Northern Light Releases the Global Risk Index to Mark the World Economic Forum Davos Annual Meeting

BOSTON, Jan. 27, 2014 /PRNewswire/ — Northern Light® marked the World Economic Forum (WEF) annual meeting, concluded this weekend in Davos, Switzerland, with the release of the Northern Light's Global Risk Index (GRI).  This index, based on an analysis of WEF's 50 global risk categories, shows that overall the world is getting less risky, at least for now.

Using the first quarter of 2012 as the starting point with a Northern Light GRI of 100, the GRI peaked in Q4 of 2012 at 147, and declined steadily throughout last year reaching 85 by Q4 of 2013.  This finding is due in part to declining concern over chronic fiscal imbalances, particularly in Europe, over the course of 2013.

(Photo: http://photos.prnewswire.com/prnh/20140127/PH53587 )

To calculate the GRI, Northern Light applies its MI Analyst™ text analytics to an index of over 20 million news articles aggregated from the Web and representing the world's business and technology media.  MI Analyst is Northern Light's text analytics solution optimized for strategic business analysis.  MI Analyst can perform the automated discovery of meaning from large repositories of documents such as news articles and research reports.

The starting point for the Northern Light GRI is the WEF publically available annual report entitled "Global Risks."  The report identifies 50 global risks categories* and a panel of 469 economic and policy experts solicited by the WEF rates the likelihood and potential impact of each of the risk categories.

Northern Light took each of the concepts of global risk as described in the WEF annual report and created algorithms that trolled the 20 million article news database looking for indications of the risk factors.  Then each risk factor was weighted for its volume in the news and by its potential impact as rated by the WEF panel of economic experts.  When a risk factor increases in its impact-weighted coverage, Northern Light increments the GRI up, and conversely decrements the GRI when a risk factor declines in impact-weighted coverage.

Using news and Web behavioral data to measure the risk of events is not a new concept. Academic research has validated the practice.  For example, in a paper in the February, 2013, issue of the ACM, Mining the Web to Predict Future Events(http://research.microsoft.com/en-us/um/people/horvitz/future_news_wsdm.pdf), Kira Radinsky of Technion-Israel Institute of Technology and Eric Horvitz or Microsoft Research undertook to mine news stories to predict the future and conclude that it is possible to do so.  In a similar vein, it has been widely reported that user queries on Google (http://www.google.org/flutrends/us/#US ) can predict local flu outbreaks.

Of the 50 global risk categories analyzed by Northern Light for the GRI, three stand out as most important in the data on an impact-weighted volume basis.  Those three are Chronic Fiscal Imbalances, Terrorism, and Climate Change.  Together, these three contribute 60 percent of the total global risk as measured in the business and technology media.  Sovereign fiscal events drove the GRI in 2012 and 2013.  The index soared with the Eurozone crises at the end of 2012 and then ebbed when the crises was abated.  Interestingly, the fiscal cliff debate in the U.S. at the end of 2013 did not touch off a similar rise in the chatter about catastrophe.  Perception of the risks from terrorism and climate change, though high, were essentially unchanged during this time period.  Also worthy of note, the Boston Marathon terrorist attack in April of 2013 did increment up the perceived risk of terrorism, but it dropped again to about the pre-attack level by yearend, indicating the public did not alter its long term view of the risk based on one event.

"While the Global Risk Index does not predict specific events, since world leaders can act to avoid disaster if they choose to, it can measure the level of danger as perceived by the world's business and technology media, and can also monitor our collective achievements in dealing with the hazards," said C. David Seuss, Northern Light's CEO.  "Overall, despite the media success of doomsday prognosticators and reality TV shows, the journalists at the world's most clued-in publications are telling us that the world has moved to a less risky posture over the last 12 months.  I, for one, will sleep a little better."

Northern Light plans on issuing quarterly updates in the future to the Global Risk Index.

About Northern Light
Northern Light has been providing strategic research portals, business research content, and search and text analytics technology to global enterprises since 1996.  Northern Light's current clients include Fortune 100 leaders across multiple industries such as information technology, life sciences, financial services, telecommunications, manufacturing, and consumer products. Headquartered in Boston, Massachusetts, Northern Light has unique content aggregation partnerships with more than 150 of the world's leading syndicated technology and industry research publishers, and, along with Lockheed Martin, is a charter member of the Center for Complex Systems and Enterprises at the Stevens Institute of Technology.

* The risk categories enumerated in the WEF 2012 report, on which Northern Light based its analysis, are: