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The extreme uncertainty of the global economy requires a new risk management framework. This session will examine the rapidly changing risks to the global economy and the need for new ways of behaving, making decisions and even reversing decisions.
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Key takeaways
We need to think far more broadly beyond simply financial risk, our view of risk must not be one dimensional. The crisis helps us learn and get better at modelling interconnected risks. Bigger, broader risks are interconnected and require increased collaboration to mitigate. Even if we are sitting on the fence and maintaining investment positions, risk has gone up.
The pandemic has turned our lives not inside out, but ‘outside in’. Rather than shut down, we should ask ourselves ‘what can we do to help the situation?’
We are in the deepest recession since World War 2, and it is completely synchronised across the world. If a vaccine is not available, the World Bank forecasts the global economy will shrink by 8 per cent.
The pandemic has set The World Bank back in its aim to help alleviate poverty – 170 million people will remain in poverty due to the pandemic with an income of below $2 per day.
The challenging environment is exacerbated by intergenerational and geopolitical tensions. Key question is how to exit from the pandemic stimulus measures.
Green bonds for example are a heartening development from the financial community.
Institutional investors are considering more non-financial risks and are engaging more deeply with investee companies. If we do this right it will mitigate, not exacerbate the issue.
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Poll results
Have you changed your attitude to risk taking because of the recent onset of unforeseeable risks including this current health pandemic?[vc_line_chart x_values=”” values=”%5B%7B%22title%22%3A%22Yes%2C%20we%20have%20taken%20risk%20off%20the%20table%20in%20our%20portfolio%20allocations%20(21%25)%22%2C%22y_values%22%3A%2221%22%2C%22color%22%3A%22pink%22%7D%2C%7B%22title%22%3A%22No%2C%20about%20the%20same%20(58%25)%22%2C%22y_values%22%3A%2258%22%2C%22color%22%3A%22sandy-brown%22%7D%2C%7B%22title%22%3A%22Yes%2C%20we%20are%20taking%20more%20risk%20as%20we%20see%20opportunities%20in%20the%20disruption%20(21%25)%22%2C%22y_values%22%3A%2221%22%2C%22color%22%3A%22sky%22%2C%22custom_color%22%3A%22%23ff9900%22%7D%5D” css=”.vc_custom_1593673826068{border-radius: 2px !important;}”]
The Florida State Board of Administration has made some strategic moves to take advantage of opportunities in the dislocation, including in private equity, distressed debt and active listed equities.. But CIO, Ash Williams, is concerned about the underlying real economy.
In the first of four articles looking ahead to FIS 2020, we highlight how the event will focus on de-globalisation and geopolitical stress, particularly the deteriorating relationship between China and the US. Elsewhere, FIS delegates will hear how asset owners are positioning their portfolios in today's challenging environment.
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Unemployment is a policy choice, according to Professor Bill Mitchell, the father of Modern Monetary Theory (MMT). He says there is no reason that unemployment should be at the current levels.
APG and CalSTRS are leading a collaboration with PRI that provides investors with ESG-related questions to ask investee companies about their responses to COVID-19.
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