Financial Risk Assessment:

Barclays Plc. Risk Assessment

Report
Introduction
The modern business operating environment is highly dynamic, characterized
by increased unpredictability, volatility and complexities. As such, business
risks are ever increasing and changing. From time immemorial, business
organizations have often perceived risk as a necessary evil that must be
mitigated or minimized as much as possible. Most recently, businesses have
diverted significant resources to address risks, thanks to the increased
regulatory requirements. The 2008 financial crisis indicated that with which
risks are identified and managed has not yet met in a timely manner. The poor
quality of underlying assets in the financial sector had a significant impact on
the quality and stability of investments. Therefore, the process of risk
identification, management and exploitation across organizations has become
important to the success of businesses. Effective risk management starts with
risk assessment, a process that provides a mechanism for identifying the risks
that presents opportunities and those that have potential pitfalls. When
properly utilized, risk assessment technique provides an organization with a
clear view of areas and variables that are exposed (Mistrulli, 2011).
This paper presents a risk assessment report for Barclays Group Plc. The report
stat by highlighting the broad scope of risk, distinguishing between different
types of risks and the steps involved in the process of financial risk
management. The paper then provides a comprehensive discussion of main
financial risks management tools and techniques. In the main body section, the
paper provides a detailed assessment of Barclays’ risk exposure. Within the
assessment, this report will: identify and prioritize the main financial risks
faced by Barclays Plc.; and Develop risk management strategy. In addition, a
critical evaluation of the impact of the recent global financial crisis on modern
risk management practices will be provided, followed by a comprehensive
analysis of the changes that are being introduced into financial markets to
enable financial institutions comply with post-crisis regulatory reforms.
Types of Risks
The first step in assessing and managing risk is risk identification. There are
various risks that an organization is exposed to, and their identification will
provide an insight on how to mitigate them. Risks can generally be categorized
by the following criteria:
 1. Market versus Firm-specific risk – Risks can be categorized into those
that affects individual or a group of firms in the market (firm-specific)
and those that affect many or all of companies in the market (market
risks). Firm-specific risks can be mitigated through diversification of
portfolios since they do not affect all companies in the market (Pritchard,
2010). On the other hand, market risks cannot be mitigated through
diversification since they impact on all portfolios found in the market.
2. Continuous versus Event Risks – Event risks are often dormant and
occurs without any early warning sign, presenting unwanted economic
consequences. Continuous risks, on the other hand, creates a continuous
exposure that can be studied by a company and mitigated. An event risk
can be presented by, for instance, a national civil revolution, whereas
changes in interest rates can be termed as a continuous risk.
3. Catastrophic risk versus Smaller risks – Some risks are relatively smaller
and trivially affects a company’s earnings while others have significant
impacts on the financial stability of a company. Catastrophic risks can
lead to the closure of a company, especially when the exposure is not
anticipated and hedged effectively (Mistrulli, 2011).
4. Operating versus Financial Risks – Risks can emanate from a company’s
financial operations such as a mix of its debt and equity and other
financing types used, or from its operations (Colquitt, 2007). For
instance, a firm can get exposed to financial risks through increases in
interest rates. On the other hand, increase in the prices of raw materials
can present an operational risk to the firm. In business operations,
operating and financial risks categorization is commonly used in risk
identification, assessment and mitigation.
Steps involved in Financial Risk Management
The process of financial risk management entails six steps:
1. Establishing goals and context
This is the initial planning stage that enables the risk management team to
understand the environment in which the company operates and its inherent
risks. This stage is undertaken through: establishing the strategic risk
management context of an organization and identifying the opportunities and
constraints within the operating environment (Christoffersen, 2011). The
organizational context and culture is established through environmental
analyses that often involves a review of regulatory standards, corporate
documents and industry guidelines on risk management. This step will also
involve establishment of the criteria that will reflect the defined context on
internal goals and objectives, policies and interests of stakeholders.
Environmental analysis can be evaluated using various frameworks such as the
SWOT and PESTLE analyses.
2. Risk Identification
After establishing risk management goals and putting the organization into a
risk-context, potential risks will be identified. Risk are not necessarily adverse
to the organization, as they may present opportunities or strengths for the
organization (Huang, et al., 2009). An appropriate risk identification criteria
will depend on the nature of organizational activities and variables that are
significantly exposed. The following techniques and tools may assist in risk
identification:
 Business risk checklists,
 Scenario planning tools,
 Examples of risk sources,
 Process mapping,
 Documentation of program evaluations, audit reports and other research
reports.
This is the most critical stage in the process of risk assessment. Therefore, the
better will be the organization to assess the sources of risks, the better the
outcomes of risk assessment process and thus an effective risk management
plan.
3. Risk Analysis
Risk analysis will entail taking into consideration the source of risk, the impacts
of these risks and the likelihood to estimate consequences of such risks without
controls in place. When lower risks are anticipated, qualitative or semi-
qualitative risk-screening techniques such as hazard matrices, risk matrices,
exposure graphs and risk graphs (Huang, et al., 2009). On the other hand, larger
risks needs to be comprehensively analyzed since they represent significant
impacts on the organization. As such, advanced risks are analyzed using
quantitative methods. The use of risk matrices enables an organization to
match the likelihood of a risk occurrence and the consequences of the
occurrence. A likelihood criteria is often applied when examining the likelihood
of a risk occurrence.
4. Risk Evaluation
After a comprehensive analysis of the risk and exposure, the assessment team
will then evaluate the impacts of the risk on business variables so exposed. The
analyzed risks will thus be compared with the previously documented risk
exposure to establish tolerability. If the protected risk is greater than the level
of tolerance, then this is an indicator for further control measures or enhancing
the existing risk controls (McNeil, Frey & Embrechts, 2010).
These analyses will lead into decisions on whether the detailed risks are
acceptable or not. For example, a risk may be considered as acceptable if:
 The exposure is considered as extremely low and the treatment of the
risk is not cost effective,
 An effective treatment for the said risk is not presently available to the
organization, and
 There is a sufficient opportunity inherent in the perceived risk and an
organization has higher chances of benefiting from the opportunity
(Christoffersen, 2011).
If it is within a manager’s well informed judgment that the risk is acceptable,
the organization will then accept the risk without any further considerations
for treatment alternatives. However, accepted risk should be diligently
monitored and reviewed on periodic bases to ensure that they remain
acceptable.
5. Risk Treatment
