States have lost control of territories and environments, including the encrypted parts of the internet, creating a world where no single state has the power to guarantee its own security.
Rapid advances in information technologies and biotechnologies are creating vulnerabilities for national and international security, according to the report. "Cyber-crime and cyber-terrorism are already realities," it said.
The report quoted earlier research, saying "the grid of connections between terrorism and criminal networks has been highly crisscrossed. The increasing sophistication of both information and communications technologies and criminal gangs and terrorist groups themselves makes the scale of the challenge considerable."
The researchers found online fraud and theft rising. "National governments and global cyber-governing bodies have been overwhelmed by the ingenuity and pervasive online presence of organised criminal gangs in recent years," they said.
They said Google had found 450,000 out of 4.5 million "suspicious" websites were capable of downloading malicious software. More than two-thirds of programs were spyware that collected data on banking transactions and sent it to criminals.
This helped to fuel a financial fraud and money laundering industry worth as much as $1.5 trilllion, about the size of the Spanish economy or up to 5% of the world's GDP, they said.
The commission said the report was published against the backdrop of a significantly worsening international situation. "We believe we are witnsessing a downgrading of the ability of state institutions to control the security envirnoment and to provide public protection," it said.
It said governments now owned less of their critical national infrastructures. As a result, private sector organisations had become more important to delivering security and social resilience.
"Governments cannot take sole responsibility for making people secure. Governments must devolve, and businesses and individuals must accept, more responsibility for national security and the costs will have to be shared," the commission said.