This chapter provides contextual background on critical risk governance, including why the OECD developed the Recommendation on the Governance of Critical Risks and an overview of events that actualised critical risks in OECD Member countries between 2017 – 2023. It provides cross-country comparisons that qualify the stakes involved in managing critical risks, including annual deaths due to disasters and annual economic damages. The chapter situates policy debates on resilience in light of actions taken before and during the COVID-19 pandemic, with a view to stimulating reflections on the range of actors needed across government, and in cooperation with the whole-of-society, to operationalize resilience ahead of future crises.
Tracking Progress in the Governance of Critical Risks
Abstract
Risk governance has been used widely for over three decades in various policy analysis contexts, but its application to critical risks is recent. Governance refers to the actions, processes, traditions and institutions by which authority is exercised and decisions are taken and implemented. Risk governance applies the principles of good governance to the identification, assessment, management and communication of risks (Florin and Bürkler, 2017[1]). It grew to prominence in policy debates over the uptake of new technologies, e.g. surrounding the broad use of genetically modified foods.
In a context of increasing and complex global shocks, the OECD Council adopted the Recommendation to apply risk governance to policies for managing risks of national significance, so-called ‘critical risks’. The increase in global shocks is associated with features of modern economies meant to create efficiencies and productivity gains, but which produce unintended consequences, including the slow build-up of systemic risks capable of transboundary, cascade or contagion effects. Among such features are technological interdependencies and interconnectedness, global mobility, social networking, population concentrations and fast-paced technological change (OECD, 2011[2]). These trends usually result from a multitude of impersonal market forces and societal decisions, not a co-ordinated top-down plan. The Recommendation provides a framework to guide Adherents in addressing such challenges as who to involve in governance of critical risks, how to foster effective engagement, and how to monitor and evaluate the range of risk management roles and responsibilities.
Governance mechanisms are frequently outpaced by the processes driving technological and social change. This drives concerns about the suitability of risk governance mechanisms to efficiently deal with urgent, evolving and uncertain risks (such as those associated with long term shifts in temperatures and weather patterns); to resolve trade-offs between diverse, sometimes conflicting, needs and interests; or to deal with potential risks from new technologies in the context of economic competitiveness and national security (for example, artificial intelligence).
In 2014, the OECD adopted the Recommendation on the Governance of Critical Risks (the “Recommendation”) to support governments in better assessment, prevention, response and recovery from the effects of extreme events. Its five principles call on governments to adopt more suitable forms of risk governance to contend with a context of increasingly complex, and in some cases systemic, risks. Key provisions under each main principle were inspired by leading risk governance concepts and practices at the time, as they pertained to risks of national significance. In this respect the Recommendation provides a unique, one-stop strategic framework for countries on how to facilitate co-ordinated approaches to managing critical risks.
The Recommendation provides that Adherents should:
Establish and promote a comprehensive, all-hazards, and transboundary approach to country risk governance to serve as the foundation for enhancing national resilience and responsiveness
Build preparedness through foresight analysis, risk assessments and financing frameworks, to better anticipate complex and wide-ranging impacts
Raise awareness of critical risks to mobilise households, businesses and international stakeholders and foster investment in risk prevention and mitigation
Develop adaptive capacity in crisis management by co-ordinating resources across government, its agencies and broader networks to support timely decision-making, communication and emergency responses, and
Demonstrate transparency and accountability in risk-related decision making by incorporating good governance practices and continuously learning from experience and science.
Source: (OECD, 2014[3])
Good governance of critical risks is a strategic investment in preventing deaths, in preserving economic competitiveness and security, and in reinforcing trust in public institutions. In democratic countries citizens expect governments to be prepared for a wide range of possible crises and global shocks. Trust in government is directly affected by how quickly, efficiently and transparently policy decisions are taken in crisis situations. Lack of responsiveness and reliability to deliver on such fundamental expectations of the social contract not only result in political accountability, they also undermine compliance with a wide range of public policies, such as public health responses, regulations and the tax system. Trust in government is also key to strengthening resilience, as it facilitates crisis management measures, nurtures political participation and builds institutional legitimacy. Trust is needed to help governments tackle long-term societal challenges such as climate adaptation, ageing populations and infrastructure, or social fragmentation, which influence the critical risk landscape (Brezzi et al., 2021[4]).
