2018-03-07 13:44:26 Security English Protect your business against potentially devastating losses when you take important steps to avoid Black Swan events and minimize the... https://d1bkf7psx818ah.cloudfront.net/wp-content/uploads/2018/03/07074729/Partners-Dressed-Black-Swan-Event.jpg What is a Black Swan Event?

What is a Black Swan Event?

1 min read

When you hear the phrase "black swan event," you know instantly that you’re discussing something of great import — but what does it really mean? A "black swan" is an event that is unexpected (like seeing a black swam amongst a group of more typical white swans). It’s also impossible to predict, and it has a catastrophic impact when it happens. Some examples of black swan events include the 2008 housing collapse in the United States and the massive currency inflation that struck Pacific Rim economies in 1998. Neither event was predicted by any large number of observers, but both had drastic and far-reaching consequences for businesses all over the world.

Because black swans have potentially devastating effects, individuals, businesses, and other entities must recognize that black swan events happen. As much as possible, you should also try to plan for them. How can you prepare for the unpredictable? As a small business owner, start by thinking of events that, although unlikely, could be catastrophic for your business, and take proactive steps to prevent them or to minimize the damage such events can cause.

One such course of action is to carry insurance. Black swans such as fires, lawsuits, large-scale thefts, and other unexpected events can lead to a destruction of your business if you don’t insure against them. Your particular business may face risks not covered by standard insurance policies. For example, if you provide advice or consulting to your clients, consider carrying errors and omissions insurance to protect you in case you’re sued for giving advice that inadvertently cause harm to a client. Another way to protect yourself against black swans is to make sure you sign contracts correctly and that the contracts you use in your business are properly written to decrease your risk.

Talk to your insurance agent and attorney about the black swans your business could face. According to Nassim Nicholas Taleb, the writer who popularized the term “black swan,” we are all blind to the randomness and inevitability of catastrophic events that occur more frequently than everyday experience suggests.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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