End of Oil Greatly Exaggerated

Of all the global risk sources at the tail end of 2017, a sudden oil price shock arguably poses the greatest risk to institutional portfolios both in terms of its likelihood and the severity of impact. But perhaps the most troublesome factor is the complacency or lack of attention towards this risk; if anything, investors’

Investment Risk: Higher Rate Drivers

Institutional investors often assume a degree of “return-to-normality” for long-term rates in their investment plans. But what are, if any, the preconditions for return to higher interest rates? And if those preconditions are not met, what could be the expectation range that takes into account the structural drivers of interest rates? The fortunes of pension

Risk Wire: Is Global Reflation Sustainable?

The global reflation trade has been in the centre of investor attention lately. One-off factors such as Brexit, commodity price increases due to government policy in China and oil price that rebounded from low levels, could explain much of this reflation. We audit the “trail” of reflation sources and identify a key vulnerability in the

Risk Wire: Quantifying the Headlines From Trump to Brexit

Is media coverage of potential sources of economic disasters proportionate to their likely impact on the economy and institutional portfolios? Investors form their perception of the magnitude of risk based on large number of public sources. Political biases, different estimation approaches and assumptions may result in unfair attention to things that do not matter and

Risk Scenario: China Disorderly Economic Collapse

Why is The Scenario Risky? The second largest economy in the world, with reported debt-to-GDP rate of 240% to 280% and a far greater ratio, if shadow banking is taken into account (source: Bloomberg, World Bank), must be a source for concern. More worryingly, the pace of debt build-up is among the fastest in

How We Tested “The Trump” With Mira

We extend LINKS Mira to the analysis at a portfolio and asset class levels. Mira enables us to value asset classes and carry out scenario analyses, such as the “Trump-effect”, presented in this issue. To establish credibility of the approach LINKS have consistently taken over the years, we also review the results of our documented

Putting Economics Back in Economic Scenarios

Rising complexity in the world and structural breaks across markets require new non-stochastic approaches to scenario generation. The world is also too complex for simplistic ad-hoc assessment. We demonstrate the insights gained by implementing a supply chain agent-based model (LINKS Mira) and run the “China hard landing” scenario with curious conclusions. As the world goes

December 2, 2016, “Unarmed and Intuitive: Risk Management Event”

Join us at our inaugural meetup dedicated to creating impact with risk management. We misunderstand probability, we’re myopic, we pay attention to the wrong things, and we are just generally very bad at probabilities. The triumph of “heuristics and biases” research pioneered by Daniel Kahneman and Amos Tversky poses a question: how do we stay

Why Are We Still Unhappy About Risk Management?

Despite years of investment in the development of the function, risk management at pension funds and insurance companies still fails to deliver on the promise. A number of fundamental issues are to blame and there is a fix, but it requires different set of skills. There is plenty of reporting, of course, but it falls

The Unexpected Beneficiaries Of Changing Marine Fuel Standards

It is confirmed: marine transport will have to shift to low sulfur fuels. The environmental mandate creates multi-billion opportunities and risks. The largest impact equivalent to nearly doubling revenues for a number of companies is far down the supply chain. The fuel standard used for the bulk of marine shipping is set to