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Understanding and Coping with the Increasing Risk of System-Level Accidents

February 10, 2011 Comments off

Understanding and Coping with the Increasing Risk of System-Level Accidents (PDF)
Source: Swiss Re

The world has seen a number of recent events in which major systems came to a standstill, not from one cause alone but from the interaction of a combination of causes. System-level accidents occur when anomalies or errors in different parts of an interconnected system negatively reinforce one another, spiraling up out of control until they eventually drive the system outside of its sustainable boundaries, resulting in system “collapse.” Systems with multiple components that are tightly linked to one another are prone to such events. Increasingly, our industrial, commercial, and social systems are coming to have the characteristics that predict system-level accidents—in some cases, driven by consistent economic forces that cause tighter interconnections to form within existing systems—and there seems to be a rising frequency of such events. Since we inhabit an increasingly tightly interconnected global collection of such systems, finding ways to reduce and to manage systemic risk is an important priority.

Categories: business and economics, insurance and risk, international, Swiss Re
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