Extreme Risks 2013

This paper has focussed on the top 15 risks, but we acknowledge that it is not possible to anticipate all risks – by definition, there are ‘unknown unknowns’ out there that cannot be included even with the best analysis. The range of potential consequences of the identified risks is very wide. Local-endurable risks would be uncomfortable for institutions caught in the wrong locale, or with the wrong exposures, and would likely be enough to cause the weaker ones to become incapable of completing their mission. At the other end of the spectrum, global-crushing risks represent a systemic and potentially terminal outcome for investors. The value of this exercise, however, lies outside prediction. To navigate through this complex world, we suggest investors need to be open-minded, avoid concentrated risks, be sensitive to early warning signs, constantly adapt and always prepare for the worst.