Risk as strategy: defending against catastrophic turns of fortune
ISSN: 1087-8572
Article publication date: 5 June 2020
Issue publication date: 24 July 2020
Abstract
Purpose
The author offers executives a strategic process for proactively mitigating the risk of catastrophic unwanted Black Swan surprises that can severely, and often abruptly, impair a balance sheet.
Design/methodology/approach
One practical way to apply the author’s approach is through hedging concentrated balance sheet exposures when market volatility is low or contracting.
Findings
Though no one can reliably anticipate pandemics and related stock market turbulence, executives do not have to predict the future to economically protect their balance sheets from Black Swan events.
Practical implications
Managers can construct Black Swan scenarios to assess how an unforeseen, disadvantageous future could develop and which risk management derivative would best mitigate it.
Originality/value
This strategic approach to managing balance-sheet-threatening risks could help a firm outperform its competitors during future crises and catastrophes.
Citation
Calandro Jr., J. (2020), "Risk as strategy: defending against catastrophic turns of fortune", Strategy & Leadership, Vol. 48 No. 4, pp. 29-35. https://doi.org/10.1108/SL-04-2020-0061
Publisher
:Emerald Publishing Limited
Copyright © 2020, Emerald Publishing Limited