Particularly in the past decade, the development of new financial products and the greater depth and liquidity of financial markets have enabled banking organizations to change their risk profiles more rapidly than ever before.
That possibility requires that we strike an appropriate balance between evaluating the condition of an institution at a point in time and evaluating the soundness of the bank’s on-going process for managing risk. The risk-focused approach, by definition, entails a more formal planning phase that identifies those areas and activities at risk that warrant the most extensive review.