The emphasis that firms in all three sectors are placing on risk management and risk measurement issues is encouraging. This should result in stronger and better managed firms. The ability to improve risk quantification can provide important tools for assessing risk/return trade-offs and encourage sound risk management practices. However, firms need to understand the limitations of such methodologies and should supplement these where necessary, for example through stress testing. As firms become active participants in new markets and take on new types of risks, it is important that appropriate policies and procedures be put into place to measure and manage.
