Risk contagion and what could the safety domain learn from risk governance in the financial services industry

Because of the interaction between system entities across a whole capability or between firms across a whole industry, there is great potential for risks that affect one project, area, firm or group of firms, to go on and affect the risk profile of the whole sector system. This is widely known in the financial world as contagion and it causes systemic risk. The liquidity crisis that started in 2007 and developed into the global credit crisis through 2008 and 2009 is now a classic example. The rest of this paper introduces the concepts of contagion, discusses the financial and other examples of contagion in various domains, and finally describes the principles of the risk management framework in the financial services industry intended to cope with contagion risk and how they may be considered and used by practitioners in the safety industry.