The risks posed by epidemics, stock market crashes, and massive avalanches are characterized by losses of huge magnitude but infrequent occurrence. Analyzing and managing such extreme risks are inherently difficult. The limited data we collect on these rare events is unlikely to be representative. This lack of data often results in a tendency for policymakers to under-invest in protecting against these risks. When these disastrous events finally eventuate, people are likely to over-invest in response due to their lack of experience and cognitive errors. Extreme risks pose challenges for conventional models of risk analysis and risk management, and they invite development of new approaches to complement existing methods. Historically, these risks have usually been managed on a piecemeal and ad hoc basis. Although banks have in place sets of risk tools to address extreme risks, it remains unclear whether the existing risk management fit contributes to lasting resilience within the banking industry.

To illustrate the validity and dynamics of the fit-resilience association, I perform a retrospective case study of an exemplary relationship between the existing extreme risk management tools and the banks, and see how the latter have become more resilient since the application of these risk measures. Case findings show that the existing risk framework to address extreme events is associated with poor resilience of banks. This misfit is only temporal, however, as banks can borrow from the corporate world a set of qualitative risk concepts to alter the poor relationship in terms of resilience between existing risk tools and banks and regain resilience. Furthermore, the case demonstrates the importance of a set of qualitative extreme risk management tools that should be embedded in the strategic planning and organizational design of the bank, as existing (quantitative) risk controls appeared unable to overcome difficulties in achieving better resilience. In this respect, the case also shows the bank management's active role in establishing an organizational governance and business process that is better tailored to address extreme risk environments by borrowing from the corporate world qualitative risk concepts such as HRO, supply chain risk management, and business model reverse stress testing.