Risk Australia: Banks ignored uncertainty in run-up to crisis

Pay more attention to unknown unknowns, Debelle advises

More attention should be paid to uncertainty when modelling and measuring risk, says Guy Debelle, assistant governor, financial markets, at the Reserve Bank of Australia (RBA). Speaking at the Risk Australia conference held in Sydney today, he said a key element of the recent crisis has been the mis-assessment of risk, and in particular, a failure to take appropriate account of uncertainty. Risk management models, he said, focused too much on measurable risks without taking appropriate account