Systemic Risk

Systemic risk is the name given to impacts that spread within and across systems and sectors (e.g. ecosystems, health, infrastructure and the food sector) via the movements of people, goods, capital and information within and across boundaries (e.g. regions, countries and continents). The spread of these impacts can lead to potentially existential consequences and system collapse across a range of time horizons. Globalization contributes to systemic risk affecting people worldwide. The impacts of climate change or COVID-19 show how the challenges of addressing systemic risk go beyond conventional risk management and governance. Critical system interdependencies, amplified by underlying vulnerabilities, highlight that there is a growing need to better understand cascading impacts, systemic risks and the possible political (governance) and societal responses. This includes improving our understanding of the root causes of systemic risk, both biophysical and socio-economic, and related information needs. Addressing contemporary challenges in terms of systemic risk requires integrating different systems perspectives and fostering system thinking, while implementing key intergovernmental agendas, such as the Paris Agreement, the Sendai Framework for Disaster Risk Reduction and the Sustainable Development Goals.

Changes in fiscal risk against natural disasters due to Covid-19

The coronavirus pandemic caused serious social and economic impacts around the world. Governments implemented massive fiscal stimulus and protection packages to counteract these severe consequences which lead them into weak fiscal positions and elevated debt. This affects the fiscal risk to natural hazards governments are exposed to as well. To shed light on this issue we compare fiscal risk due to natural disaster events pre-Covid and for today to indicate the magnitude of change. This is done by applying the so-called CatSim model which combines natural disaster risk and corresponding losses a government is exposed to with financial resources it has available to finance them. While only indicative due to data limitations our results can be interpreted as a warning call to not underestimate disaster risks that can realize any moment and that will be much more difficult to be efficiently responded to compared to the pre-Covid era. Especially the poor are now in a significant weaker position than before. We suggest some possible ways forward how to enable a more integrated perspective and to track progress of fiscal risks over time. © 2021 The Author