“He is a passionate, emotional player, and those characters will always argue with people. He is a winner and that is what I love about him. He confronts people, he demands more. He is a better player than anyone else at Arsenal and he works harder than the lot of them … Very few players have Sanchez's natural ability, but there is no reason why they shouldn't have his work ethic too.”

—Danny Murphy describing Arsenal FC player Alexis Sanchez, London Evening Standard, 6 January 2017

Part II of the book comprises essential breadth and depth on bank risk management for practitioners. In other words, now we are beyond the theory. In banking, to be effective from all stakeholder viewpoints one has to have an ability to take decisions, to understand both risk and return. Often the most difficult process in banks is the one that requires an actual decision to be taken; inaction (actually a decision in itself) can be as risky, if not more so, than deciding on a proactive course of action. Board members are prone to suffer considerable angst when a decision needs to be taken, except when there is consensus or the boss has spoken.

The best preparation and grounding for decision‐making ability in a bank is to understand the balance sheet, what its current shape and structure are, what its sensitivities are to changes in market factors, and what shape one would like it to be in the medium‐term. To be at this stage requires experience and some measure of technical expertise. Part II hopes to supply some of the latter, and possibly a proxy form of the former. It comprises chapters on:

• Risk “taxonomy”, in other words, coverage of the different types of balance sheet risks (credit, market, and liquidity) as well as operational risk;
• Regulatory capital basics and requirements.

There is also a chapter on financial statements and accounting. As we describe later in Part III, managing the balance sheet of a bank effectively requires good interaction and process between Treasury, Risk, and Finance, as well as the business lines. Not everyone in these various departments will be familiar with elements of finance and financial reporting, yet it is important for bankers to know the basics, which is why we include material on the topic in this book.