ETH Risk CenterChallenges and PerspectivesHans Rudolf Heinimann, Chairman of the Steering CommitteeWolfgang Kröger, Managing DirectorRisk Day, ETH Zürich, September 9, 2011

September 9, 2011 1ETH Risk Center

Wh ETH Ri k C t ?Why an ETH Risk Center?

Increasing integration and connectedness of systems („system-of-systems“)Increasing integration and connectedness of systems („system-of-systems“)

Interactions/interdependencies lead to «novel» kind of risks („systemic“) andcomplex behavioral patterns

Interactions/interdependencies lead to «novel» kind of risks („systemic“) andcomplex behavioral patterns

Risks emerge from various sources, interconnected at macro-level• Economy• Society

Risks emerge from various sources, interconnected at macro-level• Economy• SocietySociety• Geo-politics• Technology• Natural hazards

Society• Geo-politics• Technology• Natural hazards

=>Need for a „trans-silo“, truly integrative approach=>Need for a „trans-silo“, truly integrative approach

NZZ am Sonntag, 5.06.2011, Wirtschaft

September 9, 2011 2ETH Risk Center

I f t t ff t d b th 2004 R T lInfrastructures affected by the 2004 Rome Telcomini-blackout: Illustration of interdependencies

Transport (Air transport)

Stop of check-in and ticketing

services

f

Flood causes loss of power supply Delays and

Transport (Postal services)

Block of information flows

Breakage of a pipe carrying

cooling water in a T l d

Financial services (Banks)

ICT(Telco & Internet)

Flood of apparatus room

causes short circuit

service perturbations

Telco node

Shut down of the air-conditioning plant for

Failure of major telecommunicati

on node

ICT(Information systems and

circuit

Data transmission problem and partial out of

i f fi dconditioning plant for replacement causes

overheating

systems and networks)

service of fixed and mobile

phonesBoth main and

backup links fail by connecting to the same telco

node EnergyLoss of

monitoring andnode Energy (Power Supply)

monitoring and control in SCADA

ETH Risk CenterSeptember 9, 2011 3

U d t di l tExamples: Power Grids, Traffic Flows, Financial Markets, Large Supply Chains

Understanding complex systems

1. Large number of interacting (mutually coupled) system elements.

2. Element interactions are usually non-linear.

Causes & effects are not proportional to each other. Network interactions inducing cascading effects.

3. Dynamic rather than static & probabilistic rather than deterministic behavior.

Causes & effects are not proportional to each other. Network interactions inducing cascading effects.

September 9, 2011 ETH Risk Center 4

Source: D. Helbing

V l bilit d l d iVulnerability model and scenarios

Lo S sceptibilitLow Susceptibility

High Susceptibility

(Verletzlichkeit)

(Elastizität)

g p y

Susceptibility

(Anfälligkeit)

(Elastizität)

(Erholung)(Verkraftbarkeit)

Susceptibility

Source: S. Bouchon

September 9, 2011 ETH Risk Center 5

Meeting global challenges

There is great interest in understanding and governing risk and vulnerabilities but often these efforts are fragmented and isolated

There is a pressing need to develop an overarching and cross disciplinary vision of integrated risk management, e.g. at regional level

This endeavor would spurn the development of a new language toThis endeavor would spurn the development of a new language to model, understand, and handle risks across a wide range of domains in real time and of new interfaces

September 9, 2011 ETH Risk Center 6

Challenges of the new established ETH Risk Center

Managing the increasing complexity of our social and man‐made systems,

Managing systems for more robustness and adaptive capacity,

Overcoming highly segmented hazard and risk research and management activities,

Need for novel government structures and mechanisms to manage interrelated risks,g ,

Lacking approaches to manage whole portfolios of risks within a regional context.

September 9, 2011 7ETH Risk Center

Integrated Risk Management

Vulnerable Assets

ures

ureskk

• Human lifes

• Social Activities

S SGeopolitical Preservation

Mea

suM

easuRis

kR

isk • Social Structures

• Trust

• Infrastructure

Hazards

MM• Infrastructure• Lifelines

• Eco-Structures

Asset PortfolioRisk Portfolio Portfolio of Measures

September 9, 2011 8ETH Risk Center

Why Zurich as a place to do risk research?

