Systemic and cascading risks
Systemic risk is the risk that a shock in one part of a connected system spreads, amplifies and disrupts the whole. A drought can travel through water, energy, food prices, public budgets and health; a financial failure can halt payments that hospitals and utilities rely on. The Global Centre for Risk and Innovation (GCRI) studies how shocks cross water, energy, finance, infrastructure, health and society, where they amplify and where they can be stopped. This page is part of global challenges.
- 01InstitutionThe Global Centre for Risk and Innovation (GCRI)
- 02Service levelR0: information and enquiries
- 03In briefThe short answer
- 04Key ideasFour features make a risk systemic
- 05How GCRI approaches itMethods for connected risk
- 06Key termsTerms used on this page
- 07Where to go nextPlatforms, fields and counterparts
GCRI · Institution · service level R0
The short answer.
Systemic risk is the risk that a shock in one part of a connected system spreads, amplifies and disrupts the whole, as when a drought travels through water, energy, food prices, public budgets and health. GCRI studies how shocks cross water, energy, finance, infrastructure, health and society, where they concentrate and which methods can see them.
Systemic exposure in the Gulf.
Where people and networks concentrate, the exposure through which shocks travel between systems, shown for the Gulf as an example geography for this subject.
Four features make a risk systemic.
Systemic risk is not a separate hazard. It is a property of how systems are connected, which is why it is often invisible to assessments made one sector at a time.
Tight connections
Systems linked by flows of power, water, goods, data and money pass stress along quickly.
Feedback loops
Price spikes, hoarding, panic and forced sales can make a shock larger as it spreads.
Shared points of failure
One asset, supplier or assumption underneath many services can fail them all at once.
Thresholds and tipping points
Systems can absorb stress up to a point and then change state abruptly.
Methods for connected risk.
- 01
Map the system
Dependencies across sectors and borders with network science and contagion.
- 02
Simulate propagation
Complex systems and agent-based models that show how behaviour shapes spread, with assumptions stated.
- 03
Stress-test
Compound scenarios using scenario design and stress testing, labelled as scenario evidence.
- 04
Find points of control
Interventions that cut or buffer transmission, with their trade-offs and limits.
Terms used on this page.
Each term as this page uses it. Where a standard-setting body defines the term, the wording follows that body.
| Term | Definition |
|---|---|
| Systemic risk | Risk arising from the interactions and dependencies within and between systems, where a shock can propagate and threaten the functioning of the whole. |
| Cascading risk | Risk that a failure in one system or component triggers failures in others that depend on it. |
| Tipping point | A threshold beyond which a system shifts to a different state, often abruptly. |
| Network centrality | A measure of how important a node is in a network, such as how many exposures pass through it. |
Platforms, fields and counterparts.
Field work is organized through the Systemic Risk Management platform and the Systems Science and Modelling platform, both in development, and the risk management and systemic risk field gateway. The Global Risks Forum (GRF) examines all-hazards governance, and The Global Risks Alliance (GRA) examines systemic stability in finance. Worked illustrations are on risk transmission examples.
A model of systemic risk is a tool for understanding, not a prediction. Every result states its assumptions and uncertainty.
Questions and answers.
How is systemic risk different from ordinary risk?
Can systemic risk be measured with one number?
Who uses this work?
How do countries take part?
Can systemic risk be eliminated?
Around GCRI.
Start with an enquiry.
The current service level is R0: information and enquiries. An enquiry receives a reference and names the next step; applications, payments, compute allocations and registrations open only when their team, terms and review capacity exist.