Kumar,

I can’t claim to be an expert on this area, so I will happily defer to others’ suggestions. Nevertheless, not being the bashful sort, here are my suggestions:

1. Derivative Risk Management

Derivatives are powerful tools for managing and moderating risk, but used casually they can create serious risks of their own. Some basic principles for proper management of derivative activity are essential.

2. Assuring Financial Statement Integrity – A Special Form of Operational Risk Management

Preparation of financial statements is a specialized type of business process. Methods to assure proper discipline around this process are similar to those for other processes from manufacturing to customer service. Integration of broader operational risk management techniques is the sensible approach to assuring financial statement integrity.

3. Liquidity Risk Management

Failure of effective funding and unexpected inability to liquidate assets when required are ever present threats. The best time to address such risks is before a crisis occurs, not after.

4. Stress Testing – Forewarned is Fore-armed

Just simulating a repeat of “the market’s greatest hits” does not constitute a proper stress testing program. Analyzing events that exploit the most serious vulnerabilities in a firm’s current situation is essential.

5. Broaden Your Risk Horizons

Often the worst risks are those not recognized. A classic example is the financial consequences of the tragic accident suffered by Roy Horn of Siegfried & Roy. It is said the Mirage had no key man insurance to cover the impact of such a possibility on the revenues of the casino in such an event. What unrecognized potential events could hit your firm? In many cases a little imagination can identify both such risks and possible ways to limit their impact.

6. GAAP Earnings vs. Economic Fair Value – Managing the Tradeoff.

Historical cost accounting will play a continuing role in financial statements despite the growing application of fair value accounting. Managing the inevitable tradeoff between these two concepts represents a continuing challenge.