The Recommendation was adopted following such transboundary crises as the 2011 Great East Japan Earthquake, the European Volcanic Ash Cloud, the H1N1 and H5N1 flu outbreaks, MERS and Ebola virus epidemics, the BP Deepwater Horizon oil spill, and multiple, large-scale attacks by terrorist groups, as well as numerous climate-related and geological disasters. These extreme events revealed elements of a new risk landscape characterised by increasing technical interconnectedness and economic interdependencies, where disruptions to one critical system transmit impacts across production, distribution, and social networks. Effective management of such critical risks requires a new approach to risk governance that leverages the disaster risk and crisis management capabilities of multiple actors, and invites their input in policy design.
How crises are managed, before, during and after they occur, puts citizen trust in government to the test. Citizens expect governments to identify and assess the highest risks to their country, enact policies to mitigate them, invest in preparedness and response capabilities, and support financial recovery and reconstruction plans while exercising fiscal responsibility. Importantly, these public investments and policies should be informed by scientific hazard analysis and vulnerability studies. The Recommendation calls on Adherents to understand critical risks as the combination of an event’s likelihood and potential for consequences of national significance.
Governments function within constraints of defined jurisdictions and statutory authorities. They often have neither the means nor the opportunity to manage a transboundary risk effectively on their own. To address such gaps, the Recommendation calls for a fundamental shift in risk governance that fosters stronger international co-operation, whole-of-government co-ordination at national and sub-national levels, and enhanced partnerships with non-government stakeholders.
Changes in climate, technology, demography and mobility were amongst the principal drivers of exposure and vulnerability behind critical risks in 2016. While these risk drivers continue, the worldwide COVID-19 pandemic and Russia’s war of aggression against Ukraine present a unique backdrop to this Report. They both present multi-risk scenarios and long-lasting crises that have required governments to adapt and seize opportunities for international co-operation.
The COVID-19 pandemic in particular provides a lens to examine application of the Recommendation across countries that suffered from the same critical risk over approximately the same period of time. The experience of the pandemic reaffirms that critical risks may arise in faraway locations, traverse national boundaries to produce deadly consequences and complex, long-lasting disruptions to economic activities. Russia’s war of aggression against Ukraine has destabilised security of supply of energy and grains to many parts of the world (OECD, 2021[5]), and raises the likelihood of broader armed conflict, as well as cyber-attacks and other acts of sabotage on critical infrastructure systems. Both the pandemic and the war have raised awareness about the risk of overdependence on unreliable supply chains for essential goods.
In addition to the pandemic, most Adherents reported having suffered from at least one major disaster or crisis since 2017 that generated extensive direct or indirect socio-economic impacts. Table 1.1 presents information on occurrence of critical risks since the 2017 Report (other than COVID-19), many of which led to enactment of policy reforms. The examples cover a wide range of hazards and threats that Adherents’ crisis management systems have had to respond to and bring into focus the need to continually develop disaster risk and crisis management capabilities.
Often, these events challenged crises managers by their unexpectedly large scale, their novelty or unprecedented nature, and their complexity, all of which produce uncertainty concerning their consequences and how to handle them effectively. In some cases, the impacts involved major loss of lives, damage and destruction of property, and costly disruption to public and private critical infrastructure or key industries. These consequences in turn may lead toward or deepen economic recession and acute social welfare losses, as well as impact trust in government. Even absent any significant direct losses, a crisis may threaten core social values, increase tensions among different stakeholders, and lead to political backlash against decision makers, if the public perceives the crisis response to be inadequate.
Source: 2022 OECD Questionnaire on the Governance of Critical Risks and Secretariat desk research
Nearly all Adherents are susceptible, to greater or lesser degrees, to the same macro-trends driving increased disaster damages, such as extreme climate events and climate variability, highly interdependent and digitised infrastructure, excessive dependence on supply from a single source, aging societies, and polarised income distribution. These vulnerability factors are growing at the same time that intensive and frequent climate hazards intensify (Intergovernmental Panel on Climate Change (IPCC), 2023[6]) and human threats increase. The emerging picture of future disasters calls for improving capacity to understand, anticipate and prepare to respond to emerging critical risks.
