Complex problem: Difference between revisions
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* [[Model]] | * [[Model]] | ||
* [[Non-linear]] | * [[Non-linear]] | ||
* [[Procyclical]] | |||
* [[Tipping point]] | * [[Tipping point]] | ||
*[[Wicked problem]] | *[[Wicked problem]] | ||
[[Category: | [[Category:Financial_products_and_markets]] | ||
[[Category:Identify_and_assess_risks]] | [[Category:Identify_and_assess_risks]] | ||
[[Category:Manage_risks]] | [[Category:Manage_risks]] | ||
[[Category:Risk_reporting]] | |||
[[Category:Risk_frameworks]] | [[Category:Risk_frameworks]] | ||
[[Category: | [[Category:The_business_context]] | ||
Latest revision as of 20:47, 21 November 2023
Modelling - relationships - non-linear - contrasted with complicated.
Contrasted with merely complicated problems, complex problems are inherently enormously more difficult to analyse and manage.
Complex systems and problems consist of both:
- A large number of interacting elements; and
- Non-linear and unpredictable relationships between the interacting elements, making the system impossible to model reliably using traditional techniques.
For example, climate change is generally considered to be a complex problem (and not merely a complicated one).
- Example - Shortcomings of climate change model include linear estimation
- "A shortcoming of our model build so far is that some economic impacts are linearly estimated: non-linearities are not adequately captured.
- ... it’s not possible to estimate non-linear relationships between temperature increases and economic activity for most channels, especially for temperature increases that have not been observed yet.
- We use multiplicative factors of 5 and 10 to simulate the increasing severity of outcomes from nonlinearities.
- Importantly, the framework does not consider tipping points, events such as the partial disintegration of ice sheets, biosphere collapses or permafrost loss, that pose a threat of abrupt and irreversible climate change...
- ... other research suggests that if tipping points do happen, there could be an x8 increase in climate change associated economic damages."
- Swiss Re Institute - The economics of climate change: no action not an option - April 2021