Uncertainty and risk during the COVID-19 pandemic (გაურკვევლობა და რისკი კოვიდ-19 პანდემიის პირობებში)

Abstract

Almost every market, both for services and goods, has been experiencing increasing uncertainty since the beginning of 2020. A lot of interesting research topics have emerged after the impact of COVID-19 on the economy. The disdain for the expected high dangers and related risks, which were overlooked by many countries' governments in prior years, may be seen in the context of the COVID-19 pandemic. Scientists had warned that the world was ill-equipped to deal with the pandemic. Immediately after it began, it became clear that the reactions of many countries were delayed, and the measures taken were ineffective. This affected almost every industry in the economy. One of the most intriguing consequences of COVID-19 is its effect on demand and increasing risks in a variety of markets as a result of the negative effects of the economic recession and rising unemployment. It's worth noting that the negative economic effects of pandemics, isolation, and remote working practices completely altered market demand for goods and services, and therefore the offer. It is very hard to assess which effect is more significant, and the impact is likely to vary per country. In this study, the evaluation of political measures affecting the economy is discussed on the basis of the "Black Swan" and "Grey Rhino" terms, in situations of unpredictable uncertainty and measured risks. "Black Swan" is used to describe very rare events that are highly predictable and have a high impact, and "Grey Rhino" describes very likely high-impact risk events. Risk describes the situation where there is a loss or danger. While uncertainty differs from risk in that risk can be estimated in advance and measured using historical market data, uncertainty cannot. As a result, risks are easier to handle since they can be insured, but uncertainty cannot be insured. The reality following the COVID-19 pandemic is a very good example of taking decisions in a situation of uncertainty. We faced a lot of uncertainties at the start of the epidemic – we did not know how to protect ourselves, how to carry on with everyday life, and so on. The Black Swan Theory explains why society ignores the most significant changes when traditional risk management is completely ineffective. It refers to an unforeseen and suspicious event that has a significant impact, while the "Grey Rhino" is the very obvious but ignored threat. The "Grey Rhino" is a metaphor for threats that we can see and hear but fail to address. In some ways, the term "Grey Rhino" is the opposite of "White Swan." In the future, facing the challenges requires long-term, large-scale thinking. The link between individual psychology and economic decision-making is becoming increasingly apparent.