Cambridge stress test series covers pandemics to cyber sabotage
The Cambridge Stress Test Series – reports on the potential global impact of threats including pandemics, cyber sabotage, regional conflict and social uprising – has been launched by the Cambridge Centre for Risk Studies at the university’s Judge Business School.
With the Ebola outbreak, conflict in Ukraine, Internet security issues and concerns over rising global inequality, the reports present fictional crises similar to real-life events to explore the possible impact of such crises.
They are also designed to help businesses identify their own vulnerabilities to such ‘catastronomics’ so they can identify ways to improve their resilience to sudden shocks in the system.
The economic impact of such scenarios can range from relatively modest loss of gross domestic product to – in the most extreme of several outcomes sketched out in the series – tens of trillions of dollars. The financial damage will depend on the situation’s handling, its duration and its rate of escalation – factors that underline the importance of vigorous planning and efficient response to such dangers.
“We want the Cambridge Stress Series to help organisations with their risk preparedness in a complex and increasingly unpredictable world,” said Dr Andrew Coburn, director of the advisory board of the Centre for Risk Studies.
“A theme running through the series is that globalisation of our economy means that events once confined to a single region can now quickly become worldwide crises – so businesses are looking for ways to manage these emerging and disruptive risks.”
The official launch of the Cambridge Stress Test series follows completion of the first four reports, which focus on the economic impact of external events. These will be followed by a second cycle of reports more focused on financial shocks such as a global property crash and sovereign defaults.
The initial quartet are the Pandemic Stress Test, which envisions a fictional influenza strain H8N8 that starts in Brazil; the Cyber Catastrophe Stress Test, in which a ‘Logic Bomb’ infiltrates a software company and spreads throughout the world; the Geopolitical Conflict Stress Test, imagining a China-Japan military conflict; and the Social Unrest Stress Test, focusing on uprisings sparked by high youth unemployment and disaffection.
The series does not predict or speculate that any of these catastrophic events will occur – the fictional scenarios are all designed as ‘1-in-100’ events. The scenarios were chosen because. although unlikely. they are plausible and businesses need to be prepared to address such ‘what-if’ scenarios.
Each report is structured around a narrative of the fictional scenario and various versions of events, ranging from the standard scenario (S1) to the extreme scenario (X1), and each scenario is measured using a metric called World GDP@Risk – the predicted loss of global GDP output over a five-year period following the event, compared to what would have been expected if the event had never occurred.
In the cyber sabotage scenario, for example, a key variable between levels is the latency period between the Logic Bomb’s activation and its discovery, because the longer the latency the greater the corruption of global computer systems and data.
The Series reports have various corporate and academic sponsors, identified in the reports, and all reports can be downloaded free of charge from the website of the Centre for Risk Studies.
• To find the first four of the Cambridge Stress Test Series (along with other papers), follow this link to the Centre for Risk Studies – http://cambridgeriskframework.com/page/20