This takes me to the main challenge for market participants, namely to raise their risk-adjusted profitability on a sustainable basis. Rather than trying to add to the debate on the “profit” side of the equation and the corresponding business decisions, I will elaborate briefly on the “risk-adjusted” component.
In recent years, a succession of crises has raised everyone’s awareness of the risks involved in financial activities. In the wake of these crises, major strides have been made in the measurement and management of risk.