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Family Office – Risk Management Systems (1)

Risk management systems

Risk, return and liquidity are among the foremost issues to be considered in any investment decision and asset allocation process. These prerequisites will be the basis for the risk management system, which in itself will cover risk mitigation and cost reduction and may lead to value creation. Factors include:
Risk mitigation

  • Identify and address key risk areas that matter.
  • Effectively assess risks across the family office, driving accountability and ownership.
  • Manage and mitigate mission-critical risks.
  • Establish comprehensive risk frameworks.

Cost reduction

  • Cost efficiencies are a critical part of setting up a family office.
  • Implement an automated risk management process to materially improve the cost structure.
  • Reduce cost of control spend through the improved use of automated controls.
  • Streamline or eliminate duplicative risk activities.
  • Improve process efficiency through continuous monitoring.

Value creation

  • Achieve superior returns from risk investments.
  • Improve control of key processes.
  • Combine risk and control management to improve performance.
  • Use analytics to optimize the risk portfolio and improve decision-making.

Family office CEOs, CFOs or CIOs increasingly perceive enterprise risk management as adding value to the family office operation. According to the EFO Survey, family offices worry most about investment risks, family reputation, banking/custody risks and political/ country risks. After the financial crisis, risk management has developed further toward a risk-return based optimization model.

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