Understanding the Technology Risks Landscape

The emerging technologies of the Fourth Industrial Revolution (4IR) will inevitably transform the world in many ways – some that are desirable and others that are not.

The extent to which the benefits are maximized and the risks mitigated will depend on the quality of governance – the rules, norms, standards, incentives, institutions, and other mechanisms that shape the development and deployment of each particular technology.

This was the preamble of the recently released World Economic Forums Global Risk Report (GRR). The report lists a number of risks but discusses technology disruption in depth as it is one of the most pertinent risks we face today.

Extreme debates

Too often the debate about emerging technologies takes place at the extremes of possible responses: among those who focus intently on the potential gains, and others who dwell on the potential dangers.

The report points out that the real challenge lies in navigating between these two poles: building understanding and awareness of the trade-offs and tensions we face, and making informed decisions about how to proceed.

This task is becoming more pressing as technological change deepens and accelerates, and as we become more aware of the lagged societal, political and even geopolitical impact of earlier waves of innovation. Over the years, The Global Risks Report has repeatedly highlighted technological risks. In the second edition of the Report, as far back as 2006, echoes of current concerns were noted in one of the technology scenarios we considered, in which the “elimination of privacy reduces social cohesion”. This was classified as a worst-case scenario, with a likelihood of below 1%. In 2013, the Report discussed the risk of “the rapid spread of misinformation”, observing that trust was being eroded and that incentives were insufficiently aligned to ensure the maintenance of robust systems of quality control or fact-checking. Four years later, this is a growing concern.

Governance Dilemmas

How to govern emerging technologies is a complex question. Imposing overly strict restrictions on the development of a technology can delay or prevent potential benefits. But so can continued regulatory uncertainty; investors will be reluctant to back the development of technologies that they fear may later be banned or shunned if the absence of effective governance leads to irresponsible use and a loss of public confidence.

The GRR points out that, ideally, governance regimes should be stable, predictable and transparent enough to build confidence among investors, companies, and scientists, and should generate a sufficient level of trust and awareness among the general public to enable users to evaluate the significance of early reports of negative consequences. For example, autonomous vehicles will inevitably cause some accidents; whether this leads to calls for bans will depend on whether people trust the mechanisms that have been set up to govern their development.

But governance regimes also need to be agile and adaptive enough to remain relevant in the face of rapid changes in technologies and how they are used. Unexpected new capabilities can rapidly emerge where technologies intersect, or where one technology provides a platform to advance technologies in other areas.

Currently, the governance of emerging technologies is patchy: some are regulated heavily, and others hardly at all because they do not fit under the remit of any existing regulatory body.
Mechanisms often do not exist for those responsible for governance to interact with people at the cutting edge of research.

The report adds that even where insights from the relevant fields can be combined, it can be hard to anticipate what second or third-order effects might need to be safeguarded against history shows that the eventual benefits and risks of a new technology can differ widely from expert opinion at the outset.

To the extent that potential tradeoffs of a new technology can be anticipated, there is scope for debate about how to approach them. There may be arguments for allowing a technology to advance even if it is expected to create some negative consequences at first if there is also a reasonable expectation that other innovations will create new ways to mitigate those consequences.

Even if there is widespread desire to restrict the progress of a particular technology – such as lethal autonomous weapons systems – there may be practical difficulties in getting effective governance mechanisms in place before the genie is out of the bottle.

The growing popular awareness of the dilemmas associated with governing new technologies is revealed by media analysis: relevant mentions of such quandaries in major news sources doubled between 2013 and 2016.

But which technologies should we be focusing on? In the latest GRPS, we asked respondents to assess 12 technologies on their potential benefits and adverse consequences, public understanding and the need for better governance.

The Disruptive Impact of Emerging Technologies

The GRR rounds off its debate on technology risk by exploring the impact of emerging technologies. The potential of emerging technologies to disrupt established business models is large and growing. It is tempting to think of technological disruption as involving dramatic moments of transformation, but in many areas, disruption due to emerging technologies is already quietly underway, the result of gradual evolution rather than radical change.

Consider autonomous vehicles; we are not yet in a world of vehicles that require little or no human intervention, but the technologies that underpin autonomy are increasingly present in our ordinary cars. As the technological changes entailed by the 4IR deepen, so will the strain on many business models. The automotive sector remains a good example. It has been clear for some time that car manufacturers need to plan ahead for a world in which many of the factors that determine current levels of car ownership may no longer be present. Increasing evidence of this planning is now starting to shape commercial decision-making.

The GRR pointed out that in December 2016; Volkswagen launched a new mobility services venture (MOIA) in recognition of an ever-stronger trend away from owning a vehicle towards shared mobility as well as mobility on demand. The deep interconnectedness of global risks means that technological transitions can exert a multiplier effect on the risk landscape. One obvious channel through which technological change can lead to wider disruption is the labour market, with incomes pushed down and unemployment pushed up in affected sectors and geographical regions. This, in turn, can lead to disruptive social instability, in line with the GRPS finding this year that the most important interconnection of global risks is the pairing of unemployment and social instability.

Another prism through which to look at the interaction of risks and emerging technologies is that of liability – or, to put it another way, the question of who is left bearing which risks as a result of technological change. There are multiple potential sources of disruption here. The insurance sector is an obvious example when talking about liability; just as car manufacturers must prepare for a future of driverless vehicles, so the reduction in accidents this future would entail means insurance companies must prepare for plummeting demand for car insurance.

In the past, I have spoken about knowing your business intimately and understanding the environment that it operates in. Yes, technology can be a risk and a threat, but it can equally be a force for good and something that can add significant profit to your bottom line. The question you need to ask is: what do the 4IR and the rise of technology mean for my business?

Innovation is the key aspect that drives the growth of the fourth industrial revolution which will define the way we interact with our world.