate change, supply chains, outsourcing, offshoring, hospitals, Deepwater Horizon, BP, Fukushima, OECD Guidelines for Multinational Enterprises, Global Reporting Initiative

Research Basis:
Based on extensive research by the author, especially material from the paper, "Global Governance and Systemic Risk in the 21st Century," published in Global Policy 1, no. 1 (January 2010) with T. Vogel.

About the Author:
Ian Goldin is the director of the Oxford Martin School and professor of globalization and development at the University of Oxford.

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