Canadians can practice smart risk management by being prepared for bad outcomes, writes Jack Mintz in the Financial Post. Below is an excerpt from the article which can be read in full here.
By Jack Mintz, December 23, 2020
Every year, when I prepare holiday season cards, I review the ones I received the previous year. This year’s review was especially meaningful. Many comments in December 2019 predicted 2020 would be an even better year.
How wrong they were! A year of pandemic illness and deaths, lockdowns, steep economic losses and social stress, 2020 will go down as the worst ever in my lifetime. As we close the year, we face another year of continued uncertainty. We all hope vaccines will establish herd immunity. Yet even that can’t be predicted with certainty should the coronavirus mutate.
Imagine if we were back in 1920, having just survived the twin ravages of World War I and the Spanish influenza. Would we have expected the next 20 years to bring a Great Depression and the start of another world war, this one against Germany, Italy and Japan? On the brighter side, would we have predicted the transportation and consumer goods revolutions that took place after WWII? I doubt it. Even during the war, most predictions were for a return to economic depression once it was over.
This past week, in synagogues throughout the world, the chapter in Genesis focused on Joseph’s interpretation of Pharaoh’s dream was read. Joseph had the uncanny ability to predict seven boom years to be followed by famine lasting a further seven years. Because of this prediction, Egypt stored grain during the good years to help the population cope with the expected famine. It also led to centralization of political power as the people gave up their cattle and land to the Pharaoh, who also took a fifth of the crop — a tax similar to what we will face as governments try to save the COVID-recessionary economy.
We don’t have Josephs today to support these types of economic predictions. Canadians, nevertheless, can practice smart risk management by being prepared for bad outcomes. Preparation pays — the one critical lesson to be learned from 2020 hindsight.