This paper discusses the difficult challenges of measuring and managing risk of innovative financial products. To measure risk requires the ability to first identify the different dimensions of risk that an innovation introduces. The list of possible factors is long: model restrictions, illiquidity, limited ability to test models, product design, counterparty risk and related managerial issues. For measuring some of the different dimensions of risk the implications of limited available data must be addressed. Given the uncertainty about model valuation, how can risk managers respond? All parties within a company - senior management, traders and risk managers - have important roles to play in assessing, measuring and managing risk of new products.