Over the last two decades the scale and breadth of disasters has increased steeply, leaving lasting marks on affected communities and livelihoods. In 2020 alone, disaster events related to natural hazards affected approximately 100 million people, accounted for an estimated USD 190 billion of global economic losses, and resulted in 15,082 deaths (Jones, Guha-Sapir and Tubeuf, 2022[7]). Figure 1.1 depicts an upward trend in the average number of disasters over the past 35 years due to natural hazards and technological accidents across all Adherents. While the number of technological accidents has decreased on average, disasters due to natural hazards continue to increase in frequency.
Source: Authors’ calculation using data from: EM-DAT: The Emergency Events Database - Université catholique de Louvain (UCL) - CRED. D. Guha-Sapir –www.emdat.be,Brussels, Belgium (accessed on January 2023).
Figure 1.2 depicts the annual average number of disaster fatalities relative to the size of a population. It refers to deaths due to natural and technological hazards during the period 2000-2020, excluding COVID-19 or heat waves and shows the Adherents suffering relatively high disaster fatalities in proportion to the size of their population. The trend across Adherents overall is one of improvement, i.e. average disaster fatalities have declined in recent decades, especially when outlier events are not counted. This progress is testimony to the success of investments in structural protection measures and non-structural disaster risk reduction measures. There is also evidence suggesting Adherents with good coverage of multi-hazard early warning systems have lower mortality rates compared to countries that have little or no early warning systems (UNDRR and WMO, 2022[8]) .
Note: This figure includes fatalities due to natural and technological hazards only, it does not include data on deaths due to heat waves (or COVID-19) as the cross-country studies generally fall under excess deaths, making it hard to compare with the other disasters on the table (which result in mass fatalities).Many national studies do count the mass fatalities due to heatwaves and COVID, but many different methodologies are used, which calls into question validity of cross country comparisons.
Note 2: Deaths from the earthquakes that affected Türkiye in February 2023, which resulted in 48 448 deaths, have not been factored into this graph as the event fell outside the time series considered.
In February 2023, a series of severe earthquakes caused significant losses in Türkiye. The earthquakes were unprecedented in geographic scope and magnitude of the damages and losses suffered. Across an area spanning more than 110,000 square km, these earthquakes are reported to have led to the death of 48,448 people to date, with around 3.3 million people displaced and almost two million people being sheltered in emergency temporary accommodation (Presidency of the Republic of Türkiye, 2023[10]).
Adherents’ average economic losses from extreme events continue to escalate in about 1/3 of Adherents. (United Nations General Assembly, 2023[11]) As Figure 1.3presents, economic losses due to disasters are particularly acute in five Adherents where average annual losses are particularly high. In New Zealand and Chile, the annual average in economic damages due to disaster was driven up by just a few, particularly extreme, events.
Note: Data covers 38 out of the 41 Adherents: Kazakhstan, Morocco and Tunisia are missing. For information on the calculation of economic damages as a percentage of GDP, refer to the technical notes in Annex A.
In addition to recovering from the immediate, direct effects of disasters, Adherents are still experiencing the knock-on effects of the COVID-19 pandemic, which has had an unprecedented impact on the global economy. In 2020, reductions in trade and output volumes were amongst the highest since the Second World War. The declines in both world industrial production and goods traded in the first half of 2020 were of similar depth to those at the trough of the Global Financial Crisis. The volume of global trade in goods has recovered to the pre-pandemic level at fast pace from around mid-2020. (Arriola, Kowalski and van Tongeren, 2022[13]).
Beyond economic impacts, the COVID-19 pandemic also had grave consequences in terms of loss of life and wider impacts on the health and social welfare of people. The pandemic claimed millions of lives, with many more suffering long-term effects as a direct or indirect consequence of the virus. By the first quarter of 2023, more than 3.26 million people had died from the virus across OECD countries. However, it is widely recognised that these records underestimate the real death toll of the pandemic. Alongside COVID-19 deaths, excess mortality – a measure of deaths from all causes over and above what could normally be expected for a given period of time – provides a complementary measure of the impacts of COVID-19 (Diaz Ramirez, Veneri and Lembcke, 2021[14]).
