Amongst other goals, this paper aims to address complexities and challenges faced by
regulators in identifying and assessing risk, problems arising from different perceptions of
risk, and solutions aimed at countering problems of risk regulation. It will approach these
issues through an assessment of explanations put forward to justify the growing importance of
risks, well known risk theories such as cultural theory, risk society theory and
governmentality theory. In addressing the problems posed as a result of the difficulty in
quantifying risks, it will consider means whereby risks can be quantified reasonably without
the consequential effects which result from the dual nature of risk, that is, risks emanating
from the management of institutional risks.
“Socio cultural” explanations which relate to how risk is increasingly becoming embedded in
organisations and institutions will also be considered as part of those factors attributable to
why the financial environment has become transformed to the state in which it currently
exists.
A consideration of regulatory developments which have contributed to a change in the way
financial regulation is carried out, an illustration of how the financial industry and the
approach to financial regulation have been transformed by the rapid growth of the hedge
funds industry, will also constitute focal points of the paper