Risk-risk tradeoffs: what should we do in Europe?

Risk-risk tradeoffs occur when a regulator focuses on decreasing one particular risk in one area which leads to another risk appearing elsewhere which was not originally considered. These risk-risk tradeoffs abound all around us and are frequently ignored by regulators. In this article we firstly, examine why risk-risk tradeoffs are often ignored. Secondly we summarize some of the criticisms to the use of risk-risk tradeoffs and then we look at the phenomenon via a number of European based case studies. In the final section of the paper we put forward a series of recommendations to help regulators to be better equipped in dealing with risk-risk tradeoffs.