Navigating systemic risk

In many risk domains, such as occupational health and safety, transportation, and food safety, modern risk governance is a success story. Despite these advancements, risk governance still struggles with systemic risk in the context of extreme climate and weather events, associated disasters and emergent risks. Systemic risk affects entire systems on which society depends, such as the health care system or the energy system. Systemic risk can be defined as “the risk or probability of breakdowns in an entire system, as opposed to breakdowns in individual parts or components” (Kaufman & Scott, 2003, p. 371). Connectivity between systems is the key enabler for systemic risk to manifest through cascading effects. Systemic risks originate and evolve in the nexus of tightly-coupled dynamic systems. The convergence of systemic risks with conventional risks as well as one systemic risk with another systemic risk challenges the established modes of risk analysis and governance that still rest to a large extent on differentiation and compartmentalisation.

Governance of systemic risk is concerned with the analysis of tightly coupled systems, their various interdependencies, and the resulting dynamics. Risk analysis here investigates feedback mechanisms between components of a system at the intra-system level and at the interaction with other systems at the inter-system level which result in transboundary cascading effects. In addition, governance of systemic risk is also concerned with procedural considerations of governance. Tentative, experimentalist and adaptive governance concepts, together with inclusive risk governance approaches, provide stepping stones for governance of systemic risks.

The presentation will analyse the governance challenges around systemic risk relating to issues of complexity, uncertainty, and ambiguity. Based on an extensive literature review and drawing on the case studies of the COVID-19 pandemic and climate change, a risk governance framework for systemic risks will be proposed that aims to address these challenges.