Evaluating Risk – Overarching Questions


Building a Smarter German-American Partnership

Economic and financial market risks; the consequences of climate change, terrorism, and organized crime; supply security of energy and raw materials; the increase of cyber-crime; and the vulnerability of critical infrastructure—governments, businesses, and societies face numerous systemic risks. Purely national approaches to cope with these transnational challenges are doomed to fail. In fact, there is a need for international cooperation. The United States and the EU are key players in this context—without the two economic and political heavyweights, systemic risks cannot be adequately handled. Despite the high degree of integration of their economies, sound political relations, and similar vulnerabilities to systemic risks, cooperation between the two partners is often difficult—not the least because both continents seem to evaluate risk differently.

On the surface, Germany is considered risk-adverse and the United States is portrayed as embracing risk. Yet, analysis of a variety of issues reveals that the picture is more complex than that. The nuclear energy phase-out in Germany can be seen as the result of the German government and public opinion determining that nuclear energy is too risky for the country. However, a decision to abandon an energy system that is proven and embrace a more or less uncertain future energy supply could also be considered risky. The question of the relationship between policymakers and other societal actors is central to the question of risk. Just because a country does not debate risks associated with a new technology or policy does not mean that other actors such as companies and entrepreneurs will not move forward. Many times, regulatory frameworks play catch up with new technologies put forward—geoengineering and fracking are on only two of the most current examples. Elected officials are the usually the first that will make the decision on how acceptable a risk is for a society. Others, such as the courts and lawyers, also play a role—however, often all of them only come in after an incident that puts society at risk.

Another central question to evaluate risk is the question of if it should be evaluated as to how it pertains to the individual citizen and the society as a whole. Is the well-being of society at large more important than security for the individual? How can a cost-benefit analysis reflect societal and personal risk and cost? And how can risk and benefit be quantified? Should a majority be able to dictate how much risk a minority should be able to tolerate? If risk is mitigated, should the burden and cost be borne by all or only the part of society that is taking the risk? How can risk be evaluated fairly and evenly when all information might not be available? All of these questions have to be constantly evaluated over a wide area of policy fields and are central to many of the topics discussed in AGI’s series on Risk in Transatlantic Relations.

The evaluation of risk is pertinent to financial policy, security challenges, and environmental policy decisions in the U.S. and Germany. In his essay White, Grey, and Black (Euro) Swans: Dealing with Transatlantic Financial Risk in 2012, Matthias Matthijs examines how the financial crisis has shaped economic risk perceptions in Europe and how it is even harder for policymakers to deal with uncertainties than risk. The essay by Sabrina Schulz on Climate 2.0 – Can Geoengineering Make the World a Safer Place?, Aki Kachi’s essay on Energy Security Risk Assessment: A Transatlantic Comparison, and Kirsten Verclas’ examination of The Decentralization of the Electricity Grid – Mitigating Risk in the Energy Sector examine risk assessment on both continents in the environmental sector. The authors point to the challenge of new technology, the risk of energy dependency, and how renewable energy can become a catalyst not just as a climate-friendly technology, but also to mitigate risk in energy production. Rana Deep Islam, Ann-Kristin Otto, and Almut Möller examine the more classical areas of risk and security issues: EU-Turkish Relations, the Arab Spring, and NATO involvement in Afghanistan.

Foreign policy is the area most commonly associated with a discussion of risk. Yet, cost-benefit analysis in the financial realm and evaluation of new and old technologies affecting the environment are also issues dealing with risk. With its essay series and ongoing projects on the evaluation of risk and risk mitigation, AGI seeks to provide policymakers and constituencies across the Atlantic with tools to examine how to evaluate risk, and what kind of risks and risk management are acceptable and which are not.