The author offers executives a strategic process for proactively mitigating the risk of catastrophic unwanted Black Swan surprises that can severely, and often abruptly, impair a balance sheet.
One practical way to apply the author’s approach is through hedging concentrated balance sheet exposures when market volatility is low or contracting.
Though no one can reliably anticipate pandemics and related stock market turbulence, executives do not have to predict the future to economically protect their balance sheets from Black Swan events.
Managers can construct Black Swan scenarios to assess how an unforeseen, disadvantageous future could develop and which risk management derivative would best mitigate it.
This strategic approach to managing balance-sheet-threatening risks could help a firm outperform its competitors during future crises and catastrophes.
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