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Shedding light on South African risk management trends
Investment Management Risk: 2017 Deloitte Survey
This article presents the results from Deloitte’s recent investment management risk survey.
Key Take-outs from this report
- Investment management risk is the risk of losses arising from errors, negligence and incapability of asset managers in charge of financial portfolios
- An asset manager’s activities are classified into investment management or operational activities
- Volatility is a popular metric for market risk and the total exposure per counterparty is the preferred metric for credit risk.
- 43% of firms indicate that the board, senior management and audit risk committee are aware of but do not actively attend to investment risk and mandate compliance risk
- Asset managers have a strong reliance on third parties for their operational activities
- 75% of participants stated that they perform due diligence on a vendors’ ability to meet requirements on an on-going basis
- South African asset managers have well-developed risk management practice levels, however, there are key gaps that need to be addressed
What our experts say:
In the current climate of macro-economic volatility and ever-increasing regulatory prominence, asset managers are compelled to enhance their investment management risk identification, measurement, mitigation and monitoring processes and frameworks. In this survey we defined investment management risk as the risk of losses arising from errors, negligence and operational incapability of asset managers in charge of financial portfolios. Failure in risk management in this regard may lead to unexpected financial or non-financial impacts on the value of client investment assets or portfolios, and consequently will have unexpected impacts on an investment management firm, its earnings and its reputation.
How can Deloitte help?
Deloitte is a trusted and well-established partner in the provision of risk advisory services. Our service offering for the purposes of managing investment management risk includes the following:
- Design or review of risk governance structures;
- Design or review of risk management frameworks for investment management risk (including related policies and procedures);
- Quantitative risk analysis for investment funds (market risk, liquidity risk, credit risk, back testing and stress testing;
- Design or review of business processes for the purpose of risk management;
- Independent assurance on efficiency and effectiveness of current governance structures and risk management frameworks;
- Outsourcing risk assessment (third party outsourcing arrangements and internal control procedures);
- Designing and implementing risk dashboard capabilities for governing bodies; and
- Provision of risk training for decision making stakeholders or governing bodies.