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For this issue of Vanguard, we have analyzed the risks identified by the four main institutional clusters whichinclude International Organizations, Banks, Reinsurance Companies and Consulting Firms. We have alsoidentified the common risks within each institutional cluster.The risk landscape below portrays both common and unique risks identified in each of the four institutionalclusters. It is divided by four different color themes ranging from dark to light tones from the core to the borderareas. The most common risks identified in each cluster by three or more institutions are positioned nearest to thecore and are depicted by the darkest tone. The middle ring shows the common risks identified by at least twoinstitutions and is depicted by the mid-range tone. The outer-most ring shows the unique risks identified byinstitutions and is depicted by the lightest tone. The risks, while compared within each cluster, are not comparedacross all four clusters, as each cluster has a unique perspective on risks. In addition to this "risk landscape", wehave produced four separate summary tables which will list and compare the risks identified by each institutionwithin the four clusters.
 
In summary, the common risks identified by International Organizations include Health Risk, Natural Disasters,Macroeconomic Risk and Climate Change Risk. For Banks, these include Over-Complexity of Banking Regulation,Global Economic Risk, and Banking and Market Liquidity Risk. Reinsurance Companies have listed Property-Causality Insurance Risk, Capital Market Risk and Underwriting Risk. And Consulting Firms have identifiedExchange Rate Risk, General Economic Risk, Regulation Requirement Risk, and Market and Credit Risk.
 
 
International Organizations
 
Summary Table
 
The United Nations
 
1. The World’s Recession in a More Pessimistic Scenario
 
Given the great uncertainty prevailing today, a more pessimistic scenario is entirely possible. If the global creditsqueeze is prolonged and confidence in the financial sector is not restored quickly, the developed countries wouldenter into a deep recession, with their combined gross domestic product (GDP) falling by 1.5 per cent; economicgrowth in developing countries would slow to 2.7 per cent, dangerously low in terms of their ability to sustainpoverty reduction efforts and maintain social and political stability. In this pessimistic scenario, the size of theglobal economy would actually decline, an occurrence not witnessed since the 1930s.
 
2. Increased Commodity Price Volatility
 
The crisis has already had a severe impact on global commodity markets with far-reaching implications for theprospects of the developing world at large. Commodity prices have been highly volatile during 2008. Most pricessurged in the first half of 2008, continuing a trend that had begun in 2003. Trends in world market prices reversedsharply from mid-2008. Oil prices have plummeted by more than 60 per cent from their peak levels of July toNovember. The prices of other commodities, including basic grains, also declined significantly. In the outlook,most of these prices are expected to even out further along with the moderation in global demand.
 
3. Falling Amounts of International Trade
 
Growth of world trade decelerated to 4.3 per cent in early 2008, down from 6.4 per cent in 2007, owing mainly toa decline in imports by the United States. United States imports, which account for about 15 per cent of the worldtotal trade, have registered a decline in every quarter since the fourth quarter of 2007 and dropped as steeply as7 per cent in the second quarter of 2008. Growth in the volume of world trade had dropped to about 3 per cent bySeptember 2008, to about one third of the rate of growth a year earlier. In the outlook, global trade is expected toweaken further in the future.
 
4. The U.S. Dollar Collapse
 
The United States dollar had depreciated substantially vis-à-vis other major currencies, particularly the euro, inthe first half of 2008, but has since reversed direction even more sharply. Many currencies in developingcountries have also either reversed their earlier trend of appreciation vis-à-vis the dollar or slowed theirappreciation.Currencies in a number of developing countries, particularly those that are commodity exporters, havedepreciated against the dollar substantially since mid-2008. The heightened risk aversion of internationalinvestors has led to a “flight to safety”, as indicated by the lowering of the yield of the short-term United StatesTreasury bill to almost zero. However, it is expected that the recent strength of the dollar will be temporary andthe risk of a hard landing of the dollar in 2009 or beyond remains.
 
5. Lack of credible mechanisms to respond to systemic failures
As immediate solutions are being worked out, it remains important to understand the systemic causes of thepresent crisis, which, in a nutshell, relate to weaknesses in global economic governance, excessive financialderegulation, the problem of global (current and capital account) imbalances and related systemic shortcomingsin the international reserve system and the lack of an international lender of last resort.
 
The immediate priority in today’s context is to prevent the global financial crisis from turning into a 1930s-styleGreat Depression. Over time, the ability of the IMF to safeguard the stability of the global economy has beenhampered by, among other things, limited resources and increasingly undermined by the vastly greater (and morevolatile) resources of private actors with global reach. As a consequence, the IMF has, by and large, beensidelined in handling the present crisis. The lack of a credible mechanism with broad representation forinternational policy coordination reflects an urgently felt lacuna which is limiting swift and effective responses tothe present crisis.
 
6. The Poor will be the Worst Victims
 
Coming on the heels of the food and energy security crises, the global financial crisis will most likely substantiallyset back progress towards poverty reduction and the Millennium Development Goals. The tightening of access tocredit and weaker growth will cut into public revenues and limit the ability of developing countries’ governments tomake the necessary investments to meet education, health and other human development goals. Unless
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