In Good Company• Mar 19, 2026• 1:25:04Panel

This is how we work with risk in the fund Risk Summit 2026 Norges Bank Investment Management

From In Good Company

Espen Fysterå(Host)•Nikolaj Tangen(Guest)•Marta Polino(Guest)•Matthew Brunette(Guest)•Trude Vika(Guest)•Danny Schlotz(Guest)•Lars Dahl(Guest)•Elise Melsom(Guest)•Riga Tensin(Guest)•Lars Kvikstad Sørensen(Guest)•Jusso Nisinen(Guest)

Executive Summary

Norges Bank Investment Management (NBIM) is adapting to a fundamentally changed risk landscape, characterized by heightened geopolitical competition, market fragmentation, and the dual nature of AI as both a risk and a tool.
The fund is increasingly leveraging AI for advanced risk management, including continuous monitoring of geopolitical scenarios, assessing counterparty credit quality through news analysis, and extracting key terms from legal contracts.
Scenario analysis is a core practice, used not for precise prediction but for organizational preparedness and strategic planning, with key stress tests modeling a 37% loss in a "fragmented world" and a 10% loss from an "AI correction".
Proactive counterparty risk management, exemplified by the successful mitigation of exposure to Credit Suisse before its collapse, and a dynamic approach to funding off-benchmark real assets are central to NBIM's strategy.

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Concerns Raised

Fundamental shift in the geopolitical landscape towards competition and fragmentation.
Potential for a sharp correction in AI valuations and high concentration in the AI supply chain.
The interconnectedness of new risks, such as AI influencing geopolitical and cyber threats.
Sudden counterparty defaults and the need for constant credit quality monitoring.

Opportunities Identified

Leveraging AI to create more efficient and powerful risk monitoring and analysis tools.
Generating significant excess returns through well-managed programs like securities lending.
Using superior risk management and organizational preparedness as a competitive advantage in volatile markets.
Capturing unique return streams from unlisted real assets like real estate and renewable infrastructure.

Key Themes

The New Era of Geopolitical Risk

The global order has shifted from an era of post-Cold War cooperation to one of competition and fragmentation. This change is viewed as a fundamental, long-term alteration to the investment landscape, making geopolitical analysis an essential and integrated component of risk management rather than a peripheral concern.

This shift invalidates old investment playbooks that assumed global stability, forcing institutions like NBIM to develop new frameworks and stress tests (e.g., the "fragmented world" scenario) to model and mitigate these pervasive risks.

AI as a Double-Edged Sword: Risk and Tool

Artificial intelligence presents a dual challenge: it is both a significant new source of market risk (e.g., valuation bubbles, supply chain concentration) and a powerful tool for managing risk. NBIM is actively integrating AI into its processes to monitor geopolitical events, assess counterparty credit quality, and analyze legal documents more efficiently.

For large asset managers, navigating the AI landscape requires balancing the potential for significant portfolio losses from an "AI correction" against the operational advantages and enhanced insights that AI tools can provide for risk mitigation.

Proactive Counterparty Risk Management

The collapse of Credit Suisse serves as a case study in the importance of proactive counterparty risk management. By placing the bank on a watchlist early, actively reducing securities lending exposure, and demanding more collateral, NBIM successfully mitigated potential losses, demonstrating the value of continuous monitoring and decisive action.

This highlights a shift from reactive to preemptive risk management, where institutions use a combination of traditional analysis and new AI-driven tools to monitor credit quality and prepare detailed response plans for potential defaults.

The Strategic Application of Scenario Analysis

Scenario analysis and stress testing are used less for precise prediction and more for strategic purposes like enhancing organizational preparedness, challenging assumptions, and testing the robustness of long-term asset allocation. The primary value is not in the exact loss figures but in ensuring decision-makers have "seen the film before" when a crisis materializes.

This approach acknowledges the inherent uncertainty of complex risks, allowing organizations to build institutional resilience and develop clear action plans for tail-risk events, as demonstrated by NBIM's response to the invasion of Ukraine.

Managing Idiosyncratic Risks in Real Assets

Unlisted real assets, while a small portion of the fund, introduce unique risks due to their absence from the benchmark, high transaction costs, and distinct return drivers. NBIM manages this through a dynamic funding strategy (selling a mix of equities and fixed income) and deep, asset-specific due diligence to mitigate structural risks like currency and beta exposure.

This demonstrates the complexity of managing illiquid, off-benchmark assets, where the focus must shift from broad market risks to asset-specific factors, requiring specialized expertise to navigate high ownership stakes and irreversible investment decisions.

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Topics

Risk Management Geopolitics Scenario Analysis Stress Testing Norges Bank Investment Management (NBIM)Sovereign Wealth Funds Artificial Intelligence (AI)Counterparty Risk Credit Risk Securities Lending Credit Suisse Real Assets Real Estate Investing Renewable Energy Infrastructure Strategic Asset Allocation

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