Market risk Securities and portfolios of securities should be stress-tested to understand their potential performance under a variety of market conditions. Liquidity Investors want to be certain they are receiving adequate compensation for relative liquidity of securities in their portfolios. The key is receiving adequate compensation for credit exposure. The emphasis should be on quick response to computer, human error or confirmation discrepancies to minimize potential impact. The key is to require total separation of trading and accounting systems and to insist that aggressive detection systems be in place.
Risk management is a complex process.
Its goal is to identify and control risks undertaken for a given level of return, and not to eliminate or necessarily even to minimize risk.