Zurich Financial CenterCenter• One of the Leading Centers of

the World [#5]ETH hi

pgehi

pge

• Important Services• Banking• Insurance

ETHRisk Center

rtne

rsh

xcha

ngrt

ners

hxc

hang

• Security Dealing• Asset Management• Fund Providing• Stock Exchange

Par ExPar Ex

• Stock Exchange

September 9, 2011 9ETH Risk Center

Network of available resources (5 (6) departments involved)

LSATechnology

(Kröger)

LSATechnology

(Kröger)ZISC

Information Security

ZISCInformation Security

SystemicRisks

(Schweitzer) E tI ti

ETH

(Basin)(Basin)(Schweitzer) Entrepre-

neurial Risks(Sornette)

Innovation Policy

(Gerspach)

Integrative Risk Mgmt

Sociology

ETHRisk Center

RiskLabFinance & Insurance

(Embrechts)

RiskLabFinance & Insurance

(Embrechts)

Risk Mgmt.(Bommier)

(Helbing)

ConflictResearch(Cederman)

Math. Finance

(Embrechts)( )( )

CSSCSS

(Cederman)(Embrechts)

Traffic Systems(Axhausen)

Comp. Physics

(Herrmann) Forest Engineering

HazNETHNatural Hazards

(Faber)

HazNETHNatural Hazards

(Faber)

Center forSecurity Studies

(Wenger)

Center forSecurity Studies

(Wenger)

Engineering(Heinimann)

(Faber)(Faber)

September 9, 2011 10ETH Risk Center

HB Zurich – Systemic Risks in the backyard

Precipitation ScenariosEngelberg / Meringen `05Engelberg / Meringen 05• 4-5 km2 flooded• Damage CHF 2-5 bn• Lifelines (Railway,

Energy/Electricity, ICT-Infrastructure)ICT-Infrastructure)

• Economic Activities

S M tthi O l tkSource: Matthias OplatkaAWEL Zürich

September 9, 2011 11ETH Risk Center

Development options of ETH Risk Center

«Science«Science-I d tETH

Risk Center

«Science-Policy»Interface

Industry»Partners

•SwissRe

IRGC, WEF, … •Zurich FS

•AXA

•KPMG

•swisselectric•swisselectric

•………

«Science-Agency»

( , )Interface(FOCP, …)

September 9, 2011 12ETH Risk Center

FuturICT www.futurict.euThis is a multi-university ongoing research programy g g p gfunded by the European Research Council. Thegoal of the FuturICT flagship project is tounderstand and manage complex, global, sociallyinteractive systems, with a focus on sustainabilityand resilience

ETH Risk Center

This is the newly formedmulti-disciplinary competency

Singapore-ETH Center on integrative riskcenter based in Zürich

dedicated to the integrativestudy of risk.

on integrative risk

September 9, 2011 ETH Risk Center 13

Spuring the ETH Risk Center: Status & first achievements

Inaugural event 23rd June 2011, current funding by ETH and private industry

First interdisciplinary research proposal with 3 work packages to ETH (CHIRP2,

applying for CHF 2 mio.) by end August 2011

Seminar series on „Complex Social Systems and Integrative Risk Management“,

autumn semester 2011

Establishment of Executive Office, building Advisory Board and partnerships (TU

Munich WEF Risk Initiative IRGC )Munich, WEF Risk Initiative, IRGC, …)

Pre-proposal for Singapore ETH Center on Interactive Risks to be delivered by

end of October 2011 to NRF (applying for CHF 15 mio )end of October 2011 to NRF (applying for CHF 15 mio.)

Ongoing fundraising activities (ETH Foundation, Risk Fund); first Partnership

Council meeting by November 2011Council meeting by November 2011

September 9, 2011 14ETH Risk Center