corporates and under guidance from their investment bankers — risk analysts will manage and hedge their exposures using traded financial instruments to create commodity-, interest rate- and foreign exchange hedges (see further below). Because company specific, "over-the-counter" (OTC) contracts tend to be costly to create and monitor — i.e. using financial engineering and / or structured products — ”standard” derivatives that trade on well-established exchanges are often preferred. These comprise options, futures, forwards, and swaps; the "second generation" exotic derivatives usually trade OTC. Complementary to this hedging, periodically, Treasury may also adjust the capital structure, reducing debt-funding so as to accommodate increased business risk. Multinational Corporations are faced with additional challenges, particularly as relates to foreign exchange risk, and the scope of financial risk management modifies dramatically in the international realm. Here, dependent on time horizon and risk sub-type — transactions exposure (essentially that discussed above), accounting exposure, and economic exposure — so the corporate will manage its risk differently. Note that the forex risk-management discussed here and above, is additional to the per transaction "forward cover" that importers and exporters purchase from their bank (alongside other trade finance mechanisms). It is common for large corporations to have dedicated risk management teams — typically within FP&A or corporate treasury — reporting to the CRO; often these overlap with the internal audit function (see Three lines of defence). For small firms, it is impractical to have a formal risk management function, but these typically apply the above practices, at least the first set, informally, as part of the financial management function; see . Correspondingly, the discipline relies on a range of software, from spreadsheets (invariably as a starting point, and frequently in total) through commercial EPM and BI tools, often BusinessObjects (SAP), OBI EE (Oracle), Cognos (IBM), and Power BI (Microsoft). Hedging-related transactions will attract their own accounting treatment, and corporates (and banks) may then require changes to systems, processes and documentation; see Hedge accounting, Mark-to-market accounting, Hedge relationship (finance), Cash flow hedge, IFRS 7, IFRS 9, FASB 133, IAS 39. Investment management Fund managers, classically, define the risk of a portfolio as its variance (or standard deviation), and through diversification the portfolio is optimized so as to achieve the lowest risk for a given targeted return, or equivalently the highest return for a given level of risk; these risk-efficient portfolios form the "Efficient frontier" (see Markowitz model). The logic here