Only by separating those risks that are devastating from those that are acceptable (even rewarding) can organisations meet their long-term financial aspirations. What’s more, the avoidance of deep plunges means that you can achieve a more stable path to growth.
Since forming in 2000, Cardano’s mission has been to provide exactly this type of robust risk management to our clients. We believe passionately that if financial services as a whole were properly risk-managed in this way they could better support the financial wellbeing of our whole society.
Too often in financial services, a “hope for the best, prepare for the best” attitude prevails. There’s also a strong tendency to try and predict uncertain events despite the industry’s extremely poor track record in doing so.
In our view there is no use in being 95% right if the remaining 5% could lead to unprecedented disaster. Our preferred adage is “hope for the best, prepare for the worst”. This won’t exactly set off firecrackers in the boardroom, but it can ensure the organisation reaches its goals. And, after all, that’s what really matters.
Our philosophy is founded on three basic principles:
Before considering how it’s done, let’s look at the core reasons why it hasn’t happened before.
- Financial institutions must be redesigned to cope with true uncertainty, not just selectively chosen statistics from the recent past or theoretical models
- We must stop building investment solutions based on strong (possibly erroneous) beliefs about how the world (especially the financial world) works
- Any strategy we implement must be able to reach its intended realistic objectives – often a range of possible outcomes we consider acceptable – this should be the case regardless of your beliefs on how the world works