ECB Member Frank Elderson addresses resilience against non-linear risks at ECB-Bank of England Conference

Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, spoke at the ECB-Bank of England Conference on supervising climate risk in a non-linear world in Frankfurt am Main on 14 October 2026. He noted that modern risk management, based on stable relationships and historical data, is challenged by complex macro trends like geopolitical fragmentation, demographic change, AI, quantum computing, and climate and nature (C&N) crises. These trends exhibit non-linear behavior, where small changes can trigger disproportionately large effects, moving tail risks closer to the baseline. Elderson distinguished between measurable risk and radical uncertainty, which involves future events whose probabilities and outcomes cannot be measured with confidence, proposing a framework of known knowns, known unknowns, and unknowns we don't know we don't know.