Risk and Resilience Management in Social-Economic Systemsi

Risk and Resilience as complementary measures of stress We propose a definition of resilience as an important complement to risk. Both concepts describe stress within a socio-economic system from two different angles, and together allow for a comprehensive approach to governance and management. Stress is an internal response of a system to a perturbation called stressor or stress-factor (Kovalenko & Sornette, 2013). Here, we think of stress as a variable that characterizes the current (or potential) state of a system on a continuum scale ranging from its normal functioning state (e.g. low average level of stress with bursts below certain amplitude and time thresholds) to an unsustainable dynamics leading to a change of regime (e.g. high average stress level with strong upward trend).ii In natural sciences, stress can be directly quantified from its observable effects, for instance in the form of physical deformation of a stressed body in engineering or a set of common non-specific physiological changes in living biological organisms. In contrast, stress is hard to quantify in socio-economic systems. As in natural sciences, socio-economic systems are complex and multi-scaled, subjected to a large number of exogenous and endogenous factors, with feedback loops and coupling mechanisms. However, clearly differentiating responses to exogenous from responses to endogenous stressors is made harder by the existence of learning, anticipation and self-fulfilling prophecies, where beliefs govern actions with feedbacks on processes. As an alternative, an indirect approach to measure stress was developed, based on: 1) Risk (as the triplet of (i) probability/uncertainty, (ii) potential loss and (iii) mitigation techniques, i.e. counter-measures to reduce vulnerability of a system) characterizes possible environmentand system-specific stressors. By analogy with the Newton's third law, risk is a proxy for a potential internal stress response of a system to these threats; 2) Resilience (as the four-level hierarchy of (i) local ‘engineering resilience’, (ii) non-local ‘ecological resilience’, (iii) ‘viability’ enriched with managerial impact and (iv) adaptation and transformation mechanisms) embodies the inner capacity of a system to cope with stressors of any nature (Kovalenko & Sornette, 2013). It characterizes the maximum