Risk: The New Management Imperative in Finance

Introduction

This book shows how and why risk has become the new strategic imperative in financial management. Financial firms, which have traditionally mediated flows of capital through markets, have been squeezed by recent market developments. Greater price transparency, new trading products, and increased competition (resulting from deregulation, globalization, and so on) have tightened these firms’ margins. Even worse, electronic markets are reducing the need for any intermediaries at all. This trend is well underway in the most fluid capital markets.

Financial firms’ role in capital transfer has diminished, but their role as intermediaries for risk has grown. Derivative products allow them to easily parse and price specific bundles of risk. ...