Anticipating 'Black Swan' And Other 'Extreme' Events

Business Monitor International (BMI) has just published a special feature on the risks associated with 'extreme' or other 'low-frequency, high-impact' events.

Extreme events and shocks are by definition difficult to predict. The term 'black swan' has sometimes been used to describe these incidents, but in our view it is overused. A true 'black swan' event is something that has either never happened before or could not have been anticipated. These are extremely rare. However, there are many 'known unknowns' out there, and in our feature article, which is available to subscribers of Business Monitor Online, we discuss several of these events, and their potential consequences.

These include:

  • A new large-scale terror attack in a major city
  • A terror attack by a hitherto completely unknown group
  • A new conflict between India and Pakistan
  • Sudden political vacuums through death or assassination
  • Sudden regime overthrow or collapse
  • Unexpected political breakthroughs
  • Culturally sensitive shocks
  • A new global pandemic
  • Natural and environmental disasters
  • Major volcanic eruptions and asteroid collisions
  • A clash between 'Great Powers'
  • Cyber attacks
  • Geomagnetic/solar storms

Many of the above events have been anticipated for some time, and have certainly been imagined, either by risk planners or authors of speculative fiction. Nonetheless, these shocks are still likely to catch most observers and investors by surprise, if they were to happen.

Finally, we note that our list of extreme events refers to one-off incidents, rather than the socioeconomic, geological, environmental, or technological changes or megatrends that precede them. As technology improves in future, new shock scenarios are likely to emerge, especially from developments in the fields of nano-technology and artificial intelligence.