Risks that are acceptable are retained by an organization and meticulously
monitored. However, unacceptable risks must be treated and controlled. The
key objective for this stage is to develop a cost effective method for mitigating
established risks. Treatment options available for the organization involve the
following (Huang, et al., 2009):
 Risk avoidance, in which an organization will desist from undertaking the
activity considered as risky or likely to trigger the risk,
 Risk reduction (mitigating the risk),which entails controlling the
likelihood of occurrence or the impacts of the risk in case it occurs, and
  Risk acceptance (retaining the risk).
6. Monitoring the Risk
After the risk has been treated, it is important for the management team to
understand that the concept of risk is highly dynamic and thus continuous
review of the risk is necessary. Thus, this stage requires knowledge of the
outcomes of risk treatment and how such outcomes can be measured. Although
a review period is often dependent on the operating environment and emerging
legislation, the standard industry requirement is that risk treatment strategies
be reviewed after every five years (Amiti & Weinstein, 2011). An effective risk
review seeks to validate an organization’s risk documentation and overall
management. The review should also consider the changing industry practices
and regulatory environment.
Financial Risk Management Techniques and Tools
There are many financial risk management tools and techniques, some of which
have been discussed in the preceding section. However, in this section, we are
going to discuss various techniques that risk managers can use to hedge against
risk exposures. If an organization decides to reduce its exposure to risks, there
are several approaches that can be adopted (Mistrulli, 2011). Some of the
techniques that will be discussed in this section are integrated into the standard
financing and investment decisions that every business makes in the course of
its operations.
Investment Choices
A company can mitigate some of the risks it is exposed to through the
investment decisions that it makes. Multinational companies such as Barclays
Plc. can mitigate some country-or region-specific risks by investing in different
countries or geographic locations (Colquitt, 2007). As such, exposure in a given
country, say Mexico can be offset by exemplary performance in another country
such as the United States. Investment choices can also be affiliated to
diversification in which a company can invest into other closely-related areas
in order to reduce variability in income and make a company more stable.
Managers and strategists of global companies have often justified
diversification into multiple businesses by this premise and have led their
companies into forming conglomerates with other foreign companies.
Financing Options
Companies can also influence their overall risk exposure through their
financing decisions. For example, if Barclays Bank expects substantial income
streams in yen from a Japanese investment, it can mitigate risks associated with
foreign exchange by borrowing from Japanese financial institutions
denominated in yens in order to finance the investment. Although a
depreciation of the yen against the dollar will reduce the value of expected cash
inflows, there will be a partial offsetting impact from the arrangement.
Firms wishing to optimize their financing choices have conventionally been
advised to match a characteristic of debts to the project funded with the debt
as this will reduce the exposure to default risk (Christoffersen, 2011). Similarly,
firms can match debts to assets in terms of currency and maturity as this can
reduce the cost of debts as well as the default risk, leading to increased value of
the company. However, this strategy has inherent weaknesses since companies
that are restricted to access bond market in certain jurisdictions may find it
hard raising capital through debt financing. This is especially due to the fact that
most firms operating outside of the US and even others with operations inside
the country have access to only banks as a form of financing and thus restricted
to what banks offer.
Insurance
Purchasing insurance coverage against exposure to risks is one of the oldest
and most established method of hedging against specific event risks.
Companies can use insurance to protect their assets against possible loss,
although attention has been diverted to using derivatives to hedge against
financial risks (Bessis, 2011). There is no doubt that insurance is the main
conventional vehicle for protecting assets against exposure. However,
insurance does not eliminate risk but rather transfers risk from the company
purchasing the cover to the firm providing coverage against the proximate
cause.
Insuring against risks is said to provide benefits to both the insurer and insured.
For instance, the company providing coverage can create a portfolio of risks
and thus gain diversification advantages that will not be realized by a self-
insured company. In addition, an insuring company has expertise in risk
assessment and mitigation and the insured company will be able to benefit
from a comprehensive analysis of its exposures. Besides, the insuring company
will also provide additional services, such as safety and inspection, to the
company being ensured.
Derivatives
Although derivatives have been around for a considerably long time, their
access by many businesses were limited since they had to be customized for
each business. It became necessary to standardize derivative products after the
development if futures and options markets in the 1980s (Huang, et al., 2009).
This made it possible to individuals and companies to hedge against specific
financial risks. There are many derivative instruments that can be used to
hedge against various financial exposures, and these instruments keeps on
growing. The mostly used derivatives in financial risk management includes
futures, forwards, swaps and options.
Forwards and Futures
A futures is a contract that enables an individual to buy a product –which may
be currency or a commodity – at a specific future date at a fixed predetermined
price. The seller obligates to deliver the agreed product at the specified future
date and the set price. The price for purchase of a commodity or currency in
future is predetermined and fixe, and thus at the expiration of the contract, it is
possible to measure the payoff to both the seller and the buyer (Colquitt, 2007).
The buyer of a forward contract will realize a gain from the contract, equal to
the difference between the actual price and the market price, if the actual price
at the time of contract exercise is greater than the agreed forward price.
However, if the actual market price at the exercise date is lower than the
contract price, the seller will gain the equivalent while the buyer losses. Since
the forward contract is initiated between private parties, there is a possibility
that the losing party may default.
A futures contract, more like a forward contract, is an agreement to buy or sell
an underlying asset at a predetermined future date. Although the payoff
diagram for a futures contract is similar to that of a forward contract, there are
some differences between the two derivatives. Futures contracts are highly
structuralized and trade on the exchange market while the forward contract
does not. Futures contracts are also more liquid than forwards and have no
default or credit risk. It has been argued that this is a balancing feature since
futures contracts are highly standardized and thus cannot be customized for a
company’s precise needs (Huang, et al., 2009). Secondly, Huang et al., (2009)
argues that futures contract enables buyers and sellers to settle differences on
a daily basis in the trading market and thus does not wait until the maturity of
the contract. Since futures are settled on a daily basis, they can be converted
into a sequence of daily forward contracts. This can influence the pricing of such
assets. In addition, when futures contracts are traded, parties to the contract
are required to put aside a percentage of the contract price as a margin which
operates as a performance bond, reducing default risk.

