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Family Office – Turning Risks into Results

What differentiates the top performers?

A study performed by EY found that while most organizations perform the basic elements of risk management, the top performers do more. Specific risk practices were identified that were consistently present in the top performers (i.e. the top 20% based on risk maturity) and not present in the bottom 20%. Thse risk practices can be organized into the challenge areas depicted as shown below. The organizations that successfully turn risk into results concentarte on all five challenge areas of the risk agenda.

The Risk Agenda

Enhance risk strategy

  • Two-way open communications with external stakeholders
  • Communication is transparent and timely, provididng stakeholders with the relevant information that conveys the decisions and values of the organization
  • The board or management committee plays a leading role in defining risk management objectives
  • A common risk framework has been adopted and implemented across the organization

Embed risk management

  • There is a formal method for defining acceptable levels of risk within the organization
  • Stress tests are used to validate risk tolerance
  • Leadership has put in place an effective risk management program
  • Planning and risk reporting cycles are coordinated so that current information about risk issues is incorporated into business planning

Improve controls and processes

  • Family office established key risk indicators (KRIs) that predict model risk assessment
  • Self-assessment and other reporting tools are standardized across the business
  • Controls have been optimized to improve effectiveness, reduce costs and support increased performance
  • Keey risk and control metrics have been established and updated to adress impactson the investments and the business

Optimize risk management functions

  • Completion of risk-related training is incorporated into individual performance
  • Risk monitoring and reporting tools are standardized across the organization
  • Integrated technology enables the organization to manage risk and eliminates/ prevents redundancy and lack of coverage
  • The reporting system notifies all stakeholders affected by a risk, not just those in the function or area where the risk was identified

Enable risk management / Communicate risk coverage

  • Issue tracking, monitoring and reporting are regularly performed using GRC software
  • Risk identification and assessment are regularly performed using GRC software
  • Organizations taalk about the risk management and control framework in their annual report
  • Provide assurance to their customers and other stakeholders using independent reports (e.g. SOCR)

For further questions please contact us directly.

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