If we were not ready for a predictable pandemic, what else aren’t we ready for…
by Rebecca Nadin, Director, Global Risks & Resilience, Overseas Development Insititute
This blog also acknowledges contributions from Sarah Opitz Stapleton with work adapted from Risk-informed development: from crisis to resilience
The 21st-century risk landscape
Today’s world is more interconnected and interdependent than ever before. Technology is evolving in ways that even ten years ago, our younger selves would not have imagined. This world also often described as volatile and unpredictable — facing unprecedented threats such as climate change, pandemics and antibiotic resistance, increasing economic and financial instability, the spread of transnational criminal networks and terrorism, cyber disinformation and disruption, geopolitical volatility and conflict. These global threats are creating a 21st-century risk landscape that is highly complex. One in which our own responses to threats are generating feedback, creating further new and emerging risks.
Many of these global threats are not new and nor are their impacts so unpredictable. Many now watch Bill Gates during a Ted Talk in 2015 explaining “why we are not ready for the next pandemic” with chills. And in 1995 the IPCC Second Assessment Report concluded there was “a discernible human influence” on the Earth’s climate. Yet the will of the politicians and the private sector to truly tackle climate change remains elusive.
Citizens and businesses expect governments to be prepared for a wide range of threats and risks. Scientists and experts warn time and time again about the destabilising nature of their field’s specific threats and how events could unfold but are rarely heard by the wider public or policy-making audiences. Until, of course, after an event occurs. Only in January, were we worried about a possible World War III, exploding in the Middle East when a U.S. airstrike killed Qassem Soleimani, commander of Iran’s elite Quds Force. Certainly, the rapidity of the 2008 financial crisis and the devastations of the 2011 Fukushima earthquake and subsequent nuclear emergency caught many off-guard.
The risk industry calls these black swans — events that seem difficult to predict (or more often ignored by most), with a low probability of occurring but with severe consequences. We are increasingly blind-sided when they occur, from the immediate impacts, the cascading impacts as these threats intersect, and the unintended consequences of our responses as they too catalyse new risks.
It’s not just about confronting these threats, it’s about understanding how they materialise and metastasise. They are not just interconnected leading to cascading and layering of risks; they are transboundary crossing political and biophysical borders; they’re transitional, shifting socioeconomic, technological and environmental systems as we respond and adapt to them; they’re transformational, with the potential to radically change societies and ecosystems and alter the status quo; and they’re all occurring simultaneously, in a single country or across many. Also, the rate, frequency, intensity, nature and geographical spread of threats and subsequent risks is changing radically. Some of the risks arising from these threats are intergenerational and accumulative (such as climate change); others arising rapidly and with severe consequences (such as we have seen with COVID-19, cyber misinformation and attacks, and economic instability). The 21st-century risks landscape means we need to accept that ‘black swans’ are increasingly becoming the new normal.
Perhaps justifiably, we struggle to wrap our heads around the enormity of the complex risks cascading from these threats. Understandably, people often want to protect themselves from disturbing information to avoid fear or feeling helpless. Global threats such as pandemics and climate change challenge what political scientists call our ontological security — the confidence that most human beings have in the continuity of their self-identity and the constancy of the surrounding social and material environments of action. In other words — we simply get overwhelmed just thinking about the enormity of the problems and what to do about them. So perhaps, when we say we live in unprecedented times what we really mean is that we have not allowed ourselves to fully grasp the true nature, characteristics and complexity of global threats. This also explains why our risk management mindset remains very siloed.
How global threats and our responses interact in practice
To coin a military phrase, we need much better situational awareness of the nature of these global threats and holistic understanding of how they might change our operating context — our human systems. As Henry Paulson stresses “The fact we are not ready for a very predictable pandemic should be a wake-up call” he argues that the leading economies in the G20 must confront risks across a broader range of threats.
The problem is that traditional approaches to managing risk often look only at one threat at a time — they don’t, and perhaps can’t, address multiple, interconnected, simultaneous threats. Instead of taking a system thinking approach, we cling to linear analysis and response. But this doesn’t constitute risk management. Covid-19 started as a public health crisis and quickly infected all aspects of our human systems, creating obvious, and not so obvious consequences.
From the early days of the Covid-19 pandemic, the potential scale of economic and financial instability became evident as lockdown measures resulted in a dramatic fall in consumer and business spending. Less obvious is what the economic and financial fallout might have been if lockdown measures were not instituted, with some early estimates of savings of $5.2 trillion to the United States alone from lives saved.
Around the world, governments are scrambling to deploy monetary and fiscal policy measures to minimise the immediate and longer-term impacts. Companies small and large are quickly having to manage their working capital or liquidity shortages. Governments will have to decide which entities are important to our systems. Some will be winners, some will be losers. And public opinion will be shaped by what people personally experienced in terms of lost jobs or depleted finances, not by what did not happen — even if what was avoided was the worst case.