Options
Options are different from forwards and futures especially in their payoff
profiles. A call option gives a buyer the right to purchase a specified asset at a
fixed price at any given time before the expiration of the contract, while a put
option gives a buyer to sell the asset at a specified rate. There are two main
differences between an option and futures (Christoffersen, 2011). Firstly,
options provide protection against the downside risk but allows the parties to
benefit from an upwards potential. Con contrary, futures and forwards protect
parties against downwards risks but eliminates the potential for upside
potential. Secondly, whereas forwards and futures contracts have implicit
costs, options have explicit costs. Other than settlement and transactions costs
associated with daily price movements, parties to options contract will also face
costs associated with purchase of put options.
Swaps
A swap is a derivative that allows parties agree to exchange cash flows of their
financial instruments. Cash flows from swaps are calculated using notional
principal amounts. Contrary to forwards, futures, and options a swaps notional
amount is often not exchanged between parties. Besides, swaps can either be in
cash or collateral. Although swaps are mainly used by companies to hedge
against interest rate risks, some individuals and firms use the derivative for
speculation purposes on changes in the expected underlying prices (Amiti &
Weinstein, 2011). Like futures contracts, swaps are traded over-the-counter
and are tailor-made for counterparties.
BARCLAYS’ RISK ASSESSMENT
Barclays is a universal banking corporation operating in the retail, wholesale
and investment banking sectors alongside mortgage lending, wealth
management and credit cards (Barclays.com). In terms of asset base, Barclays
had a total of US$ 2.42 trillion in its global operations by 2011 and thus ranked
as the seventh largest bank by all categories. A large financial corporation like
Barclays, with its wide scope of operations, means that there are many inherent
and market risks. Thus, it is necessary to have a sound risk assessment and
management strategy.
Key Financial Risks
Credit risk
Barclays defines its credit risk as the risk of suffering financial loss should any
of the company’s clients, customers or market counterparties fail to honor their
financial obligations to the group (Barclays, 2013). Given that the main
objectives of the group is to advance credit facilities to its clients, there is need
to establish an efficient framework through which the credit advanced will not
be defaulted by customers. Also, the group obtains its income mainly from
advancing credits and thus the most significant variable to risk exposure. Other
sources of credit risk comes from trading activities such as settlement balances
with counterparties, debt securities, and reverse repurchase loans (Colquitt,
2007).
As noted above, loans and advances made to Barclays’ customers provides the
primary source of credit risk to the company. Barclays is also exposed to other
forms of credit risks like inter-bank loans, debt securities and loan
commitments. Credit risk is concentrated when counter-parties engage in
activities with the same objectives, making the ability of such parties to meet
their financial obligations to the company have a similar fate.
Market Risk
Liquidity Risk
Liquidity risk arises from the inability to meet financial obligations, which leads
to the inability of a firm to meet liquidity regulatory requirements and support
normal business activities. When Barclays faces illiquidity, the available cash
will be depleted and thus hamper client lending, trading activities and other
investments. Excessive cash outflow will ultimately result to illiquidity (Huang,
et al., 2009). Such outflows result from customer withdrawals, collateral
posting requirements, removal of financing by wholesale counterparties and
loan draw-downs.
Barclays’ ability to ensure sufficient liquidity may be hampered by a decline in
the availability of wholesale funding and increase in the costs of raising such
funds, especially during the periods of market dislocations. Other factors such
as balance sheet reductions due to asset sales and high costs of raising funds
affects the earning capacity if the company and thus presents risk exposure.
Illiquid markets may force the company to hold its financial assets instead of
syndicating, securitizing or disposing of them. This will reduce the ability of the
bank division support customer transactions or originate new loans since both
capital and liquidity are used up by existing assets.

