Watson Wyatt identifies major risks
Depression, hyperinflation and excessive leverage represent the top three risks facing investors, according to new research released by Watson Wyatt.
The research, contained in a new paper titled Extreme Risks, claimed these elements are regarded as being in the top three based on their potential impact and the likelihood they will occur.
Commenting on the paper, Watson Wyatt head of strategy research in Australia Tim Unger said events in the past two years had demonstrated that risk management could not afford to stop at the so-called 95th percentile.
"We need to find ways of factoring in very unlikely but high impact events," he said. "Being aware of risk in the extremes before they happen can protect value if built into a plan of action that can be implemented as soon as the need arises."
The paper suggested that a robust defence could be built by combining qualitative understanding, quantitative modelling and a cost-benefit analysis of possible strategies.
"By considering the possible impact of these risks in advance, rescue plans can be formulated so that they are ready to implement."
AUTHOR
Mike Taylor
Recommended for you
Sequoia Financial Group has announced it is selling off its Informed Investor subsidiary which it acquired in April 2022.
Wealth Data has examined which advice business model has seen the most growth since the start of the year including those that offer holistic advice.
Research conducted by Elixir Consulting and Lonsec has quantified the efficiency gains of using managed accounts in financial advice practices in hours per week saved.
With only one-quarter of advice practices actively seeking feedback from clients, the Financial Advice Association Australia has emphasised why this is a critical tool for client retention.
