Interconnectivity between systems is one of the defining features of our modern world, which is becoming ever more complex and dynamic. While interconnectivity can increase system efficiency and improve service delivery, it can also reduce resilience and expose the various layered systems to risk of various shocks and stresses.
Shocks to interconnected systems may cause feedback and cascading effects, extreme events, and unwanted side effects. Even when external shocks are absent, our interdependent global systems are vulnerable to failure at all scales, posing serious threats to society.
A better understanding of the causes and consequences of systemic risks is essential for decision-makers in order to prepare their organisation for future challenges. Traditional risk management practices are often not adequate in the face of high uncertainty, system complexity, and turbulence when disruptions are unforeseen and unavoidable. We need a paradigm shift in our thinking, moving our attention from the properties of the system components to the collective behaviour and emergent systemic properties resulting from the interactions of these components.
Although working to improve knowledge about those risks affecting multi-layer interconnected systems is an intellectually worthwhile exercise, priorities and constraints of organisations imply that they must focus on the specific problems posed by the difficulty of preparing for consequences that they do not know how to anticipate, and in particular those that result from crossing dangerous thresholds. Given such considerations, this project focused on those aspects of systemic risks for which practical recommendations can reasonably be developed.
The scope is deliberately restricted to risks in physical and socio-ecological systems. Purely financial risks, which have already received much attention from scientists as well as regulators in the aftermath of the 2008 global financial crisis, are not in scope of this IRGC project work.
For this project, IRGC has:
- Analysed existing literature and proposals in the fields of systemic risks
- Invited contributions from external experts
- Developed and explored the concept of ‘slow-developing catastrophic risks‘
- Considered the place and role of resilience, and how risk management and resilience building articulate and can be combined for effective governance of risks marked by significant uncertainty and potential for unexpected disruptions
- Organised two expert workshops with practitioners and academics, at IASS Potsdam, on 16 March and 26-27 October 2017
- Developed Guidelines for the Governance of Systemic Risks (2018)
- IRGC Guidelines for the Governance of Systemic Risks, 2018