It may be that a single model of the financial system is neither practical nor realistic. Given the complexity of the financial system, a suite of models combining a number of analytical tools, approaches and indicators could provide the best avenue for success. While we are working to identify key risks, recent events have reminded us that we have to expect the unexpected.
The earthquake and tsunami in Japan are examples of the kind of shocks that nobody had foreseen. Another example is the – no less seismic – political unrest of the Middle East. Clearly we can’t anticipate every shock. That’s why it so important to ensure that the financial system is more robust, so that it can withstand the shocks that will occur.