Before World War II, venture capital investments (originally known as development capital ) were primarily the domain of wealthy individuals and families.

Recent developments in the international financial markets emphasize the relevance of enterprise risk management and the strategic process to governance quality.

Capital controls, whatever their benefits in terms of mitigating the risks associated with volatile capital flows, are costly in a variety of ways.

A bloated and dysfunctional financial system had misallocated capital and, rather than managing risk, had actually created it.

But Chinese policymakers should also recognize the significant risks inherent in relaxing capital controls.

More importantly, the crisis highlighted the risks associated with high dependence on foreign capital.

Today, the global surfeit of liquidity has once again resulted in comparably low risk premia and a resurgence of capital flows, despite a broad consensus that the world faces enormous risks (including the risks posed by a return of risk premia to more normal levels.)

Borrowing in domestic currency avoids the risks associated with currency mismatches and pro cyclical foreign capital flows.

The latter course risks the worst of all worlds all of the costs of capital controls and all of the domestic policy complications from volatile capital flows, but few of the potential benefits of foreign capital.

But the advent of derivatives concentrated risk rather than dispersing it, for there was even more money to be made by selling risk to people who did not know how to value it or, indeed, what risks they were bearing.

Since high risk premiums on government bonds endanger the capital adequacy of banks, half a solution is not enough.

Pitfalls

While the right policies cannot eliminate risk, they can ameliorate the cost benefit tradeoff from capital flows.

The resulting perception that currency risk was declining bolstered capital inflows further.

Patient capital requires that we have incredible tolerance for risk, a long time horizon in terms of allowing those entrepreneurs time to experiment, to use the market as the best listening device that we have, and the expectation of below market returns, but outsized social impact.

So what are the risks?

The Risk Tsunami

Risks

Hazard pay

(United States dollars)

The risk is immense.

Internationally agreed rules stipulate that banks must create capital reserves commensurate to the risks that they take when they invest depositors savings.

D. Hazard pay

Tom understands the risks.

These risks are real.

The Politics of Moral Hazard

Sovereign Environmental Risk

The stakes are high.

Further development of a strategic approach

Objectives

Risk reduction

Risks and challenges

Risk management options

Evaluation and risk analysis.

Give me the money! The money?

Users of financial information and participants in the marketplace need information on foreseeable material risks, including risks specific to industries or geographical areas, dependence on certain commodities, financial market risk and derivative risks.

The risks faced by developing countries over the business cycle could be better managed through development of domestic capital markets, especially local currency bond markets.

Most economists in China seem to support the PBOC s stance, citing the potential benefits of capital account liberalization. But Chinese policymakers should also recognize the significant risks inherent in relaxing capital controls.

Clearly, the insured risks were a small part of the total risk.

Decision making support mechanisms such as risk assessment and risk management, have been set up under these projects.

(k) Promote the development of financial risk sharing mechanisms, particularly insurance and reinsurance against disasters.

This algorithm quantifies risk.

America s Partisan Peril

The Old New Financial Risk

But risks remain.