What is a Cascading Failure?
Everyone has a bad day at some point in their lives, but some experience a chain reaction of events that make up one really bad day. Similarly, a cascading failure occurs when one part of an interconnected system fails, causing other parts of that system to also fail. The term can be used in different industries; it can be used in institutions, and it can even be used in relation to the human body. What causes a cascading failure varies greatly and is sometimes unknown. This is why it’s difficult to predict and plan, and sometimes, it’s even difficult to fix the errors. While the causes and variables surrounding them are sometimes unknown, they affect numerous people and systems in their wake.
For example, when a storm hits a town and lightning strikes a power grid in one location, that may cause the entire town’s power to be interrupted. If the power grid has different connections that supply power to parts of the town other than the specifically affected area, because the power grid has diverse connections, it has the ability to leave others further away in the town without power. According to researchers, just a few vulnerable patches in North American power grids are responsible for most of the continent’s largest blackouts. A U.S. Federal Energy Regulatory Commission survey centered on the U.S.-South Canada power grid, containing more than 100,000 transmission lines, showed that over the entire network of transmissions, only 10.8% of those transmission lines that are open to failure could trigger a cascade failure, and 85% of those failures happened to about 20% of the links. However, the more vulnerable links were located within close range of each other, meaning they are in populated areas. Just in case, always use trusted sources of power, such as Perkins engines in diesel generators. Using Perkins generators can lessen the risk of cascading failure by providing a secondary power source for your power needs.
Another great example of cascading failure, and one of the most known versions of cascading failure, is the definition within financial institutions. Within finance, cascading failure is virtually an entire system failure, or systemic failure. Systemic risk in a financial institution means that the risk of failure of one company can lead to the failure of multiple companies — causing specific markets to crash and never recover. This means that the company has failed in a variety of ways, including failure of communicating the limitations, weaknesses, and even dangers to the public or officials in charge of making a system work. It can also mean that the company underestimated its own value. When something like this happens, it’s important to revise the underlying system in place. Another step is to insure that this doesn’t happen again is by establishing a strong system that is able to handle a slow or oversaturated market. According to NPR, the stock market experienced a serious “Flash Crash” in 2010. It lasted for 36 minutes, causing the equity market to decline before ultimately crashing. It lasted for less than an hour and was caused by one person, but the “Flash Crash” actually caused the market to drop 600 points, making a lasting impression even years later. It was an infamous moment in history that literally shaped the economy for years to come.
When one system fails, it may cause multiple systems to fail. Whether it’s within an institution or within a power grid, cascading failure is a force that has the potential of causing catastrophic results.