The very nature of DeFi instruments is that the majority are backed by stablecoins, which means they are linked to the rise and fall of the dollar, i.e. YIELD App fund positions are structured as dollar neutral. For DeFi pools that contain cryptocurrencies such as Bitcoin or Ether, YIELD App hedges against rises or falls in their value with corresponding positions at equal value through licensed crypto futures exchange contracts.
The other great thing about DeFi products is their construction, designed to have binary outcomes. i.e. the fund providers in the pools will either earn a return or payment for providing liquidity, or they will receive nothing, there is no downside volatility. Think of it as being paid only when these funds are used rather than speculating with them.
The risk of systemic failure or contagion does exist, but is extremely low; this would be similar to the US federal reserve raising interest rates suddenly to 20% without any warning, it is highly unlikely but not impossible, in both cases it would be a ‘Black Swan’ event.