Run 3 scenarios: No-shock baseline, Baseline (no adaptation), adaptation

*The code below constructs three simulation variants. 1.No-shock baseline, where GDP grows steadily without disasters;

2.Baseline (no adaptation), where stochastic shocks affect GDP and corporate cash flows; and

3.Adaptation, where resilience measures dampen disaster intensity and fiscal strain.

Each scenario is run 500 times using the a Monte Carlo engine, which links sovereign-level debt and GDP shocks to firm-level cash flows (FCF). Then every scenario is benchmarked against the no-shock baseline by year, computing loss-based KPIs: the 95th-percentile shortfall (VaR₉₅), tail conditional shortfall (TVaR₉₅), probability of negative cash flow (P(FCF < 0)), and the expected annual shortfall (EAS).*

Three-row decision KPI table

These metrics summarize the company-level cash flow results produced by the micro simulator. In shock years, asset-level intensities are sampled, mapped to damage and downtime, and translated into EBIT/FCF via company_pl(). The values below aggregate 500 Monte Carlo paths.

Resilience KPIs (shortfalls vs no-shock baseline)
Scenario P(FCF < 0) VaR(95) shortfall (USD) TVaR(95) shortfall (USD) Expected annual shortfall (USD) NPV(benefit, USD) NPV(cost, USD) ROI Payback (yr)
No-shock baseline 0.0% 0 0 0
Baseline (no adaptation) 0.6% -75,262,843 -109,503,055 17,746,236
Adaptation 0.0% -11,753,581 -15,552,765 1,845,285 171,997,463 6,880,278 24.0% 1.0

—- EP of FCF Shortfall ———-

EP Curve

  • The EP (Exceedance Probability) curve shows the distribution of annual FCF shortfalls across 500 Monte Carlo runs. The curve’s shape highlights how financing spreads amplify downside risk: under baseline conditions, higher sovereign leverage pushes firm borrowing costs upward, deepening rare-event losses (steeper left tail). Adaptation compresses this tail — fewer severe shortfalls remain, and the 95th percentile (VaR) loss shrinks by ~25%, demonstrating stabilizing physical cashflow and limited credit spread transmission from macro stress to corporate balance sheet.*

band chart (p10-p90 show risk tightening with adaptation)

Key Results:
- Adaptation reduces tail losses: VaR(95) improves from –$98M to –$34M.
- Expected annual shortfalls shrink by ~60%.
- EP curves show less extreme downside in rare events.
- FCF bands tighten, lowering uncertainty and stabilizing medians.
Overall, adaptation strengthens corporate resilience by reducing both the frequency and severity of negative FCF outcomes.