Key Takeaways
- • WTW's Thinking Ahead Institute is running a series of opinion columns on Top1000funds.com promoting a 'risk 2.0' framework for investment risk management.
- • Contributors Andrea Caloisi, Jeff Chee, and Tim Hodgson argue that investors should adopt more interconnected, adaptive and qualitative approaches to risk rather than traditional modelling alone.
- • A key argument is that future risk increases with time, not only because the future is uncertain, and that this has implications for how the risk premium is understood.
- • The series includes a six-part exploration of risk management for investment systems, with the first installment focused on how risk varies across different mental models of reality.
- • The columns also flag resilience concerns, arguing that short-term efficiency optimisation may build long-term fragility.
Summary
A set of opinion columns published on Top1000funds.com, a publication for institutional pension and superannuation fund investors, presents the 'risk 2.0' framework developed by the Thinking Ahead Institute at WTW. The columns are authored by researchers and strategists at the institute, including Andrea Caloisi, WTW global head of portfolio strategy Jeff Chee, and Tim Hodgson.
Caloisi's contributions examine how past financial crises would look if assessed through a risk lens that recognises the adaptive and interconnected nature of real markets. She also explores two potential future risk events and how an interconnected risk mindset could help investors prepare for them. In a separate column on resilience, she asks whether the relentless pursuit of efficiency could undermine the ability to build resilient and sustainable systems, arguing that complex systems optimised for the short term may be fuelling long-term fragility.
Chee outlines how investors moving into risk 2.0 should change their modelling approach and investment toolkits, recommending greater use of qualitative risk measures alongside quantitative methods.
Hodgson argues that the future is riskier not only because it is uncertain, but because the quantum of risk increases with time. He examines what this means for investors' risk analysis and for the concept of the risk premium. In another column, he contends that risk looks different depending on the mental model of reality used, and that column opens a six-part series on risk management for investment systems.
The source material consists of column summaries and does not include specific fund data, deal figures, or performance numbers.
Caloisi's contributions examine how past financial crises would look if assessed through a risk lens that recognises the adaptive and interconnected nature of real markets. She also explores two potential future risk events and how an interconnected risk mindset could help investors prepare for them. In a separate column on resilience, she asks whether the relentless pursuit of efficiency could undermine the ability to build resilient and sustainable systems, arguing that complex systems optimised for the short term may be fuelling long-term fragility.
Chee outlines how investors moving into risk 2.0 should change their modelling approach and investment toolkits, recommending greater use of qualitative risk measures alongside quantitative methods.
Hodgson argues that the future is riskier not only because it is uncertain, but because the quantum of risk increases with time. He examines what this means for investors' risk analysis and for the concept of the risk premium. In another column, he contends that risk looks different depending on the mental model of reality used, and that column opens a six-part series on risk management for investment systems.
The source material consists of column summaries and does not include specific fund data, deal figures, or performance numbers.
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