A Taxonomy of Threats for Macro-Catastrophe Risk Management

Cambridge Centre for Risk Studies Working Paper Series01234The two threat types are uncorrelated, and if they occurred coincidentally, theirconsequences would be broadly the same as if they occurred independentlyNo mechanism for this threat to directly cause an event of the second threat type, but theconsequences of a coincidental second event shortly afterwards would be made significantlyworse, for example because resources would be already committed and abilities to respondand contain would be weakenedThere is some potential for an event to contribute to the causal mechanisms that wouldtrigger the occurrence of an event of the second typeAn event of this type potentially can directly trigger an event of the second typeAn event of this type potentially can directly trigger another sub-category of threat withinthe same threat categoryThe worst catastrophes are combinations of events, where a primary catastrophe causes secondaryeffects by triggering another ‘follow-on’ catastrophe. The escalation of consequences can be worsethan if they had happened separately. For example the Japan Tohoku catastrophe of March 2011 wasa magnitude 9.0 earthquake that triggered a 20 metre tsunami, that caused an INES level 7 nuclearpower plant industrial accident. The correlations and potential causal mechanisms for one type ofcatastrophe to trigger another is an important element of risk assessment.The most surprising and unexpected catastrophes tend to fall into this category of multiplecompounded shocks.The potential for one class of threat to trigger or exacerbate the effects of another threat type isconsidered systematically in the matrix in Figure 1. A qualitative assessment is made for the potentialfor one event to trigger another, categorized by the degree of causation and exacerbation that wouldresult. Not all combinations can be related back to identifiable historical precedents, but it is possibleto conjecture potential mechanisms and plausible scenarios where one catastrophe can lead toanother.7 PrecedentsThere are a number of other frameworks and classification systems for considering macrocatastrophes.Each has merits and limitations.7.1 WEF Global Risks ReportThe World Economic Forum has been publishing a review of Global Risks 25 annually since 2005. Risksare structured into Economic, Environmental, Geopolitical, Societal, and Technological. It develops alisting of global risks in terms of impact, likelihood and interconnections, based on a survey of expertsfrom industry, government and academia. The annual review makes this a useful guide to thechanging perceptions and importance assigned to the risks identified. The framework is derived fromexpert opinion and is crowd-sourced from a broad range of analysts.25The 2013 version of the WEF Global Risk Report is available http://reports.weforum.org/global-risks-2013/Cambridge Centre for Risk Studies 14