Assessing Systemic Risk

Ian I. Mitroff and Abraham Silvers
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Ian I. Mitroff: University of California-Berkeley, Berkeley, CA, USA
Abraham Silvers: University of California, San Francisco, CA, USA

International Journal of Risk and Contingency Management (IJRCM), 2016, vol. 5, issue 2, 66-75

Abstract: Far too many applications of Risk Analysis (RA) and Risk Management (RM) treat risks as though they are distinct and independent. Thus, risks are largely treated as though they can be evaluated and mitigated independently of one another. This paper takes a fundamentally different approach. The basic argument is that there are no such things as independent and separate risks. All risks are part of a larger system of interrelated issues, problems, and risks. Each risk is not only connected to all of the other risks that are parts of the system, but if only in part, each risk is responsible, in causing and triggering of all of the other risks. Using recent findings in the probability of implication (Mitroff and Silvers, 2013), a simple mathematical treatment of the interconnectedness of risks is developed. The treatment is capable of being expanded indefinitely to include more complex situations. Finally, the mathematical treatment shows how risks and crises are interrelated.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:igg:jrcm00:v:5:y:2016:i:2:p:66-75

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