With changes come uncertainties. Whether it’s the economy, a business, the climate, or an ecosystem – no complex system changes along a predictable path. We cannot know what the sustainable society will look like, how we will live in it, and which companies will be the winners and losers. To achieve objectives with minimal investment risk, we employ various risk management tools, such as statistical analyses, scenario planning, and pre-mortem analysis.

Scenario thinking

With scenario thinking, we utilize multidisciplinary knowledge to outline multiple future scenarios and determine their impact on investments. This knowledge encompasses economic, technological, demographic, ecological, and cultural developments. It is fundamentally a creative process where we engage with a diverse range of people with different backgrounds, expertise, and perspectives to explore potential outcomes. We discard existing conventions, assumptions, and premises in this process.

Pre-mortem

The pre-mortem is a special form of scenario thinking. We conduct the pre-mortem once we have developed a plan or strategy with a client and it is ready to be implemented. We examine why the well-thought-out plan could still lead to a very poor outcome. We search for the scenario that corresponds to this. In this way, we reverse cause and effect, which leads to ideas and perspectives that were still hidden.

Combining instruments

Risk management at Cardano is largely a creative process. Predicting future developments with a fundamental impact on the economy and society is challenging based solely on historical data. Nevertheless, statistical methods are helpful in exploring sensitivities of investment strategies to various economic and financial market variables. Therefore, we combine different risk management tools. In doing so, we aim to achieve the most diverse view of the future and a corresponding robust investment strategy.