This is the 2018 update of the Cambridge Global Risk Index. The Global Risk Index compiles the impacts of 22 types of threats into a single, annual measurement of economic loss. Interstate conflict, belong to the geopolitical and security threat class, is the only risk of the 22 that has increased systemically between 2017 and 2018.
The research by the Centre for Risk Studies is unique in making an annual qualification of the potential GDP impact of unpredictable shocks on the world’s most prominent cities. The Risk Centre’s analysis shows a 6.5% increase in GDP@Risk from 2017 to 2018. Of this, economic growth accounts for slightly more than half the increase while the balance results from changes in risk levels.
GDP@Risk is a calculation of each city’s economic output and its exposure to particular threats associated with its geography and type of economy offset by its resilience in recovering from them. The underlying analytics provide a methodology that governments, infrastructure providers, insurers and development organisations can use to quantify the economic value of improvements in city resilience.
This year’s report shows that the estimated potential impact of geopolitics and security catastrophes – including threat types civil and interstate conflict as well as social unrest – has risen significantly since 2015 when the Risk Centre compiled its first Global Risk Index. This increase reflects combined high levels of political turbulence in developed economies – challenging the contract between civil society and states, and evidenced by a rise in populism – and risks to global trade and global security. It is the only threat that has increased overall.
This working paper documents the methodology used for the 2018 analysis. It describes how cities were selected, GDP projections, and the updated resilience ratings. It outlines the Catastronomics methodology and how GDP@Risk is calculated.
The Cambridge Global Risk Index was developed by the research team at the Centre for Risk Studies, which was made possible by project funding provided by Lloyd’s.