Managing Systemic Risks

Managing Systemic Risks

Managing Systemic Risks begins with a working definition of systemic risk as "a systemic risk is a risk that an event will trigger a loss of confidence in a substantial portion of the financial system that is serious enough to have adverse consequences for the real economy." It focuses on an operational definition of systemic risk management as a combination of six specific things that governments can do:  

  • Resilience and robustness: reduce the chances of a mishap by making the system more resilient and robust;
  • Monitoring: put in place an early warning mechanism to detect when exposure to systemic risk is increasing; 
  • Response: develop a set of policy instruments to help nudge the financial system back on course when risks are rising; 
  • SSI oversight: regulate and supervise the safety and soundness of systemically significant institutions (SSIs) - that is, those institutions and markets whose failure would threaten the stability of the system as a whole; 
  • Failing institutions: manage the failures of SSIs in an undisruptive way; and 
  • Crisis management: contain any systemic collapse of confidence, institutions or activity and shepherd the system back to health.

The paper explores what exactly each of these possible elements of systemic risk management might involve.

Pew is no longer active in this line of work, but for more information, visit the main Pew Financial Reform page.

National Homeownership Month

Composite image of modern city network communication concept

Learn the Basics of Broadband from Our Limited Series

Sign up for our four-week email course on Broadband Basics

Quick View

How does broadband internet reach our homes, phones, and tablets? What kind of infrastructure connects us all together? What are the major barriers to broadband access for American communities?

Pills illustration
Pills illustration

What Is Antibiotic Resistance—and How Can We Fight It?

Sign up for our four-week email series The Race Against Resistance.

Quick View

Antibiotic-resistant bacteria, also known as “superbugs,” are a major threat to modern medicine. But how does resistance work, and what can we do to slow the spread? Read personal stories, expert accounts, and more for the answers to those questions in our four-week email series: Slowing Superbugs.