Systemic Risk Archives - Page 3 of 3

Anatomy and Resilience of the Global Production Ecosystem

The authors argue that the worldwide production and distribution of food, fuel, and fibre has created a “global production ecosystem” subject to immense simplification, intensification, and control by humans attempting to maximize efficiency. The resulting system is homogenous, highly connected, and has weak feedbacks – “features [that] converge to yield high and predictable supplies of […]

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Things are Different Today: The Challenge of Global Systemic Risks

The authors clarify the systemic risk concept using the Global Financial Crisis as an example. They explain how global systems involve micro and macro-dynamics interacting with each other and their environment, leading to stable periods and multiple possible future scenarios. Some of these scenarios may pose catastrophic risks, so that agents must confront systemic risk.

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Systemic Risks: The New Kid on the Block

Ortwin Renn proposes that societies are good at conventional risk management, which focusses on discrete events like a fire or car accident, but increasingly challenged by systemic risks where a failure in one part of a system quickly spreads to disable the whole system and has ripple effects on others. “It is the totality of

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The Emergence of Global Systemic Risk

The authors argue that the world constitutes a tightly coupled, global complex system that endogenously generates systemic risks and vulnerabilities as it grows more complex. After discussing complexity, risk, and networks as key elements of their framework, they provide case studies of global systemic risk in trade, finance, infrastructure, climate change, and public health. The

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Globally Networked Risks and How to Respond

Dirk Helbing demonstrates that “Systemic failures and extreme events are consequences of the highly interconnected systems and networked risks humans have created. When networks are interdependent this makes them even more vulnerable to abrupt failures.” He surveys key concepts in complexity and network science, draws upon examples of financial meltdowns and crowd disasters, and ultimately

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The Butterfly Defect: How Globalization Creates Systemic Risks, and What to Do about it

Ian Goldin and Mike Mariathasan argue that systemic risk is endemic to globalization that cannot be removed. “It is a process to be managed rather than a problem to be solved” (p. xiii). But rather than retreat from globalization and forfeit its considerable benefits, the authors argue that systemic risk requires global governance reforms to

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What Is Systemic Risk, and Do Bank Regulators Retard or Contribute to It?

George G. Kaufman and Kenneth E. Scott provide one of the most often cited definitions of systemic risk as “the risk or probability of breakdowns in an entire system, as opposed to breakdowns in individual parts or components, and is evidenced by co-movements (correlations) among most or all parts” (p. 371). They explain how systemic

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