Worst-Case Scenarios in Forecasting: How Bad Can Things Get?

Roy Batchelor, Foresight's Financial Forecasting Editor, explains that conventional business-forecasting models are not set up to tell us about the impacts of extreme events-hence, their worst-case forecasts are liable to be less severe than the worst that plays out in the future. While recognition of this caveat is important in itself, there are ways to model the impacts of extreme events and thus derive a realistic indication of downside risk. Copyright International Institute of Forecasters, 2010