Our Methodology - The Integrated Feedback Loop
We provide a unique & specialized approach that utilises an interdisciplinary methodology that was developed at Imperial College & vetted by HM Treasury. We use this to help leaders & decision-makers build a “Control Room” to navigate increasing volatility amid the current transition from cooperative globalization (Pareto-equilibrium) to competitive fragmentation (Nash-equilibrium).
This methodology is integrated into our macro-geopolitical-industry-financial models that are interconnected and have been used to advise governments, financial institutions & senior business executives over 40 years.
Our methodology is the bridge between Engineering (Control Theory) & Economics, which captures:
- The Pillar of Optimal Control: We view the economy as a dynamic system and use optimization algorithms to determine how policy adjustments influence the macro environment and market expectations.
- The Nexus of Interdependency: Our integrated models account for interdependency between sectors that link the US Housing Market to global supply chains, and liquidity to geopolitical positioning.
- Risk Matrix – Beyond Markowitz: We define risk not as historical covariance, but as policy-induced volatility. We quantify how the pursuit of national interests (US, China, EU, Japan, BRICS) creates the Business Cycles of the 21st century.
- Game Theory Application: We utilize Nash and Pareto equilibrium models to determine whether international actors (US, China, EU, Japan, BRICS) are moving toward competition or cooperation, analyse geopolitical developments, and assess the resulting impact on the global economy & asset prices (tangible and financial).
Our Approach
The global economy has transitioned from a liquidity-driven cycle into a Geoeconomic-Macro Cycle. This is a significant departure from the Globalisation era, which operated on a Pareto-equilibrium of cooperation. In this new era, asset prices (tangible & financial) are no longer driven by market liquidity, but by the competitive pursuit of national economic objectives (Nash-equilibrium) that is fracturing trade & supply chains, prioritising energy & resource security, and obscuring policy objectives.
Our approach is built on the realisation that risk is a function of policymakers Objective Functions, which describes their priorities on traditional targets of economic policy (inflation, growth, budget/ current account deficits, employment/ unemployment).
- By understanding the mathematical constraints of central banks and treasuries, we identify market pivots before they manifest in the data.
- Our deep-understanding of the inter-connectivity of the global economy & interdependency between sectors incisively monitors dynamic shifts in markets & associated risks.
- Our models fuse housing & financial markets, shipping cycles & monetary policy we convey a unified risk analysis.
- It builds a main scenario upon which to evaluate upside & downside risks that capture the geopolitical reality.
- It accounts for the impact of geopolitical developments as the global balance of power alters.
ENAS' unique approach enables our clients to navigate this global trading environment and devise strategies proactively to achieve their commercial objectives & mitigate risks ahead of pivot events.