Chapter 1. Introduction

Risk—let's get this straight up front—is good. The point of risk management isn't to eliminate it; that would eliminate reward. The point is to manage it—that is, to choose where to place bets, and where to avoid betting altogether.

—Thomas Stewart, Fortune^[1]

As businesses worldwide enter the twenty-first century, they face an assortment of risks almost unimaginable just 10 years ago. E-commerce has become ingrained in society with amazing speed: Companies that cannot keep up are doomed to obsolescence in record time. Technology is driving business models to be retooled in months instead of years. The traditional gatekeepers of information are being supplemented with the Internet democracy in which anyone with a PC can disseminate information widely and quickly—for good or bad.^[2] Derivatives, which were originally intended to help manage risk, have themselves created whole new areas of risk.