Mark:

I am concerned about committing to the development of legal risk books using 
a VAR-like analysis since our attempts in this direction a couple of years 
ago failed (Bob Williams and I worked on that project).  Many of the risks 
that were identifiable did not lend themselves to the numeric analysis so 
near to the commercial guys' hearts and the numbers we came up with were 
close to meaningless.

If you want a technical example of a legal risk in our financial trading 
contracts, you could use either (i) the statute of frauds (deals of more than 
one year in length may be unenforceable if the confirm isn't signed) or (ii) 
the widespread use of multiple "Omnibus" short-form contracts for trades 
before a master agreement is executed (resulting in many transactions where 
netting in bankruptcy has not been tested in court).  Item (i) could be fixed 
with legislation (as it has in New York).  Item (ii) could be reduced if the 
traders/dealmakers were willing to put pressure on their customers to sign 
master agreements.

I like the idea of emphasizing the need for buy-in from the commercial side 
in the contract negotiation/formation process.  That buy-in needs to be at 
all levels and it will only happen with the line folks if they get it from 
the top.

Mark T.