There are significant risks faced in the financial market. The explosion and deepening of subprime crises and the European debt crises fully reveal the risks associated with today’s financial market and the inadequacy of previous risk management tools and methods. Effective management of potential risks is an increasingly important issue for current major financial institutions.
In the context of deepening global financial integration, along with the range of the lasting impacts of the financial crisis, economic recovery is slow; unexpected events and uncertainties also emerged, which led to increasingly stringent external regulatory requirements. Meanwhile, the slowdown of China's macroeconomic growth, the structural adjustment of financial markets, the deepening of interest rate marketization, as well as external challenges for financial product innovation and new business development all pose huge challenges for Chinese financial institutions in terms of risk management.
Currently, the risk management infrastructure of financial institutions in China is not comprehensive low data quality, inaccurate market risk model measurements, lack of business portfolio risk analysis and profit and loss attribution analysis, especially lacking in the effective management of front office trading risk. Therefore, there is an urgent need to strengthen the integrity of risk management. As we face an increasingly sophisticated financial market environment and increasingly stringent foreign regulatory requirements, building a good market risk management system which covers risk management, control policies and procedures, analytical methods, data and information systems, particularly integrating risk management into daily business activities and managing the potential risks effectively when carrying out the business through risk limit, are the key challenges faced by the financial institutions.