The global financial and economic crisis has heightened everyone’s awareness of systemic risk. Confidence in the ability of decision-makers, policymakers and institutions to handle such risks has been shattered. Psychology, a culture of destructive self-interest, and social processes have also been invoked as part of a complex set of conditions that led to the debacle. In turn, the crisis has accelerated some prevailing demographic, economic, and social trends, including population aging, political tensions, geopolitical instability, and environmental degradation, as the focus of attention has unavoidably shifted towards short-term, immediate concerns. The crisis has placed the issue of systemic risk at the top of the global agenda, forcing analysts and policymakers to make a stark distinction between what is important and what is actually urgent. In this white paper we provide an overview of the causes, consequences, and potential solutions to the problem of risk, focusing on economic and financial aspects, while also paying attention to political, social, and environmental risks associated with the crisis and its aftermath.

The analysis represents the outcome of a collective, multi-disciplinary effort at understanding risk by a group of more than 30 scholars and policymakers from around the world who gathered in Philadelphia for a two-day conference. The analysis begins with the conventional explanations of the crisis, further adding political considerations, institutional constraints, psychology, and social processes. This prepares the stage for the assessment of the effectiveness of policy interventions during the crisis which, while averting a massive meltdown, generated a number of additional problems, both short-term and long-term. Failures in global governance and in understanding complex ripple effects are also explored. Risks building up in emerging economies from financial to political and demographic are presented as a stark reminder that global instability is punctuated by a growing number of troubled hot spots.