Risk officers at large investment banks are getting their 15 minutes of fame. They must be savouring their leverage over powerful bankers and traders, following Wall Street’s billions of dollars of write-downs in the third quarter. As Merrill Lynch’s earnings bombshell reminded the market, an investment bank needs a risk management system that investors, and rating agencies, have no reason to question.

For unless investors know that risk-taking is disciplined, they are unlikely to give the banks much credit for good trading results. Investors in hedge funds demand good returns after adjusting for risk. Similarly, investors in the banks want to know there is a reliable system underpinning their hope that positive trading days will far outnumber bad ones. Goldman Sachs’s third-quarter filing was hardly for nervous nellies. There were a lot of jackpot days and a far smaller but still notable number of terrible days (gains or losses of over $100m respectively). The skewed distribution of the daily trading net revenues is understandable given the volatility in the quarter. The reason it does not scare the horses is that investors believe in Goldman’s track record on risk management.