As if risk managers did not have enough burden dealing with the rogue trading and control lapses at the likes of Barings, Sumitomo and Orange County, now comes the notion that enhancing shareholder value also should be part of the discipline's function. But this really is not an outrageous idea; if you limit risk management to preventing cataclysmic loss or providing quantitative analysis of risk, you find yourself with a risk management structure that doesn't perform either function adequately.

Risk management is slowly changing most financial and non-financial management processes in institutions. The principles which measure economic activity and performance of an organization and its staff are evolving to incorporate risk-reward concepts. So far, most change is apparent only in internal management information. Yet the Securities Exchange Commission's recent disclosure requirement covering an entity's interest rate, currency, equity and commodity risk is a strong first step on behalf of external audiences, and concepts such as value-at-risk are becoming more widely accepted measures of economic activity.

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