Black swan and Forum for the Future: Difference between pages

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''Risk management''.
''Sustainability.''


An apparently unusual event of very high impact.
The Forum for the Future convenes collaborations between businesses, governments and civil society to accelerate policy changes toward a sustainable future.


Particularly one which - before it happened - was believed in error to be highly improbable, or even impossible.


It was established in 1994.


The use of the term in finance derives from the widespread historical (and wrong) belief in the Northern hemisphere that black swans did not exist.  This wrong belief was held in the period before the common occurrence of black swans in the Southern hemisphere had been reported in the North.


The concept was popularised in a 2007 book by Nassim Nicholas Taleb - "The Black Swan".
The Forum for the Future identifies five areas of capital in a model designed as a "framework for sustainability".


The five areas of capital in this model are:


Taleb summarises the problem in risk management as "the confusion of <u>absence of evidence</u> of Black Swans (or something else) for <u>evidence of absence</u> of Black Swans (or something else)". 
*Human capital
*Social capital
*Manufactured capital
*Financial capital
*Natural capital


This means that the existence of financial "black swans" tends to lead to systematic under-assessment and <u>understatement</u> of financial risk.
<span style="color:#4B0082">'''''Turning black swans white'''''</span>
:Taleb points out that black swan events depend on the observer, and the information and analysis obtained and applied by him or her.
:Being slaughtered shortly before Christmas is a black swan surprise for a turkey; especially following 1,000 days of consistent - apparently predictable - feeding and friendliness from humans.
:The slaughter of the turkey is not a black swan event for the human butcher.
:Turkeys need to gather more information and to analyse it.
:''How not to be a sucker - A Black Swan is relative to knowledge - The Black Swan, 2010 pp40-44.''
<span style="color:#4B0082">'''''Robustness not fragility'''''</span>
The key message from Taleb's work is about seeking robustness and avoiding fragility.
:"You have to avoid debt because debt makes the system more fragile. You have to increase redundancies in some spaces.
:You have to avoid optimization. That is quite critical for someone who is doing finance to understand because it goes counter to everything you learn in portfolio theory....
:I have always been very sceptical of any form of optimization. In the black swan world, optimization isn't possible.
:The best you can achieve is a reduction in fragility and greater robustness.
:You may have heuristics, but not an optimization rule.
:I hope the message will finally get across because I haven't succeeded yet.
:People talk about black swans but they don't talk about robustness, which is the real lesson of the black swans."
:''Living with Black Swans - Nassim Nicholas Taleb.''




== See also ==
== See also ==
* [[COVID-19]]
* [[Accounting for Sustainability]] (A4S)
* [[Fat tail]]
* [[Bottom line]]
* [[Guide to risk management]]
* [[Business & Sustainable Development Commission]]
* [[Heuristic]]
* [[Capital]]
* [[Moody's]]
* [[Carbon footprint]]
* [[Optimisation]]
* [[Climate benchmark]]
* [[Portfolio analysis]]
* [[Corporate social responsibility]]
* [[Probability]]
* [[Environmental profit and loss]]
* [[Redundancy]]
* [[ESG investment]]
* [[Resilience]]
* [[Financial capital]]
* [[Risk]]
* [[Global Sustainable Investment Alliance]]
* [[Stress test]]
* [[Human capital]]
* [[Unicorn]]
* [[Manufactured capital]]
* [[Metaeconomics]]
* [[Moratorium]]
* [[Natural capital]]
* [[Net Positive Project]]
* [[Organic]]
* [[Reputational risk]]
* [[Social capital]]
* [[Stakeholder]]
* [[Sustainable Development Goals]]
* [[Sustainability]]
* [[Sustainability Accounting Standards Board]]
* [[Sustainability bond]]
* [[Sustainability Linked Loan Principles]]
* [[Sustainability reporting]]
* [[Sustainable finance]]
* [[Triple bottom line]]
* [[UK Sustainable Investment and Finance Association]]




== External link ==
== External link ==
[https://www.moodysanalytics.com/-/media/article/2020/weekly-market-outlook-coronavirus-may-be-black-swan-like-no-other.pdf Coronavirus may be a black swan like no other: Moody's]


*[https://www.forumforthefuture.org/?gclid=EAIaIQobChMI8ZOa0P2X7wIVqujtCh242gMcEAAYASAAEgKW2_D_BwE Forum for the Future - What we do]
[[Category:Accounting,_tax_and_regulation]]
[[Category:The_business_context]]
[[Category:Corporate_finance]]
[[Category:Investment]]
[[Category:Long_term_funding]]
[[Category:Ethics]]
[[Category:Identify_and_assess_risks]]
[[Category:Identify_and_assess_risks]]
[[Category:Manage_risks]]
[[Category:Risk_frameworks]]
[[Category:Risk_reporting]]

Revision as of 22:50, 15 August 2022

Sustainability.

The Forum for the Future convenes collaborations between businesses, governments and civil society to accelerate policy changes toward a sustainable future.


It was established in 1994.


The Forum for the Future identifies five areas of capital in a model designed as a "framework for sustainability".

The five areas of capital in this model are:

  • Human capital
  • Social capital
  • Manufactured capital
  • Financial capital
  • Natural capital


See also


External link

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