Low-likelihood, high-impact global events are happening more and more, says Cormac Mc Garry

we just laid out some of the geopolitical tensions going on I know you're also looking at a few other ones including Venezuela Guyana and also what's going on in the Democratic Republic of Congo uh in addition to just the tensions in China so clearly there's a lot for us to talk about I want to start with the broad picture when you're you're talking to your clients who are off in investors how do how should they view the risk out there globally and how should it guide some of their investment de

cisions well you know Frank something that's changed in the last four or five years that we've noticed from our clients of control risks is uh them asking us to talk more about these low likelihood but very high impact events and that's been driven by two key experiences number one the covid-19 pandemic which forced most multinational companies to realize that they live in a world full of countries that can have different laws and jurisdictions and um the Russian invasion of Ukraine two years ag

o to the day also brought home that point that these high impact events can happen no matter how likelihood you might think they are and there's more of them out there in the world and unfortunately we're seeing a world in which these low likelihood high impact events are just happening more and more right you know that's an interesting thesis Cormac so give us a sense uh the Israel Hamas war is that a low- likelihood situation it's clearly been high impact we've seen the impact on the Red Sea a

nd other things um and then also we see a lot of global Brands highlighting the impact uh many of them seem to be in the consumer discretionary and Consumer Staples space do you expect that sector to be disproportionately impact by what we're seeing in the Middle East specifically so this is an example of a conflict that one could have predicted Israel Hamas going to war with each other not necessarily unpredictable but the nature in which it is affecting the region that is something that we are

control risks we advise our clients to scenario plan for these events so not just stating that an Israel Hamas War may occur but what are the scenarios that might play out that affect the broader middle east region and one of one of those scenarios I for example is regional escalation something that we're not quite at yet in terms of regional conflict or War but there are trigger points for that scenario and one of them is indeed what we're seeing in the Red Sea with houthi attacks and shipping

and in that in that specific trigger point you are looking at an immediate impact on one specific sector that is shipping in the maritime industry generally and then there's let's say the Ripple effects from that it's uh the caros that those ships are carrying and the supply chains that will be affected as those ships stop and of course that's affecting no one uh more than the countries right there in the Middle East yeah we're showing the audience right now some of the attacks on International

Shipping in the Red Sea uh on the other side of the coin I was actually surprised that you said you're also talking to your clients about the opportunities that are coming from some of these events and you're actually looking at the Russia Ukraine war as potentially long-term as a possible investor opportunity well our job our control risks is not to scare our Clans away from doing business it's quite the opposite it's to help them understand the real risk that they may be uh venturing into and

to embrace opportunity where they can so that's just a good example of course Ukraine is a is a is a war zone it's not a place you can just easily enter and do business very very very securely but you can uh control risks have uh been into Ukraine ourselves and um while the war is ongoing there's also billions of euros and US Dollars being prepared for reconstruction efforts and those those uh dollars and Euros are coming from the European Union the United Kingdom and the United States and uh i

t's going to be companies from those areas that are going to be able to take advantage of those opportunities to invest and that's just one example uh in Ukraine so can I ask you would you invest in an index tied to the country or tied to the region or specific stocks that you think would benefit I think specific stocks are are worth looking at because if you look at the construction companies for example and everything in the supply chains around them that will be gearing up to go into to Major

uh building and reconstruction efforts into Ukraine and that that that would entail specific stocks