Risk Management
Identifying, measuring and governing the risks a portfolio is taking, including those it is taking unintentionally.
Purpose
Risk management is not the avoidance of risk. It is the deliberate choice of which risks a portfolio takes, in what size, and the ongoing verification that the portfolio is taking those risks and not others.
Approach
- 01
Define risk in terms the investor actually experiences: drawdown, shortfall against objectives, and liquidity strain.
- 02
Look through funds and vehicles to underlying exposures, including currency and counterparty.
- 03
Run scenario and stress analysis alongside statistical measures, recognising the limits of both.
- 04
Escalate breaches of agreed tolerances through a defined governance process.
Where it fits
A continuous control function applied across every other capability.
- Mandates with formal governance requirements or investment committees.
- Portfolios where unintended exposures may have accumulated over time.
Risk considerations
- Risk measurement relies on assumptions and historical relationships that may not hold.
- No risk framework can eliminate the possibility of loss.
Next capability
Private Wealth & Multi-Generational Capital
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Mandates begin with a discussion of objectives, horizon and constraints, before any portfolio is proposed.
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