Chapter 1: Introduction

As evidenced by the plethora of academic and professional certification programs, Risk Management has definitely come into its own as a body of knowledge. The timing of this book could not have been better though unfortunate. The entire world is going through a Black Swan event (made popular by Nassim Nicholas Taleb) due to COVID-19. Losses to both firms and countries have reached trillion of dollars. On the well-known loss distribution, this occurrence is quite certain to be outside of the 99% confidence level or less than once in a 100 years. The event has significantly altered not only economics but also lives and society. Social distancing became a new term. What is most pertinent for the purpose of our discussion here is that it may not take another 100 years for a similar event to recur with the ever-growing global linkages. Besides, losses that are now in trillions may rise to tens or even hundreds of trillions. The Black Swan today may just be a regular White Swan in the near future. Losses of such magnitude become more frequent not unlike Category 5 hurricanes or tsunamis. All these are educated guesses but for those making investment decisions involving millions or billions of dollars, these prospects need to be analyzed and quantified rather than left to judgment…