When the financial models of liquidity, operational, insurance and other risks are improved and more extensively used, the framework developed here can be extended to these risks. The remaining issue is to address in the annual report is the commitment of the firm to high quality disclosure of its global risk management process. The firm should provide information that allows the reader to judge its level of risk management commitment uniformly and meaningfully across risk factors and across business activities. It should also present how this is accomplished at the operational level and enforced across the various business units.

A discussion of the existing procedures for evaluating the performance of the risk management process within the firm and its consistency with proposition 1 should follow. In other words, market participants should be able to evaluate and compare across annual reports the value-added of different risk management policies. This knowledge should enhance their confidence in the firm's ability to efficiently manage its risk exposures.

Finally, the economic capital allocation process and methods should be explained. It is important that market participants learn whether decisions to maximise a well-defined objective function, such as maximising return on an aggregate risk-adjusted capital basis. (For example Bankers Trust uses the RAROC framework to adjust for market, credit and operational risks in the firm's equity attribution process). For capital allocation purposes, the firm should identify which risks it explicitly considers and how it aggregates them, as well as how it deals with credit-rationing issues and managerial incentives to optimise its capital allocation. Ultimately, the disclosure quality level must be sufficient to meet its primary goal, i.e. to objectively inform market participants about the firm's ability and willingness to measure and monitor risks on an ongoing basis. An important benefit of high quality disclosure is the increased difficulty of risk-shifting, whereby a manager transforms (part of) the credit or market risk exposures into not-yet-measurable risk factors. This perverse strategy decreases the firm's apparent cost of capital while actually increasing its effective cost of capital.