These risks are often difficult to quantify, but the result can be severe damage to the reputations of both the companies engaging in the transactions and their financial advisers - and, in turn, impaired public confidence in those institutions.
These potential risks and the resulting damage are particularly severe when markets react through adverse changes in pricing for similarly structured transactions that are designed appropriately. Assessments of the appropriateness of a transaction for a client traditionally have required financial firms and advisers to determine if the transaction is consistent with the market sophistication, financial condition, and investment policies of the customer.