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The market may now seem to be improving, but nay-saying consultant Watson Wyatt has one message for investors: If it turns out to be a double-dip recession, don’t say we didn’t tell you so!
In a new report provocatively titled Extreme Risk, Watson Wyatt says depression, hyperinflation and excessive leverage are the top three risks out of 15 listed facing the global economy.
Tim Hodgson, a senior investment consultant at Watson Wyatt, says, “By accounting for these risks in advance, rescue plans can be formulated so that they are ready [to be implemented] as soon as necessary to prevent value destruction. The events of the last two years have demonstrated that risk management cannot afford to stop at the 95th percentile.”
If there’s anything this market has taught advisors and their clients, it’s the need to hedge against multiple (and sometimes interlocking) risks. So, here’s Watson Wyatt’s list of what it considers the 15 most extreme risks, detailing cause, effect and what a decent hedge against that risk might be.
