The second is that delegated monitors are subject to their own governance challenges. Unfortunately, this last point is illustrated all too well by the governance problems that have recently surfaced in the U.S. mutual fund industry. Financial innovations and disclosure Over the past few decades, firms have acquired effective new tools with which to manage financial risk.
For example, securitization helps a firm manage the risk of a concentrated exposure by transferring some of that exposure outside the firm. By pooling assets and issuing marketable securities, firms obtain liquidity and reduce funding costs.