The lockdown is also impacting the bottom line of less ‘traditional’ actors. Transnational crime networks are switching or intensify other areas of revenue. For example, due to supply chain issues in a Covid-19 operating environment, the price of cocaine has tripled in the UK. With the consumer market for drugs in many countries restricted due to lockdown measures, criminal gangs who rely on income from certain illegal drugs are diversifying. Covid-19 scams are rife, from phishing emails to companies selling fake products. The speed of the diversification into new product areas demonstrates the adaptability of these criminal networks to emerging crisis and the potentially huge illicit profits to be made.
For those concerned about climate change, the post-Covid-19 world is increasingly becoming about ensuring that economic recovery is a green one. Lockdowns have meant dramatic reductions in carbon emissions from aviation and industrial output — an unintended but positive consequence for the environment. While also being devasting for the millions employed in the tourism industry around the world.
There are calls that the emissions reductions we are experiencing must be sustained if we want to tackle climate change. But at the same time the banking industry, previously concerned about climate risk financial disclosure is now calling for a “pragmatic” approach, with some financial sectors calling on regulators to delay requirements to start disclosing the exposure to climate-related risks by the end of 2020.
Technological responses to the pandemic, such as South Korea’s requirement that those exposed to the virus must download a mobile-phone app so they can be monitored during self-quarantine, and Israel’s announcement that it’s Security Agency will no longer need a court order to track individuals’ phones, have raised new concerns about surveillance and privacy, and about the trade-offs between health, big data and individual rights.
“We are our choices.” Jean-Paul Sartre’s
We need to re-evaluate how we perceive and tolerate risk. Risk perception, preferences and tolerances are subjective and value-laden, they determine what we deem to be acceptable or unacceptable risks, and how severe we think those risks might be. These shape how we respond. We’re seeing the real-time fallout of this right now through the COVID situation — even with the same information about potential mortality and morbidity rates, governments are reacting differently.
Countries’ approaches to risk management are driven by their tolerances for perceived risks. In a complex situation, there may be a range of options where the ‘least bad’ is deemed the right course of action. In the case of Covid-19, shutting down the economy was seen as more preferable to allowing the pandemic to take hold.
Concerned about vulnerabilities to its supply chain from climate shocks as well as historical concerns about its geographic susceptibility as a double landlocked nation, Switzerland’s approach has been to stockpile foodstuffs and medicines. But for other countries cost is an obstacle, as well as politicians’ unwillingness to pay to store products that may never be used and require funds to be diverted from other priorities. Others might focus on building resilience by strengthening national production capacity; the trade-off being increased protectionism.
But who gets to decide what is an acceptable level of risk to whom? Is it governments, business or citizens? Deciding on the ‘acceptable’ level of risk involves scientific and technological evaluations, mapping of political considerations and economic cost-benefit analyses and weighing these against social and moral considerations. It also must better take into account not only how governments prioritise risks, but also on whose responsibility it is to manage and bear the risks. Quite often, those who must bear risks are different from those whose job it is to manage them.
Asking the right questions, not the easy ones
Of course, it’s easy to see these threat interactions and unintended consequences of our risk prioritization and responses after the event. Everyone has a PhD in hindsight, especially it seems Piers Morgan. But perhaps in the first instance, systems thinking is more of a shift in mindset than a hard skill. We need to become much more cognizant of the true nature and characteristics of the 21st-century risk landscape. We also need to make our rational starting point an innate acknowledgement that no matter how well targeted our actions and interventions are; they will have multiple intended and unintended consequences. Only then can we start to find the courage to ask the right questions instead of the easy ones; Do I really understand the short- and long-term implications of my risk management decisions? How can I adapt to the evolving risk landscape? What do we need to change about standard approaches that are consistently failing? Do we have a 21st-century mindset?
Paulson calls for the development of a ‘framework for global co-ordination’, to ‘fix global institutions and establish the treaties and protocols needed to prevent and mitigate future tragedies’. Addressing complex risks requires policy and legislative coherence at local, regional and global frameworks. However, policy, programming and financing architecture for risk management is deeply fragmented. As is allocation of resources and the political accountability at the national level, which often lies with sectoral ministries.
There is already inequality (along income-levels) between countries in ability to carry out risk assessments. Moving to a risk-informed development approach that considers systemic risks, understands the risk preferences of actors and assesses trade-offs of response measures is critical. But without adequate support to build the risk assessment capabilities in low-income countries, the gap is going widen even further.
Perhaps the greatest concern is that in the post-COVID-19 world, we will return to traditional siloed approaches of risk governance, clinging helplessly to linear analysis whilst failing to grapple with the unintended consequences of our responses to manage one set of threats and risks while ignoring the need to tackle others — particularly climate change.
Instead, we need to ensure that it is a catalyst for the birth of a 21st risk management mindset. One that embraces systems thinking, one that enables us to consider how multiple threats interact and how we can build resilience by ensuring our risk mitigation policies and programmes do not lead to unintended, cascading consequences. Climate change has so far not had this effect but maybe Covid-19 can.
