Understand Risk Innovation
This blog will be based on reading the following risk profile report
In the risk profile report, there are four different kinds of risks were mentioned. They are;
Reserves Stockpiles
This shows total foreign reserves (excluding gold) held by each country's central bank as a percentage of the gross domestic product. They effectively act as a cushion against economic shocks, such as hyperinflation and currency depreciation, that could be triggered by external or internal events.
Unemployment
Figures are 2017 estimates by the International Labour Organization for those in the labor force aged 15+. Unemployment can serve as a proxy for the overall health of the economy. Long-term high unemployment levels eventually lead to less spending power among consumers, lower tax revenues for governments and possible social unrest.
Inflation
When prices are rising too quickly, the resulting confusion can lead to lower investment due to uncertainty about future costs and profits. Poor economic policies can spark or exacerbate inflation, as can a weakening currency.
Currency Volatility
The figure is for 3-month at-the-money implied volatility of the currency's USD exchange rate. Currency options represent the market's overall expectation of a currency's future volatility. Significant movement in a currency's exchange rate can bolster or weaken returns, depending on the type of investment. The figure for the United States is for implied volatility of the USD-EUR exchange rate.
Sometimes we can seek opportunities from risks if we understand risks very well. For example, in some countries with a high rate of unemployment, people in the country will have a very strong desire to work, so that they would accept high workloads with lower salaries than the people in those countries with low rate of unemployment. They will treat the work very seriously because they don't want to lose this rarely work opportunities. The benefits for the company are the lower cost of labor, and high productivity and high quality of products.
In addition, if we are able to predict the future trend of currency volatility, we can make some benefits from this risk. We can spend less money than other countries to buy the same products, material or equipment if we know the currency volatility very well.
In summary, opportunities are everywhere, but they are not easy to find, you must keep an innovative attitude to treat everything you are meeting. As I mentioned in this blog, you can find the opportunities through risks if you have an innovative attitude.
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