A lot has changed over the past 20 years. Back in the early 1980s, risk management was still considered by some to be the backwater of financial services, a place for ex-traders or people who wanted to be traders. Risk management just got in the way of the brave new world of swaps trading, a wet blanket that limited what traders could do and the money they could make.
Then came the Black Monday stock market crash of October 19, 1987. In a single day, the Dow Jones Industrial Average lost 22.61% of its value - its largest one-day drop for more than 70 years. Portfolio insurance and program trading were initially blamed for the drop - factors that were little understood by bank senior management. All of a sudden, risk management's stock had risen.
At around that time, Risk magazine was preparing for the launch of its first issue. In many respects, it was fortunate timing. As Risk's founder, Peter Field, wrote in 1997, if the decision to launch the magazine had been taken a couple of weeks later - just after Black Monday instead of before - the board of the company that originally backed the magazine's start-up probably wouldn't have given the go-ahead. But the stock market crash also meant Risk's first issue in December 1987 coincided with a huge thirst for risk management knowledge by banks, corporate treasury departments and others. The magazine quickly took off.
Fast forward 20 years, and the landscape has changed beyond recognition. Risk management is no longer just an afterthought, primarily aimed at satisfying the regulators. Rather than being locked away in a cubbyhole somewhere, risk managers are now often situated on or close to the trading floor. They play a key part in the investment process and group strategy as a whole. And weak risk management processes can now negatively affect a firm's share performance. Perhaps most tellingly, risk management is now no longer just a job for ex-traders - it's a real career and attracts the very brightest from the quant community.
That's reflected in Risk's readership. From primarily banks (risk managers, swaps traders and quants) and corporate treasury departments in 1987, the magazine is now read by an array of investors, hedgers and traders - from hedge funds to academics, insurance companies to software vendors, and pension funds to brokers. It's been a fantastic two decades, and in this special anniversary issue of Risk, we look back at some of the events that have shaped the magazine and the industry as a whole.
Thanks to all those that have supported the magazine over the past two decades, and we look forward to another 20 years covering this exciting and fast-moving market.
Nick Sawyer, Editor.