The extracts from Bankers Trust's and CSFP’s annual reports reflect to a certain extent the internal reports generated for senior managers and the board. This is because information contained in annual reports is both a distillation and evolution of information demanded by senior executives for the smooth running of the company. They thus give us a glimpse of the kind of exposure reports produced for senior managers in large financial institutions.

The fact that there are various kinds of first- and second-order risks reinforces the point that a market risk report must be comprehensive if it is to alert management to the Achilles heel of the firm (if any). But senior managers may not have the time to study reams of daily market risk reports, so line managers must design executive snapshots of crucial line-management data to allow the board of directors and senior management to digest important information quickly. The VAR data must be divided not only between several asset classes but also broken down for the different business divisions of the firm. Each business division’s or asset class’s VAR must be presented against its limits so that limit utilisation can be monitored. The market risk report must also contain daily profit and loss figures as well as a qualitative description of significant positions and a discussion of market conditions.

For end-users and financial institutions with less active portfolios, senior managers should receive summary reports weekly and the board or the two directors with special responsibility for financial instruments (see answer to question #2) monthly. For large financial institutions, the executive arms of the board should receive such information weekly and senior managers daily.