To conduct a credible internal analysis of relevant risks, institutions should identify which risks can generally be quantified and which ones cannot. When risk measurements are based on scarce or incomplete data, or on unproven quantitative tools, institutions might need to use sensitivity analyses, stress tests, or scenario analyses to a greater extent in order to develop meaningful risk measures.
Banks that wish to remain competitive must keep up with the latest developments in risk measurement and management. Bankers must ensure that their models keep up with current practice and continue to capture risks accurately, especially as new activities and new products are introduced. Similarly, the supervisory community needs to keep up with developments in banking and finance.