Seeing Around the Corner – Early Crisis Detection Using Causal Statements

Are crises happening more frequently in our world today?

It certainly seems that way. And that may be because the interconnection of human activities in the world increases the impact of a crisis when one does happen. That impact is felt on countries, industries and companies in a way it never has been before. That’s why the question of early detection of such potential crises has become crucial for asset managers, company executives and policy makers.

We describe here a method to leverage in real time the wisdom of crowds of authors, by analyzing the causal statements they express in texts, and track the evolution of these causal statements over time.

We applied that method to two case studies: the 2020 impact of Covid on the airlines industry, and the 2021 semiconductor shortage’s impact on the car manufacturing industry.

The results are quite promising: in each case the causal statement method produced an alert a week before an indication can been seen in the analysis of statements about the future of various indicators for the respective industries studied.

We also describe a novel way to present causal graphs, offering a fast understanding of the highlights of a specific company inside its industry. These “causal contrast maps” can be used by investors or managers either as a real-time supervision tool, or to analyze post-mortem the evolution of a crisis and improve detection for future such events.

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