In the context of the Australian banking sector, economic risks such as Asian economies remaining subdued, asset and house price collapses, and the failure of coordinated regulation would give rise to some of the largest financial impacts should they eventuate. In contrast to other developed economies, the expectation for domestic economic risks to occur is deemed to be relatively low. This suggests a high degree of faith in, and the perceived resilience of, the Australian economy and its supporting institutions.
In contrast, environmental risk were rated as severe in both magnitude and likelihood. The depiction acknowledges Australia’s vulnerability to extreme weather events, but it is also in contrast to the severity and likelihood of environmental risks as assessed in surveys for other regions. In a sense, Australia is more confident about economic outlook and management than other developed economies but more bearish on the potential downside risks of environmental risks.
What remains clear is that the magnitude of the economic risks necessitate sophisticated, ongoing risk management. This is particularly important in light of the increasing levels of interconnectivity of these risks, and the importance they pose to the Australian risk universe.
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