An economic shock is an unexpected event that impacts an economy positively or negatively. It refers to unpredictable changes in external factors outside the scope of economics that influence internal economic variables. Risk analysis uses methods like failure trees to identify cause-and-effect relationships between potential risks and undesirable outcomes. Combining risk management and scenario planning by correctly understanding relationships between factors can help mitigate or prevent economic shocks.

1. In economics, a shock is an unexpected or
unpredictable event that affects an
economy, either positively or negatively.
Technically, it refers to an unpredictable
change in exogenous factors—that
is, factors unexplained by economics—
which may have an impact
on endogenous economic variables.
(after Helmut Lütkepohl (2008), source
Wikipedia 21/11/12)
Risk is the potential that a chosen
action or activity (including the choice
of inaction) will lead to a loss (an
undesirable outcome).
See figure to the left
(Source: wikipedia 21/11/12)

2. Example of a formal risk-analysis
method, in this case a Failure Tree (Arbre
de Panne). This example is based upon
& the NEN-norms for risk analysis.
The example is less than perfect, as the
NEN norm focuses on cybernetic systems
and economic shocks generally are more
+ holistic. The philosophy of identifying
cause-and-effect relations are none the
less valid in my opinion.

3. Very roughly put, I see a analogy between
the scenario planning explained on the
campus weekend and risk analysis.
Assuming correct measurements in place
and a correct understanding of the cause-
and-effect relations, the combination of
risk management and scenario planning
could mitigate or prevent shocks