On my shelves is a little book called Derivatives in Plain Words, published in 1997 by the Hong Kong Monetary Authority. It was handed out at the 1997 IMF/World Bank meetings in the city, which I was covering for The Independent. Those were exciting days. The UK had just handed back Hong Kong to China, and the Asian financial crisis was in full swing. Then-Malaysian PM Mahathir Mohamad accused George Soros of causing the crisis and the two debated in a bad-tempered spat about the role of hedge funds. Paul Krugman later wrote that speculators had indeed attacked the Hong Kong currency, using all the derivatives they had at their finger tips.

I picked up the book again yesterday. It's superbly clear – you can download a pdf version from here  – but I was most gripped by the emphasis it places on risk management. A whole section covers 'The importance of senior management's involvement'. It says: “There are two … basic issues which the senior executives should pay attention to. Is the profit generated from activities which they and the shareholders approve? Is the profit a real and normal one? These two seemingly easy questions are, in reality, great challenges to the senior executives – especially when it comes to derivative activities.”

How true.