New order of risk management: Theory and applications in the era of systemic risk

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The systems on which society depends are increasingly more open and connected, and the people, goods, services, technology, and information supporting these systems are increasingly more mobile. Inevitably, the overall risk landscape nowadays is increasingly more systemic. The COVID-19 crisis and the Geopolitical Crisis in Ukraine are ongoing examples of materialized systemic risks (SRs) that highlight the change and serve as a reminder of the global urgency to act on taming SRs immediately, before a point where we may no longer be able to mitigate and repair the impacts of such risks is reached. However, to be able to deal with SRs successfully, there is an acute need for a fundamental transformation in how we think of and manage risk, beginning with a better understanding of the notion of SR itself. We need to adopt a broader view of risk and deal with the complexity of its systemic nature without resorting to notions that isolate and remove from context. Hence, we need to consider risk as a complex physical phenomenon - with inputs from the formal and natural sciences, and as an equally complex social phenomenon - with inputs from the social sciences, under the understanding that the physical and the social are intertwined. In this research program, we will develop a comprehensive theory of SR that combines the physical and social dimensions of risk, its spatial and temporal domains, and its primary and secondary channels of impact within a framework that acknowledges differences in risk vulnerability and susceptibility. Then, building on the enhanced theoretical understanding of SR, we will: (1) redefine the risk management control cycle by revamping its stages to explicitly integrate SR; (2) develop risk financing mechanisms capable to cushion the financial consequences of SRs; (3) devise regulatory instruments that measure the inclusivity of SR transfer mechanisms and ensure accurate and fair reflection of the attribution to SR in regulatory accords.