The Bretton Woods Institutions are adapting to new world economic conditions, including greater relative weight of some emerging market economies. The members of the IMF aim to agree on changes in the governance of the Fund by January next year as confirmed in the latest IMFC 10 Communiqué. A review of quotas is central to these deliberations. Quotas determine the voting weight of individual member countries in the institution. Some expect the review to lead to changes in the Executive Board of the IMF. Its current size ensures broad and fair representation of the member countries and avoids an undesirable concentration of power. An important part of the governance reforms should be to enhance the role and status of the IMFC. The composition of the IMFC ensures fair representation of the membership through the constituency structure. Although without formal decision-making powers, it has political power and stature which it can bring to bear. A reinvigorated IMFC requires a firm policy commitment from the membership that strategic discussions for the institution and global economic cooperation take place in the IMFC. Adequately dedicated and effectively managed, it can provide strategic leadership and guidance to the Executive Board. The G20 has assumed a dominant role in matters of international economics and finance. Success in their ambitious tasks can only be welcomed by the rest of us. However, it is a weakness that the members of the G20 represent only themselves. Virtually entire groups of countries and regions are left out.

Technically speaking, this means we cannot determine an optimal commitment period for our investments. In point of fact, our investment horizon is usually relatively long-term, although it can be abruptly shortened in the event of a crisis. Finally, we also pay special attention to reputation risks when engaging in specific investments. One of  BIS Review 123/2006  1  the SNB's most important assets is its good reputation and its credibility. Damage to its reputation could also have a negative impact on monetary policy. Consequently, in cases of doubt, we avoid investment classes and instruments that may be expected to have a damaging impact on our reputation. We are also very risk-conscious when it comes to potential conflicts of interest. For instance, all staff engaged in practical investment activities are shielded from confidential monetary policy information. Effective risk management requires that all relevant risks be identified and assessed regularly, in a manner that is as unbiased as possible. Experience has shown that technical failure is seldom at the root of serious losses. The greatest losses result from a lack of risk consciousness, from a total failure even to recognise significant sources of risk. This danger exists when risk assessment is restricted exclusively to easily measurable quantitative risk variables, excluding areas such as processes or legal risks, which are referred to as 'operational risks'. For this reason, we also include operational risks in our assessment. However, while pursuing this broader route, we certainly do not neglect the regular quantitative measures for assessing financial investment risks.