The governance of uncertainty: how to respond to non-quantifiable risk?

Rainer Sachs ()
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Rainer Sachs: Sachs-Institut

Environment Systems and Decisions, 2023, vol. 43, issue 4, 537-543

Abstract: Abstract Non-quantifiable risks become increasingly relevant. Reasons include the complexity of the risk landscape, multiple concurring crises, and systemic events. The governance of uncertainty poses a challenge for organizations and societies today and our ambitions related to sustainable development and transformation. Lack of understanding, knowledge and data, inadequate methods, and models limit the success of conventional risk management approaches. Increased efforts to understand risks and improve the availability of data are valuable. Risk transfer and mitigation often rely on quantification and measurability. But following a “more-of-the-same” strategy and keeping the focus primarily on the target of quantification reduces the solution space for the governance of non-quantifiable risks. In this paper, we argue for a change in perspective. We make the case for responding to non-quantifiable risk in a fundamentally different setting. Successful governance will require a combination of hard and soft tools. Hard tools are strategies for anticipation, preparation, and systemic thinking and acting. These strategies—particularly their diversity and multiplicity—provide options for “what” can be done to improve governance. Soft tools, in contrast, emphasize the “how” of governance. They address ways of framing and communication, risk culture, values, and belief systems. The less we can know for sure in a complex and uncertain environment, the more important these soft tools will be.

Keywords: Uncertainty; Risk governance; Systemic risk; Complexity; Risk culture; Human factor (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10669-023-09920-3

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