How to Prepare for Black Swan Risks?

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How to Prepare for Black Swan Risks?
Jos Nieland, SIG Leader
According to Nassim Taleb, we can not prevent Black Swan risks (= rare events with a high impact) from happening now and then. But we CAN prepare for them. How?
Taleb is giving the following ways to prepare for Black Swans (in fourth quadrant situations):
1. Avoid optimization - Forget economics and learn to love redundancy. Keep some buffers and slack.
2. Donít use statistics to try to predict complex, fourth quadrant payoffs. Statistics donít work here. Try not to be exposed to events in the fourth quadrant.
3. No bonus without malus - Beware of the moral hazard (agency) problem. People, banks and organizations should enjoy both the positive and negative consequences of their acts and decisions.
4. Be very careful with risk information - Donít trust scenario analysis and stress testing. There is always more randomness then we think. We just donít know. Be extremely careful with using and interpret... Register

Preparing for Black Swans: 5. Systems ThinkingSign up
Augusto Carreira, Member
I agree. One way to handle the weaknesses of our h...

Preparing for Black Swans: 6. ScenariosSign up
Jim Burke, Member
I enjoyed the book. Recognize that the list reflec...

Preparing for Black Swans by Scenario ModellingSign up
John Spenceley, Member
One of the advantages of
7. Metaphors and 8. StoriesSign up
Jim Burke, Member
Indeed, Taleb writes on page XXVII: "My best tool ...

Black Swan Preparation: 9. Keep an Eye on Wild CardsSign up
Prakash Deshpande, Member
Normally, our thinking is a conditioned response. ...

Preparing for Black Swan: 10. Common SenseSign up
Dilip Khanal, Member
We all know the proverb: save for rainy days. In m...

Preparation for Black Swan Risks: 11. TrainingSign up
Sripathy K.R, Member
Most of the comments are very sensible, use common...

12. Flexible Organization and 13. Lateral ThinkingSign up
Claudio Boffito, Member
A Black Swan is unpredictable by definition and ma...

14. High Reliability Organization ThinkingSign up
Mike Olson, Member
Managing Black Swan risk could take a lesson from ...

15. Regulation and 16. Protection May HelpSign up
Jagdish B Acharya, Premium Member
In the control of power grids, often various power...

17. DiversificationSign up
Diversification is also key to prepare for risky, ...

Preparing for Black Swan Risks: 18. Build Conflict Management SystemsSign up
Dr. Wilfried Kerntke, Member
I'm agreeing in particularly with Mike Olson's and...

Preparation Against the Impact of Black Swan RiskSign up
Bulus Ibrahim, Member
A black swan just can't be managed. It needs caref...


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Special Interest Group Leader
Jos Nieland

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