The Joint Forum supports continued efforts by firms to further develop such methodologies in spite of the difficulties associated with both the need to reconcile differing time horizons for risk assessment and the measurement of diversification benefits. However, it should be noted the potential for excessive optimism when making simplifying assumptions in the calculation of risk measures that span multiple categories of risk. In the absence of precise data, it may be tempting for firms to assume significant amounts of diversification benefits, rather than take a conservative approach. Firms should therefore evaluate such simplifying assumptions carefully, particularly their potential validity.
