SimDec for Cascading Risks: Understanding Domino Effects in Complex Environmental Systems

What if a single failure could trigger a chain reaction that brings down an entire system?
That’s exactly what happens in domino-like cascading risks — situations where small local disruptions lead to large-scale collapse.

In their paper “Extending Simulation Decomposition Analysis into Systemic Risk Planning for Domino-Like Cascading Effects in Environmental Systems” (Journal of Environmental Informatics Letters, 2022), Mariia Kozlova and Julian Scott Yeomans demonstrate how Simulation Decomposition (SimDec) can be applied to assess and visualize such complex environmental risks.

🔗 Read the open-access article here:
https://doi.org/10.3808/jeil.202200079

Why Domino-Like Risks Matter

From climate feedback loops to power grid failures, cascading risks threaten interconnected systems across environmental, economic, and technological domains. Examples include:

• Melting sea ice and changing ocean currents reinforcing global warming,
• Supply chain breakdowns spreading from a single blocked port,
• Systemic financial or infrastructure failures that ripple across networks.

Traditional risk analyses struggle to capture these interdependencies, especially when low-probability, high-impact (“black swan”) events are involved.

How SimDec Extends Monte Carlo

Monte Carlo simulation already models uncertainty by generating outcome distributions.
SimDec takes this further.

By decomposing Monte Carlo outputs into visual partitions that represent different combinations of input states (for example, “high risk, proactive policy”), SimDec exposes cause-and-effect relationships that would otherwise remain hidden.

This visual approach enables decision-makers to see:

• Which input combinations lead to system survival or collapse,
• How different mitigation policies influence outcomes,
• Where proactive vs. reactive strategies make a difference.

Case Example: Proactive vs. Reactive Risk Policies

In the study, SimDec was applied to a hypothetical system exposed to cascading risks. Three strategies were compared:

1. Reactive I – baseline “business-as-usual,”
2. Reactive II – more expensive but faster emergency response,
3. Proactive – preventive investment that reduces collapse probability.

The visualization (Figure 1 in the paper) revealed:

• System collapse is a low-probability, high-impact event,
• Reactive II minimizes losses if the system survives,
• Proactive policy reduces both the likelihood and magnitude of total losses.

Without the decomposition visualization, these trade-offs would have been invisible to the analyst.

Why SimDec Is a Game-Changer for Systemic Risk

SimDec bridges qualitative risk matrices and quantitative uncertainty modeling.
It maintains the familiar color-coded logic of traditional risk assessment but adds analytical depth, revealing how interacting uncertainties shape real outcomes.

It’s especially valuable for:

• Environmental risk management and climate resilience,
• Infrastructure and energy systems,
• Financial and supply-chain modeling,
• Any domain with nonlinear interdependencies.

Reference:

Kozlova, M., & Yeomans, J. S. (2022). Extending Simulation Decomposition Analysis into Systemic Risk Planning for Domino-Like Cascading Effects in Environmental Systems. Journal of Environmental Informatics Letters, 7(2), 64–68.
https://doi.org/10.3808/jeil.202200079

‍