Risk Factors
The above key risks may be presented by risk factors that exists in the
company’s operating environment. These factors include:
An economic downturn – The Group’s financial position, credit worthiness
and liquidity may be adversely affected by the increasing economic
uncertainties around the globe in regions that Barclays operate. Any
deterioration in the economic environment may impact the company’
operations. Some factors that may influence the economic stability include:
1. The extent and sustainability of economic recovery, especially the
influence of austerity measures in most of Eurozone economies,
2. Increasing unemployment rates which results from weak economies in a
number of nations and regions in which Barclays operates,
3. The possibility of further decline in the prices of residential properties in
the United Kingdom, Western Europe and South Africa, and
4. The United States’ Fiscal Cliff and Debt ceiling negotiations (Barclays,
2013).
The Eurozone crisis – The performance of Barclays may be adversely affected
by the perceived and actual increases of default risks on sovereign debts of
some countries in the Eurozone, the stresses being exerted on these countries
by financial systems within the Eurozone, and the risk that one or more of these
countries may exit the Eurozone. These impacts are presented through:
 1. The impact of deteriorating sovereign credit capability, and
2. Potential exit of some countries in from the euro as a result of the debt
crisis.
Market Risk
The earnings or assets of the company are at risk of being reduced due to the
following exposures:
Traded market Risk – this exposure results from the group’s support for
customer activities primarily through the Investment Bank division and risk of
changes in the levels of volatility in trading books. Among these changes include
inflation rates, interest rates, property prices, credit spreads, commodity
prices, foreign exchange levels and equity and bond prices (Mistrulli, 2011).
Non-traded market risks – this mainly emanates from efforts made by the
group to support customer products especially in retail banking. The risk
presents itself as the inability of the company to hedge its balance sheet at
prevailing market levels.

