A. Understanding systemic risks

Before the COVID-19 pandemic, the interconnectedness of risks in our world may not have been immediately obvious in our daily lives. Nor was the systemic nature of these risks, meaning how they affected, or can potentially affect, whole societies beyond the initial problem.

For one thing, we have tended to think about systemic risks in relation to what happened as a result of the 2008 financial crash, where the failure of big banks rippled across the global economy, leaving millions out of work and sparking a global economic recession.

Other examples can be seen in how climate change, natural hazards and more recently the global consequences of the war in Ukraine have brought home how our world relies on a complex, often fragile, web of interdependent factors that, if destabilized, can have devastating effects on whole societies. For example, Ukraine and Russia are both key global cereal and fertilizer producers. One of the ripple effects of the war can be seen in rising global food prices, resulting in higher costs of living for those who can afford it and pushing those who cannot deeper into food insecurity.  

But it has been the emergence of COVID-19 that’s really forcing a broadening of perspective on systemic risks. Put simply, the pandemic produced a domino effect when it hit, starkly illustrating that our world is interconnected through systems, which come with associated, volatile risks that have revealed, and reinforced, vulnerabilities across society.

While some of these risks are undoubtedly negative effects of the pandemic, we can learn from them because they have expanded our understanding of risk.

First, we can now see more clearly that hazards and shocks can emerge from inside and outside the system. By “system,” we mean the way our societal processes, such as government, supply chains, education and health care are designed, organized and function, and how they are in constant interaction with one another. A system could be, for example, a city's critical infrastructure, national scale health care, education or international trade. Systems are made up of different subsystems, that have specific components, elements and stakeholders. The boundaries of the system depend on, for example, the decision-making or governance context. By considering events from the perspective of systems, it helps to reduce complexity and understand how things are interconnected. To illustrate this in the context of COVID-19, though for many countries the disease initially emerged from “outside” of the system via international travel, it quickly spread throughout populations and communities within national borders due to an initial lack of containment measures. Many of the government measures to protect at-risk groups or prevent the collapse of health systems have led to widespread effects on society, leading to so-called cascading effects, such as school closures, disruption of supply chains, unemployment and increases in domestic violence. We can think of these as “secondary,” and even “tertiary,” hazards.

Second, the pandemic has also shown that exposure to these risks is not only a matter of being located in a hazard-prone area (e.g. a hotspot area with very high numbers of daily infections) but can also be through experiencing something indirect. One example is the small island nations, such as Samoa, Tonga and the Cook Islands, that were largely COVID-19 free until late 2021 but, nonetheless, due to their dependence on tourism, have been severely affected by the global travel restrictions that continue to be part and parcel of governments' responses.

Third, we saw how vulnerabilities that characterize parts of the system can in themselves be the origin of new hazards or shocks that “cascade” into the broader system. The best way to illustrate this is how governments, in protecting vulnerable people and unprepared health systems from collapse, introduced lockdowns, which then triggered other types of hazards, such as disruption of education due to the closure of schools.

Lastly, COVID-19 has shown that it makes sense to move beyond an approach to analysing risk from one that looks at each hazard (e.g. COVID-19, floods, storms, droughts, etc.) individually to a more holistic approach that considers risks in a comprehensive manner.

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