An unforeseen event is a potentially negative event that may occur in the future, such as an economic downturn, natural disaster, or fraudulent activity.
Companies and investors plan for various contingencies through analysis and implementation of protective measures.
A thorough contingency plan minimizes loss and damage caused by an unforeseen negative event.
Contingency plans may include buying options or insuring investment portfolios.
Banks must set aside a certain percentage of their capital for unforeseen circumstances, such as a recession, to protect the bank from losses.