European Parliament | 2022
This report Future Shocks 2022 addresses risks and building capabilities for Europe in a contested world. The coronavirus crisis has demonstrated that the European Union faces various risks and that those disparate risks are interlinked, and that the response to such challenges to the Union is stronger with the Union and its Member States acting together. Russia’s war on Ukraine, launched while this study was being drafted, shows us more than just the added value of the Union’s concerted action and the ability of EU institutions and Member States to find new and effective solutions to deal with major shocks.
Risks and policy responses linked
This paper, the first in an annual series, seeks to assess the risks to, and capabilities and resilience of, the EU system. Building on a review of global risks, it considers in detail specific risks with the potential to harm Europe and its people.
It then sets out options for policy responses to ensure Europe can address the dangers of such risks and minimise the potential damage. Among the options set out are those previously included in European Parliament resolutions, in positions from other EU institutions, and in policy papers from think tanks and stakeholders.
The figure on interconnections between the risks (left column) and policy responses (right column) set out in this study looks like this:
Risk definitions and dimensions
From the report: “Dictionary definitions of risk include ‘a situation involving exposure to danger’ (Oxford English Dictionary), ’the possibility of something bad happening’ (Cambridge Dictionary) and ‘something that creates or suggests a hazard’ (Merriam-Webster).
Risk analysis needs to go further to consider, for example, what is the subject of risk. Many of the reports considered here focus on risks to industry and business, not least on events that can lead to the loss of value of an investment. As this report has an EU perspective, it takes a broader approach. It will consider risks to stability, security and prosperity, all of which are core concerns of the EU and its citizens.
There are more elaborate definitions of risk than those just mentioned. An example from specialist literature is ‘uncertainty about and severity of the events and consequences (or outcomes) of an activity with respect to something that humans value’ (Aven et al., 2009). This combines two distinct aspects often taken as criteria for estimating the seriousness of a risk: probability and impact. Understanding risk also involves understanding uncertainty, which may be defined as a situation in which something is not known, is in doubt or is dependent on chance.
Risk has many dimensions. These include possible benefits of risk, risk aggregation, risk management, trade-offs between risks, the issue of mitigation versus adaptation, the need to understand the causes of risk and the need to communicate risk to a broader audience. The following will examine these aspects to clarify questions such as:
- Is a zero-risk policy a legitimate goal?
- What combinations of risks from different sectors are particularly dangerous (risk aggregation)? How can such aggregated risks be addressed in a multidisciplinary manner?
- Where is there a possibility that action to reduce one identified risk could lead to an increase of another risk (trade-offs)?
- Are the root causes of a given major risk well-known and generally agreed upon, or are they obscure or a matter of dispute?
- Are there measures that can mitigate several risks simultaneously?
- How can we move from risk mitigation and management to opening new opportunities for the EU?”
Some key figures of the report
The figure on the probability/Impact matrix for fifteen selected risks (2022/2023) looks like this:
The figure on the probability/Impact matrix for fifteen selected risks (2030) looks like this:
The governance of risk
In governance and public affairs, being in control is a desirable state of affairs. Public opinion responds badly to the appearance of loss of control. Managing risk is a legitimate concern of governance but can also be a sensitive and difficult topic.
Mitigation versus adaptation
There are differences of opinion about when risk should be met with mitigation – efforts to reduce the risk – and when it should be met with adaptation – changes in how one arranges one’s own organisation. This is a particularly lively issue in relation to climate change. In this area, mitigation is about limiting the extent of climate change effects, notably by reducing greenhouse gas emissions. Adaptation is about reducing vulnerability to the expected effects of climate change. These two approaches involve different costs and benefits; many experts support strategies that include both. (IPCC, 2014)
Risk management
Risk analysis and evaluation give a starting point. But the identification of potential hazards should not be an end in itself. It should feed into a risk management strategy (Rausand, 2011). Risk management involves identifying and applying measures and policies to control or eliminate potential harms based on judgements about the tolerability or otherwise of a given risk. For the present report, the risks to be managed are those that may harm the security, stability and prosperity of the EU.
Bibliography
Aven & Renn (2009) ‘On risk defined as an event where the outcome is uncertain’. Journal of Risk Research, Vol. 12, No. 1, January 2009, 1–11, p. 1.
IPCC (2014) Climate Change Synthesis Report 2014, p. 17
Rausand, M. (2011) Risk assessment: theory, methods and application. Hoboken, New Jersey: John Wiley & Sons.
Report Future Shocks 2022
This publication is part of Ecosystem City: Lessons from the Forest