Risk Mitigation Strategy

Risk management is a set of hedging strategies that are meant to alter the
probability distribution of exposure of a firm’s assets to destruction. Barclay’s
risks, as discussed above, can be effectively mitigated and managed using the
strategies outlined in the following table:
Exposure Definition Hedge Explanation
Instrument

Credit The uncertainty Credit A credit default swap allows a

Risk about the ability of Default buyer to purchase a contract
business debtors or Swaps and make regular payments
counterparties to (CDS) to the seller of credit
honor their protection. In the event that
contractual there is a default, the buyer
obligations and pay will be compensated by the
for the credit seller. As such, this is often
advanced (Colquitt, seen as an insurance policy
2007). for the buyer (Colquitt,
2007).
This instrument can also be
used for speculative
purposes since there is no
obligation for the buyer to
hold the asset or maintain a
loss-making relationship
with the ‘reference entity’.

Credit Credit linked notes covers

linked Note certain types of credit risk
(CLN) exposures for the company.
The CLN allows investors to
receive higher returns
because of accepting risks
relating to a specific event. As
such, a credit linked note
provides a hedge for
borrowers against explicit
risks (Colquitt, 2007). This
instrument id created
through a trust by the use of
low-risk securities as
collaterals.

Total return These are similar to interest

Swaps rate swaps. A party to the
swap makes payments in
proportion to the total return
from an asset while the other
 party then makes fixed or
floating payments. However,
the notional underlying asset
amount is the same for all the
parties.

Liquidity A danger that a Liquidity Setting up a liquidity

Risk company will have Limits framework that will
difficulty in selling incorporate various risk
its assets in order to management tools in order to
provide capital for monitor, limit and stress test
meeting short-term a company’s balance sheet
financial and contingent liabilities is
obligations. an essential step towards
ensuring that liquidity limits
are well set and met.

Internal The composition of a

Pricing and company’s liabilities can be
Incentives actively managed through
the transfer of liquidity
premiums directly within
internal business units. As
such, the premiums will be
transferred to businesses on
basis of behavioral life of
liabilities and assets and
contingent risk. Such transfer
is designed to ensure that
liquidity risk is reflected in
performance and product
pricing and thus ensure that
liquidity risk management
framework is well integrated
 into business decision-
making processes.

Foreign A danger that Forwards A forward contract hedge

Exchange adverse movements Contract works in such a way that the
Risk in foreign exchange price at which a foreign
rates will wipe currency will be exchanged at
away potential a determined future date is
profits or asset set at the time the transaction
value for a firm is entered. However, the
operating in actual exchange of the
international currency is done at the future
market. date when the contract will
be executed. With this
hedging technique, the value
of transaction, the exercise
date, the exchange date and
the payment procedure are
determined in advance and
hence there is no any
exchange of money prior to
settlement date

Money To perform a money market

Market hedge, a company will use
Operation three main steps: if there is
future payment to be made in
a foreign currency, the
company would need to
purchase the equivalent of
the currency amount using
the spot rate. The borrowed
amount will then be invested
in a bank domiciled in the
 foreign country at prevailing
interest rates (McNeil, Frey &
Embrechts, 2010). The
interest rate must be such
that at the maturity of the
investment, the exact amount
of accumulated investments
will equal the amount
required to make the
payments to creditors. At the
payment date, the company
will then withdraw the
mature amount of
investment and make
payments in the foreign
currency.

