Systemic risks are risks that manifest in complex adaptive systems. They are fundamentally different from conventional risks. Traditional risk management practices are not sufficient for dealing with them. IRGC’s guidelines for the governance of systemic risks address the question of how to deal with systemic risks in the context of system transitions, i.e., in situations that require adaptation to new context conditions or transformation of an organisation or ecosystem.
The guidelines have the following objectives:
- Provide guidance to organisations for understanding complex system dynamics and reflecting upon their position within these dynamics.
- Help actors in a system to (a) prevent the shift of the system within which the organisation operates to an undesirable regime, or (b) trigger and facilitate the transition of the system to a preferable regime, considering changes in underlying context conditions or proximity to a tipping point that may trigger a regime shift.
The guidelines comprise seven interlinked steps:
- Explore the system in which the organisation operates; define the boundaries of the system and the organisation’s position in a dynamic environment
- Develop scenarios, considering ongoing and potential future transitions
- Determine goals and level of tolerability for risk and uncertainty
- Co-develop management strategies to deal with each scenario and the systemic risks that affect or may affect the organisation, and to navigate the transition
- Address unanticipated barriers and sudden critical shifts that may come up during the process
- Decide, test and implement strategies
- Monitor, learn from, review and adapt
Source: IRGC (2018). Guidelines for the Governance of Systemic Risks.
IRGC proposes three main strategic approaches for operationalising the concept of systemic risks management:
- Support and strengthen the ability of a system to self-organise and self-control
- Undertake proactive interventions based on prevention, mitigation, adaptation and transformation principles
- Prepare for disruptions, accidents and crises
Here is a slide presentation of the guidelines for the governance of systemic risks: