Risk-based Investment Governance

Risk-based investment governance is a structural new frontier in investment management. One just needs to open the newspapers on governance lapses and their associated cost! Given the unprecedented dynamics in the investment space, asset owners, allocators, regulators and investment professionals need to pay more and better attention to how governance is being designed and implemented.

While the concepts of governance and overseeing investments are not complex, the idiosyncratic nature of especially alternative investments in volatile capital markets, with changing operating models, due to more or less outsourcing, technological developments and others, leads to emerging risks of various natures, which are difficult to grab with traditional risk management notions. Indeed, normally, risk management gets defined and applied along Basel 3-lines, credit risk, market risk and operational risk, the well-known bank capital adequacy framework - however, again, especially in complex investment setups, all kinds of other risks can materialize, which may not follow these three main categories. They may end up in one of the categories, when it’s too late… Just think about conduct risk, cyber risk, legal risk, model risk, regulatory risk, sovereign risk etc. And this is valid for investment constructs such as asset management firms, family offices, investment and private label funds, fund manco’s, pension funds, charities etc. All in all, the impact on portfolios and these investment organizations can be huge, and losses from governance lapses can be painful. And of course, this needs to be known and fully understood in the board room, which is not always the case.

In the presentation the presenter will go into this interconnectedness, resulting governance challenges and will present a coherent framework for better risk-adjusted investment outcomes.