Note: Data on excess deaths and COVID-19 deaths up to week 52-2022. Data on excess deaths missing for Japan, Korea, Türkiye, and Ireland. Different methodologies are available for calculating excess deaths. Please refer to the methodological note that accompanies this dataset: https://stats.oecd.org/wbos/fileview2.aspx?IDFile=97aacc20-eac4-4e44-8f59-9fb5b7e25090
Source:
In addition to excess deaths the impacts of the COVID-19 pandemic have also been felt in a myriad of other less direct ways, for example: supply chain disruptions for essential goods, school closures that jeopardise expected learning outcomes and long-term productivity, severe adverse impacts on mental health, and increased risk of domestic violence. Before the summer of 2020, more than half of the world’s population had experienced a lockdown with strong restrictions on personal movement and (OECD, 2020[17]) restricting civic space, underpinning concerns about the risk of democratic backsliding as a result of the pandemic (OECD, 2022[18]). As governments implemented measures to reduce close contact between individuals, school closures disrupted traditional schooling in 2020. The majority of OECD Member countries implemented school closures that saw pupils lose more than one fourth of their instruction days in 2019-2020. However, the number of days schools were closed varied considerably across OECD countries (OECD, 2022[19]) (see Figure 1.5).
Note: First quarter of 2022. Full closure of lower secondary schools, excluding school holidays, public holidays, and weekends
Source: (OECD, 2022[19])
Mental health indicators worsened severely during the pandemic, with rates of depression in OECD Member countries doubling in some cases. The periods when the highest rates of mental health conditions were reported seem to correlate with periods of intensifying COVID-19 deaths and strict confinement measures; (OECD, 2021[20]) evidencing the links between measures intended to contain the virus, the direct impacts of the virus itself and the cumulative effect of both on the mental health of the population. The long-term effects of these adverse second order impacts will require time to study and understand more fully; however, they are likely to entail significant changes to social vulnerability. Further, since the onset of the COVID-19 crisis there has been an increase in officially reported incidents of domestic violence, of calls to helplines, and of visits to websites offering support and assistance (OECD, 2022[21]). Just as forward-looking climate risk assessments consider how projected increases in average surface temperatures will drive future hazards, so too should future-oriented threat assessments analyse the significance of rising numbers of mental health disorders triggered by COVID-19.
Note: National estimates of prevalence of depression or symptoms of depression in early 2020¹ and in a year prior to 2020. To the extent possible, 2020 prevalence estimates were taken from March-April 2020.
Source: (OECD, 2021[20])
The adverse impacts of the COVID-19 pandemic on public health, employment and education outcomes affected all Adherents, but the most vulnerable in society felt them most acutely (OECD, 2022[22]). When the Recommendation was adopted in 2014, it framed the challenge of resilience as an opportunity to invest in safer and better lives for the future. The impacts of COVID-19 revealed more clearly how income inequalities accentuate vulnerabilities and exposures, shaping remarkably different outcomes for vulnerable groups in populations (Bollyky et al., 2022[23]).
A stark reminder that governments must prepare for polycrises and uncorrelated, critical risks is the initiation of Russia’s war of aggression against Ukraine. In addition to destroying lives, homes and critical infrastructure networks in Ukraine, it has also led to the largest wave of refugees in Europe since the Second World War, with over a quarter of Ukraine’s population leaving the country (OECD, 2022[24]). The challenge of providing temporary protection to persons leaving Ukraine has affected all Adherents in Europe (see Figure 1.7). In addition, the war has led to a series of knock-on effects. These include disruptions to global supply chains for energy and agricultural resources that place pressure on economies around the world (OECD, 2022[25]), which were already stressed by the rebound from the COVID-19 pandemic (OECD, 2022[26]).
Note: Numbers for Switzerland and Iceland correspond to numbers reported by November 2022, numbers for Türkiye and the United Kingdom are from January 2023, all other numbers correspond to December 2022
Sources: Eurostatand UNHCR Data
The Recommendation provides a framework for comprehensive actions that go beyond traditional disaster risk and crisis management. It calls on Adherents to leverage the production capacities, expertise, mass mobilisation of resources and capabilities across the whole of government, private and voluntary sectors needed to achieve an effective scale of response to shock events.
