Guidelines for the Governance of Systemic Risks, in the context of transitions

Complex systemic risks are fundamentally different from conventional risks, and traditional risk management practices are not sufficient for dealing with them. Elaborating on previous IRGC work, IRGC’s guidelines for the governance of systemic risks (to be published in 2018) will address the question of how to deal with systemic risks in the context of transitions, i.e. in situations which require adaptation to new context conditions or transformation. Examples include desertification processes, fisheries depletion, transformation of energy systems or new transportation systems and mobility patterns.

The guidelines have the following objectives:

  • Provide guidance to organisations in understanding complex system dynamics and reflecting their own position within these dynamics.
  • Help actors in a system to either prevent the shift of the system to a regime that would be undesirable to them, or trigger and facilitate the transition of the system to a preferable regime, considering changes in underlying context conditions. In both cases the proximity to a tipping point may trigger a regime shift after which the system may collapse.

The guidelines comprise six interlinked steps to:

  • Explore the system in which the organisation operates, define its boundaries and identify key interdependencies
  • Develop scenarios of possible development of the system (‘foresight and broadsight’) and set goals for the organisation
  • Co-develop management strategies to deal with systemic risks that affect or may affect the organisation and navigate the transition
  • Address barriers and lock-ins that may come up during the process
  • Decide, test and implement strategies
  • Monitor, learn from, review and adapt

In the face of many unknowns, increasing the overall resilience of an organisation can be a way to prepare for and better deal with the shocks and stresses arising from systemic risks. In line with mainstream recommendations for resilience building, the IRGC will propose three main strategic approaches for operationalising the concept of systemic risks, i.e. dealing with systemic risks and navigating transitions:

  • Let the system self-organise and self-control
  • Undertake pro-active intervention in the form of prevention, adaptation and transformation
  • Prepare for disruptions, accidents and crises.

These strategies can be combined or implemented successively if proximity to a regime shift seems to increase.

There must be iteration between the steps, orchestrated by a facilitator. At all stages, communication, openness and transparency are key to ensure smooth proceedings, and collaboration, learning together and experimentation are essential for improving an organisation’s capacity to deal with systemic risks. This can be organised by the facilitator, who also has the task of organising some form of ownership for systemic risks.