often faced with the challenges of evaluating the efficacy of their investment programs. A common methodology centers on the excess returns of their investment managers. However, there are inherent problems with focusing solely on performance. First, the mean is a very imprecise statistic and it can potentially take several years before any distinction between luck and skill of an investment manager can be made. Second, it is widely recognized that what matters to investors is not simply return, but risk-adjusted return, as measured, for example, by the information ratio. Knowing investment programs have a limited capacity for active risk helps crystallize the importance of generating as much return per unit of risk as possible. Good practices of plan management require not only constructing diagnostic risk tools but also effective and careful monitoring. This chapter will highlight, among other things: the importance of risk and risk-adjusted measures, the setting of tracking error targets for monitoring purposes, the process around monitoring plan risk, and how to use the Green Sheet and risk budget as tools in an effective risk monitoring program. These tools are paramount in determining whether an investment program is being adequately compensated for the associated risks. Chapter 13 explained the process of building a risk budget and Chapter 21 deals with the subject of manager selection. The focus of this chapter, rather, is on building a framework to monitor whether a plan is on track. The building of a risk-monitoring framework also means incorporating a set of assumptions about returns and volatility behavior, among other things. The task of monitoring is partly verifying that these assumptions are consistent with publicly available data. Should this not be the case, the deviations will have to be investigated. This feedback process is critical to measuring the efficacy of the investment program. Chapter 3 on risk measurement highlighted the important choices that need to be made as part of risk budgeting implementation. It is important from this to recognize that there isn't a one-size-fits-all active risk budget that plan sponsors can implement. Rather, plan sponsors need to answer several questions before determining the appropriate level of active risk to be taken. Most appropriately, plan sponsors need to fully understand what their appetite for risk is and to know at what