Good governance of critical risks does not aim to prevent all potential impacts, but rather to foster agreement on a mix of risk reduction, mitigation, and preparedness, in order to increase overall resilience. The Recommendation provides a suite of governance tools that Adherents can use to prepare for the complex aspects of managing critical risks, beginning with a high-level overview of top risks for policymakers. It calls for investment in a mix of preparedness measures for known and understood threats and hazards, and promotes building resilience, i.e. capacity to adapt, absorb, respond and recover from unanticipated or emerging threats.
The COVID-19 pandemic exposed many gaps in preparedness, but it also revealed resilience qualities across government, the private sector and civil society that were perhaps underestimated. Decades of public and private investments to increase access of households to broadband internet enabled millions of professionals to adapt to stay-at-home orders and continue working in some semblance of normalcy during periods of confinement. In addition to remote working, students took to distance learning and patients received consultations and prescriptions via telemedicine. These shifts, undertaken during exceptional conditions, revealed opportunities for rapidly evolving the way societies work, learn, and deliver essential services in crises. The ability to move rapidly to large-scale remote working and service delivery was a key source of government resilience during the initial shock of COVID-19, and critical to continuity of government functions. It was possible partly because OECD governments (22 of 34) reported to already have had the digital technology systems required for remote working in place prior to COVID-19 (OECD, 2021[27]).
Source: (OECD, n.d.[28])
Public-private partnerships during the pandemic played an important role in fostering resilience. For example, massive government funding and emergency use authorisation accelerated the development, manufacturing, and distribution of COVID-19 vaccines, therapeutics, and diagnostics. Public investment in distribution infrastructure led to the availability of viable vaccines years earlier than typical development timelines. Non-government organisations, from local volunteer organisations to global philanthropic foundations played a key role in securing and delivering diagnostic tests, treatments and vaccine doses.
Note: Fully vaccinated people are those who have received all doses prescribed by their vaccination regimen (e.g. 2 doses for Pfizer/BioNTech, Moderna, Oxford/AstraZeneca, etc. and 1 dose for Johnson & Johnson, CanSino, etc.). Alternative definitions of a full vaccination, e.g. having been infected with SARS-CoV-2 and having 1 dose of a 2-dose protocol, are not used here to maximise comparability between countries.
Source: (Mathieu et al., 2021[29])
Through the Recommendation the OECD has contributed to the global dialogue on management of disaster risks, and in particular by bringing attention to the value of and challenges in risk governance. A first report was published in 2017 to assess the progress of Adherents to the Recommendation in implementing its provisions between 2014 – 2016 (hereafter the “2017 Report”). The 2017 Report concluded, “Generally, implementation of the Recommendation remains uneven across the disaster risk and crisis management cycle, but with a few exceptions Adherents are able to keep the local impacts of disasters under control without disrupting the social order for extended periods or spreading to the economy as a whole”. The experiences of the COVID-19 pandemic reaffirm the importance of preparing well for extreme events, and provide extensive lessons for building a more resilient society and economy across sectors.
This second report on implementation assesses the continued progress of Adherents and considers the continued relevance of the Recommendation. All OECD Members as well as Kazakhstan, Morocco and Tunisia have adhered to the Recommendation. One aim of this second implementation report is to stimulate reflection amongst Adherents on what policies and practices would strengthen the governance of critical risks going forward. It provides Adherents with illustrations and country case examples of how different Adherents have been implementing various provisions of the Recommendation. It aims to inspire Adherents’ own governance frameworks to continue to develop new capabilities for resilience. The second Report takes stock of persistent gaps in risk governance amongst Adherents and highlights their strengths in facing the challenges of a future ready state. The Report aims to provide a foundation to reflect on revisions to the Recommendation, so that Adherents may continue and redouble their efforts to foster resilience to all critical risks and fortify trust in government as a key ingredient to reinforcing democracy.
This Report draws on information gathered through two cross country surveys carried out through the High Level Risk Forum: the OECD Questionnaire on the Governance of Critical Risks, and the OECD Survey on Governance of Critical Infrastructure Resilience.
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