Extreme Risks: From Pandemics, To Currency Crises

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Risk
kvfh Risk
Impact Low Very low Very, very low
aerhig Low Could be expected
High once every 10 years
from current conditions
Financial
Excessive Very low Could be expected

Medium Banking crisis
leverage once every 20 years
from current conditions
Low Insurance crisis
Very, very low Could be expected
once every 100 years
High Depression +\SHULQÀDWLRQ from current conditions
Economic
Impact
Medium Currency crisis Sovereign default High 'LUHFWDQGVLJQL¿FDQW
impact on most asset
Low (QGRI¿DWPRQH\ and liability values
Medium Direct and material
impact on some asset
High Climate change End of capitalism and liability values
Political
Low Direct impact on

Medium Political crisis Disunity in Europe Major war few values, variable
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Low Protectionism Killer pandemic

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Risk ranking* as at 30 June 2009
Rank Risk Description Possible hedge
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**1 Depression 'HEWGHÀDWLRQWUDSIDOOLQJJURZWKDQGLQFRPHV
nominal bonds
Real assets, for example gold,
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**3 Excessive leverage Debt burden cannot be serviced from income Gold, reserve-status currency
**4 Currency crisis ([WUHPHPRYHPHQWEHWZHHQÀRDWLQJUDWHV Gold, foreign assets

Nominal sovereign bonds (medium
**5 Banking crisis Balance sheets cannot absorb another shock
duration)
6 Sovereign default Default by a developed country on its debt Country insurance (for example CDS)
7 Climate change Diversion of capital to mitigation uses No general hedge
8 Political crisis Rise in power of extremist groups No obvious hedge

Nominal sovereign bonds (medium
**9 Insurance crisis Insolvency within insurance sector
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10 Protectionism Reversal of movement towards free trade No general hedge
11 Disunity in Europe Break-up of the euro Long Germany (hedged)
12 End of capitalism Move to socialism and closing of markets Gold
13 (QGRI¿DWPRQH\ Return to a gold standard Gold
14 War $PDMRUJOREDOFRQÀLFW Long neutral countries
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15 Killer pandemic Contagious disease with very high mortality
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Excessive leverage
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Banking crisis H DPNNVOJDBUFUIBUUIJTJTBRVBMJUBUJWFBTTFTTNFOUPGXIFUIFS
Insurance crisis H M FWFOUTBSFMJLFMZUPPDDVSUPHFUIFS XJUIPOFQFSIBQTCFJOHB
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Depression H H M BTTFTTNFOUPGQBTUEBUB2VBOUJUBUJWFBTTFTTNFOUPGSBSFFWFOUT
Currency crisis H H L H JTEJGmDVMU
Sovereign default H H M H M
+\SHULQÀDWLRQ L H L
(QGRI¿DWPRQH\ L M L H
Protectionism L H M L
Political crisis M M H M H H L H
Disunity in Europe L H L H H H H H
End capitalism L M L L M L H
Climate change M
Killer pandemic L L
War L L L L H L H L
Lev Bank Ins Dep Ccy Def Hyp Fiat Prot Pol Eur End Clim Pan War
H High degree of association. Could be causality in both directions

M Medium degree of association. Could be causality in one direction
L Low degree of association. A possible contributing, rather than casual, factor
No, or very low, association

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Extreme Risks: From Pandemics, To Currency Crises

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Extreme Risks: From Pandemics, To Currency Crises

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8BUTPO8ZBUU]&VSPQF

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Excessive Very low Could be expected

Low Direct impact on

Risk ranking* as at 30 June 2009

Rank Risk Description Possible hedge

**4 Currency crisis ([WUHPHPRYHPHQWEHWZHHQÀRDWLQJUDWHV Gold, foreign assets

7 Climate change Diversion of capital to mitigation uses No general hedge

8 Political crisis Rise in power of extremist groups No obvious hedge

11 Disunity in Europe Break-up of the euro Long Germany (hedged)

12 End of capitalism Move to socialism and closing of markets Gold

13 (QGRI¿DWPRQH\ Return to a gold standard Gold

14 War $PDMRUJOREDOFRQÀLFW Long neutral countries

H High degree of association. Could be causality in both directions

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Extreme Risks: From Pandemics, To Currency Crises

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

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Did you find this document useful?

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Copyright:

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Extreme Risks: From Pandemics, To Currency Crises

Uploaded by

Copyright:

Available Formats

8BUTPO8ZBUU]&VSPQF

"MMSJTLTBSFEFTDSJCFEJOUIFBQQFOEJY BOE GPSUIFJOUFSFTUFESFBEFS B

&DPOPNJD )PXMJLFMZ )PXCBE

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Excessive Very low Could be expected

Low Direct impact on

Risk ranking* as at 30 June 2009

Rank Risk Description Possible hedge

**4 Currency crisis ([WUHPHPRYHPHQWEHWZHHQÀRDWLQJUDWHV Gold, foreign assets

7 Climate change Diversion of capital to mitigation uses No general hedge

8 Political crisis Rise in power of extremist groups No obvious hedge

11 Disunity in Europe Break-up of the euro Long Germany (hedged)

12 End of capitalism Move to socialism and closing of markets Gold

13 (QGRI¿DWPRQH\ Return to a gold standard Gold

14 War $PDMRUJOREDOFRQÀLFW Long neutral countries

H High degree of association. Could be causality in both directions

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