November 2017
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You’ve Assessed Your Risk. Now What?

Riccardo Rebonato questions what we expect to our risk analyses to tell us.

“There is another aspect that current risk-management thinking does not seem to handle in a very satisfactory way: how to go from probabilistic assessments to decisions. Managing risk in general, and managing financial risk in particular, is clearly a case of decision-making under uncertainty… Most of the effort in current risk management appears to be put into arriving at the probabilities of events (sometimes very remote ones), with the implicit assumption that, once these probabilities are in front of our eyes, the decision will present itself in all its self-evidence.”

Rebonato, Riccardo, Plight of the Fortune Tellers, Why We Need to Manage Financial Risk Differently, Princeton University Press, 2007, p.20.

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