Interest This is a danger that Interest rate An interest rate swap is an

Rate Risk fluctuations in swaps agreement between
interest rates will counterparties to exchange a
reduce the value of set of future cash flows.
investment assets Barclays can enter interest
such as bonds and rate swaps with her
deposits. counterparties in various
trading regions to hedge
against interest rate
exposure.

Forward FRA allows a party to pay a

Rate fixed interest rate and
Agreements receive a floating rate equal
(FRA) to the set reference date.
Impact of Financial Crisis on Risk Management and Post-Crisis regulatory
Financial Reforms
Financial sector reforms have been the core dimension of policy response to
the 2008 global financial crisis. The financial crisis exposed the weaknesses in
risk management practices and strategies in financial services industry
especially banking institutions. Although the response to the crisis in the
Eurozone was slower compared to the US, new regulations were made by
international regulatory bodies in order to contain the impacts of financial
crisis. Since the crisis emerged, various regulations have been enforced to
ensure that credit and liquidity risks of financial institutions are well monitored
to avoid massive loss of customers’ investments in an event that such a shock
is experienced again. Some of the reforms include the following:
 Capital Requirement Directive (II) of 2009, which sought to:
 Increase the liquidity risk management of financial institutions,
 Bind originators of securitization products such that they would retain a
5% product value and keep them motivated to monitor credit risks on a
continuous basis.
 Regulations for Credit rating Agencies starting from 2009 onwards,
which would ensure that:
 There is no conflicts of interest, which arises when issuers are paid by
investors to raise their credit ratings,
 Create liabilities for Credit Rating Agencies when they analyzes and rate
financial products, and
 Monitor CRAs.
 Basel II and III regulations for banking corporations
Impacts of Basel III on Barclays
The new capital requirement implemented by Basel 3 proposals within the EU
are expected to be finalized by the end of 2013. The cumulative increase in the
costs associated with the implementation of the Basil III requirement would
imply that the bank holds more capital especially in form of common equity.
The effect of this is to reduce risk-weighted assets of the bank by reducing its
level of exposure so as to maintain a sufficient return on equity and attract
investors (Blundell-Wignall & Atkinson, 2010). Tying up more capital in various
assets and portfolios might compel the bank management to increase prices of
these assets in order to achieve the same level of returns and maintain the
profitability.
Barclays will thus have to raise the prices of retail and corporate loan facility
and reduce its activity in the bond market as a result of restrained liquidity.
This change in pricing strategy will definitely influence the demand for the
loans (Blundell-Wignall & Atkinson, 2010), which in turn would limit the
number of real estate developers [who benefited from credit facilities
(mortgage) from the bank].
Also, increased capital requirement would drive the bank as a seller and cap its
capability of buying. Although in the long –run the market would clear out after
structural adjustments have been made, in the short-run, the bank would
experience a reduction in the number of accounts especially loans.

The Basel III and changes to risk-based regulations of capital provides

substantial penalties characterized by increased capital allocations for risky
decisions. Since these penalties have potential adverse impact on capital, we
have seen that a prudent manager would reduce the risk of capital shortfall
limiting loans at the margin or maintaining high capital cushions (Blundell-
Wignall & Atkinson, 2010). This is a critical decision that has to be carefully
evaluated by the management.
Cost Constraints imposed upon the Bank
Many banks have underestimated the size and cost of implementing the Basil
III regulations and hence failed to institute strategic planning for the same.
Although implementation of the standards will commence in 2013, it is
imperative that financial institutions factor the implementation costs in their
budgets. However, there are some banks that are taking advantage of the
momentum gained from the initial requirements (Basel II) to institute more
fundamental operational risk management systems.

Conclusion
This risk assessment report for Barclays Plc. Has highlighted key areas and
variables of the ban that require effective risk management. Given the scale of
operations and the industry in which it operates, Barclays requires a well-
structured risk management framework to ensure that its assets and income
are well-guarded against adverse exposure. The report has discussed various
components of risk assessment process including the steps involved in risk
assessment, various risks exposures and mechanisms of hedging. With Barclays
Plc. as case study, the company’s risk exposures have been highlighted with
strategies on how the company can hedge against these risks explained.
Towards the end, the report has reflected on the 2007/8 global financial crisis
and its impacts on risk management. The crisis changed the way in which
financial institutions perceive risk and risk management. Also, there have been
increased regulatory framework to guard against massive losses due to
external market shocks.
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