Abstract
Throughout the past year, on-site visits to ®nancial service ®rms were conducted to review and evaluate their
®nancial risk management systems. The commercial banking analysis covered a number of North American
super-regionals and quasi±money-center institutions as well as several ®rms outside the U.S. The information
obtained covered both the philosophy and practice of ®nancial risk management. This article outlines the results
of this investigation. It reports the state of risk management techniques in the industry. It reports the standard of
practice and evaluates how and why it is conducted in the particular way chosen. In addition, critiques are offered
where appropriate. We discuss the problems which the industry ®nds most dif®cult to address, shortcomings of
the current methodology used to analyze risk, and the elements that are missing in the current procedures of
risk management.