Risk management failures are recurrent in finance. We propose a theory in which the critical cost of risk management is that it delays trading and lack of risk management emerges as a response to preemptive competition. In our model, risk management exhibits strategic complementarities and endogenous time pressure generates a “race to the bottom” towards a constrained inefficient allocation of risks. Increases in competition or in search/execution speed have ambiguous effects in that they enhance liquidity but exacerbate misallocation. These effects are amplified when firms must incentivize traders to search for trading opportunities and to comply with risk management, as competition “taxes” risk management via externalities on the agency rents under the optimal contract. Joint with Samuel Lee.