Hence, some potential negative events may be truly “unknown unknowns” and fall into the realm of uncertainly, not risk, as defined by Knight. In uncertainty, not all possible outcomes and their associated probabilities are known.2 The conclusion from this analysis is that available concepts of systemic risk are vague and too wide to be operationally useful.
If any policy framework is to be designed and applied in a meaningful way to counteract systemic risk we need to narrow this concept and make it more precise. In this sense, precision implies measurability.