Commercial real estate equity securities private placement offerings provide potential rewards but come with significant loss severity risk that calls for prevention and risk mitigation support in a real-time environment. The question is whether or not we want to fix the barn door after the horse is gone or before the horse is gone. Investment loss severity risk mitigation programs typically focus on analytics to answer the question of what will become a future loss based on what has already become a loss. Why not focus on something different? Why not focus on preventing the investment loss scenario from becoming a reality to begin with by providing a proactive risk mitigation approach to recognize market disruption events and help prevent future mitigation scenarios that are the cornerstone of the “horse has left the barn” asset management practices?
In today’s world, adaptive artificial intelligence gives us the opportunity to forecast market disruptions and their potential to create future reductions in investment cash flows due to the resulting asset obsolescence that technology risk creates. This will be the new cornerstone of risk mitigation and investment loss severity risk reduction programs that can finally provide the solace that investors, broker-dealers, lenders, registered investment advisors, sponsors and issuers have been seeking.
The key is affordability and scale. The new systemic approaches to investment loss severity risk management need to be affordable and efficient.
The times, they are a-changin’…