They did not anticipate the broad consequences of widespread deleveraging, forced asset sales that exacerbated the illiquidity in markets, or the broad loss of confidence that followed. It's now obvious that this inability to anticipate and prepare for extremely bad outcomes posed a significant risk to financial system stability.
More robust risk-management practices, grounded in a longer-term, through-the-cycle perspective and appropriately designed stress tests, could have helped to prevent the buildup of leverage that became unsustainable. It has also become clear that riskmanagement models must take into account the collective impact of individual choices.