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Understanding and managing cascading and systemic risks: lessons from COVID-19

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Executive Summary

COVID-19: A shock to global societal systems

In an increasingly interconnected and globalized world, COVID-19 is a dramatic reminder of the ever more complex and systemic nature of risks. The direct and indirect impacts of the pandemic have revealed and reinforced inherent vulnerabilities across societal systems, borders and scales. They have seen the closure of borders, economic disruptions and failures, strained and overwhelmed health systems, and failure of supply chains, all of which are contributing to ripple effects and human and national security issues.

As of 30 November 2021, more than 261 million cases and at least 5.2 million deaths have been confirmed according to WHO, making the pandemic one of the deadliest in human history. However, the pandemic has been far more than a health crisis, and has affected societies and entire economies to their core. The impacts have revealed inherent vulnerabilities across societies and have unveiled major deficiencies in pandemic prevention, preparedness, and response initiatives locally, regionally and globally. In addition to the direct health effects, COVID-19 and the interventions taken to contain the spread of the disease and protect at-risk groups, such as school and business closures, stay-home orders or travel restrictions, have led to grave cascading impacts on interconnected sectors and systems. Thereby, effects of the pandemic have not only been felt locally but, as a result of global interconnectivities and interdependencies of systems, have led to cascading effects in other parts of the world. For example, the interruption of international commercial and touristic flows have had major consequences for countries that have either experienced very limited infection rates (e.g. Togo which is featured as a case study in this report) or even the complete absence of COVID-19 cases until very recently (e.g. small island states such as the Cook Islands and Tonga).

Systemic nature of risks

While research on the systemic nature of risks is not new, existing work has largely focused on financial systems and crises and only more recently on climate change and natural hazards. Systemic risk emerges from the interconnectedness of systems and agents (i.e. actors within the system) and results from the interactions of individual risks resulting in cascades of failures. Based on the research conducted in this study, key characteristics that determine the risks associated with COVID-19 have been identified: (i) interdependence, interconnectedness and cascading effects, (ii) non-linear relationships, (iii) feedback loops, (iv) tipping points, (v) being unnoticed, (vi) uncertainty, and (vii) dynamic. Combined, these characteristics confirm the systemic nature of risks associated with the disease. Understanding risks in the context of COVID-19 hence requires a systems perspective. The findings from this report illustrate how the COVID-19 crisis has caused ripple effects that transgress from the domain of health risks and extend into economic, social, and political domains causing complex impacts and new risks.

Cross-cutting findings from five case studies

Research was conducted in five case studies. Individually, the case studies have distinctive traits that are important for understanding characteristics of cascading and systemic risks in a specific context: e.g. (i) rural-urban and national-international interlinkages in Maritime Region, Togo, (ii) a densely populated, urban setting in Guayaquil, Ecuador, (iii) a multi-hazard perspective in the Sundarbans, India, (iv) a fragile setting in Cox’s Bazar, and (v) challenges on all fronts at national scale in Indonesia. Numerous distinctive findings arose from each of these case studies. However, when taken together, the case studies are emblematic in understanding and managing cascading and systemic risks across a range of scales and systems. Six cross-cutting findings are highlighted from the case studies in this report: (i) COVID-19 interventions had clear cascading effects throughout nearly all of society; (ii) COVID-19 and accompanying interventions reinforce pre-existing vulnerabilities; (iii) COVID-19 has demonstrated that the dependence on global networks has impacts at the local level; (iv) COVID-19 and accompanying interventions have distinct impacts on women and girls; (v) COVID-19 and accompanying interventions have severe effects on the education system that will only become apparent over time; and (vi) COVID-19 risk communication and coordination has been a significant challenge for state and non-state actors across all scales. Further, all of the case study regions have been confronted with natural hazards amidst the pandemic, which has led to compounding effects, interconnected risks and, in turn, additional challenges for risk management. Hence, this report also underscores the relevance of moving from hazard-by-hazard approaches to more holistic and comprehensive ways of understanding and managing risks based on all-hazards and multi-risk approaches.

Conceptual model of the systemic nature of COVID-19 risks

The analysis of the COVID-19 crisis through multiple case studies unveiled complex and multi-faceted webs of cascading and systemic risks and impacts. Key in the analysis was the characterization of the network and system structure, and network dynamics. Informed by the case studies, expert consultation and literature review, the CARICO conceptual model is a tool to systematize, visualize and explore the most relevant characteristics, connections and cascading effects as they emerged from the case studies analyses (Figure). It provides a generalized understanding of the risks associated with COVID-19 from a systemic perspective.

The model presented here advances existing conceptual models of systemic risks in showing direct and cascading effects of COVID-19 on interconnected systems. It illustrates how these effects, coupled with decision-making processes (e.g. interventions to contain the spread of the disease) and other factors (i.e. pre-existing vulnerabilities, system dependencies, tipping points and feedback loops), have contributed to making vulnerable communities, sectors and systems more at-risk.

Lessons for prevention and risk management

The systemic nature of risk has important consequences for risk management. Firstly, it implies that risk cannot be eliminated from systems, but rather must be managed, monitored and treated regularly. Risk management must engage with questions such as what levels of risk are acceptable for whom, what are trade-offs and what are risk-transfer mechanisms. Secondly, the interconnected nature of risks implies that risk management must engage with network structure and reciprocity. This includes multi-level governance frameworks, which share the responsibility towards risk management across systems and scales. Thirdly, risk management must explicitly address the dynamic aspects of risks, as well as responses. The timing and duration of responses becomes a critical management variable. Focus should be placed on risk management pathways that enable managing future risks, not only from pandemics, but also compounding risks, through a process of iterative learning and adaptation. Comprehensive risk management pathways consist of a portfolio of specific risk management interventions (including specific contingency plans and protocols), systemic measures (targeting system structure and drivers of vulnerability) and governance considerations.