Navigating the new operational frontier
Top 10 operational risks: a survival guide for investment management firms
Every investment management firm knows that even seemingly minor operational oversights or mistakes can have huge repercussions. That is why operational departments work hard to automate and fail-safe their processes, conduct extensive reconciliations and develop detailed workflows and procedures.
A great deal is at stake, and not just in terms of direct financial costs and legal liability.
- Virtually every investment management firm has the opportunity to take risk management to higher level, taking a fresh look at common areas of risk, identifying priorities for action and then considering the variety of relatively straightforward risk-management measures
that can be deployed
- Different organisations have different exposures and tolerance levels to operational risk, depending, for instance, upon their
investment strategies, the markets in which they operate and the instruments they employ; thus there is no all-purpose checklist for identifying operational risk, nor is there a single, universally applicable set of mitigation measures.
- Concerted and systematic efforts to reduce operational risk help asset management firms build a culture and framework for operational excellence; they also create tangible investment value by reducing costs, increasing client satisfaction and reinforcing sound business relationships with trading partners
- Many risk-mitigation measures are inexpensive, demanding more in focus and foresight than in hard investment; in times of shrinking asset pies and stiff competition, the advantages to be gained through better risk management may be the real low-hanging fruit
Performance issue 14 – May 2014
Performance is a triannual digest, dedicated to investment management professionals, which brings you the latest articles, news and market developments from Deloitte’s professionals and clients.