Systemic Risk

Definition

Systemic Risk denotes any Risk Type that is (or may become) pervasive across the entire system being analyzed.

Causes

Systemic risk emerges as a negative design feature of systems that are

• too homogeneous (the same Risk Factor may simultaneously affect large number of entities
• too interconnected (an initial Risk Event affecting one unit propagates / amplifies to other units)

Examples

• Various types of financial Contagion Risk (encompassing markets and credit systems)
• Climate-Related Risk
• Pandemic Risk
• Increasingly considerations also around Systemic Cyber Risk

Issues and Challenges

• The terms systemic and systematic risk are not synonyms but have an ambiguous overlap. See Systemic versus Systematic Risk

See Also

• Correlation
• Systematic Risk