– Briefing Note on Systemic Risk (2022)
Systemic risks involve: multiple communities, cities, regions, or countries; risks that are interconnected; effects that move from one system or network to another and are uncertain or unpredictable; and they have potentially devastating outcomes – like the collapse of entire systems and threats to society as a whole.
Recent disasters that span countries, regions and societal systems have underscored the need for new understanding of the nature of more complex risks, and new approaches to their management.
The COVID-19 pandemic, heatwaves and droughts, volcanic eruptions and tsunamis, wildfires, and conflict and food security crises have all shown clear signs of the rippling effects of hazards and in a globalized world, and the need for systemic approaches to reduce the risks of disasters whose effects resonate across systems and sectors, countries and regions.
Addressing systemic risks requires a new approach, moving from a focus on single hazards, to considering multiple, interdependent hazards and compound hazards, across systems and sectors. This involves working across silos – like climate science, finance, health, and supply chain management – and accepting a greater degree of uncertainty in risk management, and developing multi-hazard early systems.
The global dimension of risk
An interconnected world with a globalized economy has created complex, interconnected risks. Disruptions to food supplies and shipping can have knock-on effects on food security around the world. Climate change creates cascading risks that intersect with non-climatic risks, amplifying the potential for disasters.
Disruptions to global trade and supply chains pose systemic risks that can threaten economic and food security. A single ship getting stuck in the Suez Canal in 2021 caused losses of up to $9 billion per day. Critical transport infrastructure – like roads, ports, canals, railways and airports – are vulnerable to climate-related hazards, especially sea-level rise but also floods, hurricanes and wildfires, and the interaction of infrastructure disruption and other hazards can have devastating impacts.
– Leslie (2022)
Cascading and compound risks
One element of systemic risk is cascading risks – where a hazard can set off a chain of events posing additional, and compounding, risks. Another is compound risks – where two independent hazards co-occur, creating new risks.
– IPCC author Mark Howden speaking at the 2022 Global Platform on DRR
During the COVID-19 crisis, the risks associated with climate-related hazards around the world have been compounded by additional risks associated with the pandemic. Countries in South and South-East Asia, for example, battled to control the virus alongside droughts, floods and cyclones.
– ESCAP (2022)
In February 2021, in Texas, a coldwave and winter storm prompted systemic failure when the state’s power grid was simultaneously overloaded by high demand for heating while inadequately winterised infrastructure stopped working. The resulting power failures set off a chain of cascading risks affecting fresh water supply, food distribution, health services, and causing over 264 deaths.
– Bridger (2022)
In early 2022, global food security was threatened by systemic risks involving heatwaves in southern Asia and conflict in Ukraine, severely affecting the availability and cost of grain worldwide.
– Srivastava, Sarkar-Swaisgood, Dubey et al (2022)
– Concept Note: COVID-19 and Systemic Risk (UNDRR, 2021)
The COVID-19 pandemic has drawn widespread attention to the systemic nature of risk. The spread of the virus across the world affected all aspects of society – with drastic impacts on employment, international trade, food supply – and this required a cooperative, systemic approach to risk management.
– Concept Note: COVID-19 and Systemic Risk (UNDRR, 2021)
A threat to sustainable development
The systemic effects of climatic hazards – like floods, droughts, storms – compounded by non-climatic crises with global reach – like conflict, pandemics, and economic disruption – threaten to steal precious development gains.
Food security in Somalia
– Source: 2022 Global Assessment Report from Thalheimer et al. (2022)
– 2022 Global Assessment Report
New approaches are needed
UNDRR’s 2022 Global Assessment Report (GAR) calls for a systemic approach to risk governance:
"In the face of global systemic risk, governance systems must quickly evolve and recognize that the challenges for the economy, environment and equality can no longer be separated… systemic risk governance needs to recognize complex causal structures, dynamic evolutions and cascading or compound impacts."
The GAR sets out a 3-point call to action for tackling systemic risks:
- Measure what we value
- Design systems to factor in how human minds make decisions about risk
- Reconfigure governance and financial systems to work across silos and design in consultation with affected people
Source: 2022 Global Assessment Report
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Stockholm Environment Institute
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University of Gothenburg
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United Nations Office for Disaster Risk Reduction, United Nations Development Programme - Headquarters, Global Facility for Disaster Reduction and Recovery, the, World Bank, the, International Recovery Platform
Asia-Pacific disaster report 2022 for ESCAP Subregions - Pathways for adaptation and resilience in the Pacific Small Island developing states
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United Nations Economic and Social Commission for Asia and the Pacific
What may be Europe's worst drought in 500 years has arrived amid an energy crisis, and the lack of water threatens to make the energy shortage worse.
Conversation Media Group, the
New modelling by a multidisciplinary team of researchers shows the impact climate change and extreme weather events could have on food supply chains, with adverse effects on income, food and nutrient availability.
University of Sydney