Second, the ongoing crisis is a most dramatic example of the tendency for financial markets and institutions to reward short-term profits at the detriment of long-term performance. The excessive focus on short-term profits has resulted in imprudent risk-taking behaviour and a significant underestimation of so-called “tail events”, i.e.
events that have low probability but imply high risks if they occur (that have turned out to be far less unlikely than previously assumed). In this context, there is a need to create an incentive framework that adequately assesses and rewards performance over the medium to longer term.