Governance, Ethics & Risk
Systemic risk
Systemic risk is the possibility that disruption spreads through an interconnected system and impairs the functioning or stability of the system as a whole.
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Systemic risk is the risk that a shock, failure or accumulating pressure propagates through interconnected institutions, markets, ecosystems or social systems and causes widespread loss of function or stability beyond the original source.
Overview
What it means in practice
Systemic analysis looks at dependencies, feedback loops, concentration, contagion and thresholds. A risk can be modest for one organisation while becoming severe when many actors share the same exposure.
Why it matters
Conventional enterprise risk management can miss harms that emerge over long horizons or through collective behaviour. Sustainability issues frequently cross organisational and jurisdictional boundaries.
Common misconception
Systemic does not simply mean very large. The defining feature is the potential loss of function across an interconnected system, often through transmission or reinforcing effects.
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