may not be a sufficient number of data points to permit a satisfactory conclusion about the statistical significance of alpha or beta. II Returns of the peer group are biased due to the existence of survivorship biases. II There is often a wide divergence in the amount of money under management among the peers. It is often easier to make larger risk-adjusted excess returns with smaller sums under management than with larger sums. SUMMARY Risk represents a shadow cost that businesses accept in order to produce profit. For a return to be deemed acceptable, expected returns must be adequate to compensate for the risk assumed. Risk management therefore implies that cost benefit process is at work. Risk is a scarce resource in the sense that organizations place limits on their willingness to accept loss. For any given level of risk assumed, the objective is to engage into as many intelligent profit-making opportunities as possible. If risk is squandered or used unwisely, the ability of the organization to achieve its profit objectives is put at risk. If excessive levels of risk are taken vis a vis budget, the organization is risking unacceptably large losses in order to produce returns that it neither expects nor desires. If too little risk is taken vis a vis budgeted levels, return expectations will likely fall short of budget. The ability of an organization to achieve its risk and return targets is put at risk anytime that risk capital is used wastefuUy or in amounts inconsistent with the policies established by such organization. There are three fundamental dimensions behind risk management-planning, budgeting, and monitoring. We observe that these three dimensions are intimately related and that they can be more completely understood by looking at their commonly used counterparts in the world of financial accounting controls. We posit that there is a direct correspondence between financial planning, financial budgeting, and financial variance monitoring and their risk management counterparts- namely, risk planning, risk budgeting, and risk monitoring. This conclusion follows from the assertion that risk is the shadow cost behind returns. Hence behind every line item in a financial plan or budget must lie a corresponding risk dimension. Financial plans and budgets can therefore be alternatively expressed using risk management vocabulary. The risk plan should set points of success or failure for the organization (e.g., return and volatility expectations, VaR policies, risk diversification standards, minimum acceptable levels of return on risk capital, etc.). The risk plan should be well vetted and discussed among the organization's senior leadership and oversight bodies. Its main themes should be capable of being articulated to analysts, boards, actuaries, management teams, and so on. For example, strategic plans have ROE targets and business diversification policies that are well known. The risk plan should describe how risk capital is to be allocated such that the expected returns on such risk capital yield the financial outcomes sought with a high degree of certainty. The risk budget-often called asset allocation-quantifies the vision of the risk plan. The risk budget is a numeric blueprint that gives shape and form to the risk