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Alternative Market Briefing

How family offices could establish solid risk management

Thursday, June 27, 2013

amb
Kristoffer Houlihan
From Komfie Manalo, Opalesque Asia:

Family offices should seek to establish a solid risk management infrastructure when considering how to best handle investment risk, advised Kristoffer Houlihan, founder and Managing Partner Armilla Partners, an independent strategy and risk advisory company.

"Lack of effective risk management has led to significant declines in family offices. Only a few managed to utilize adequate risk controls in order to mitigate financial losses," Houlihan said in an interview with Opalesque. He added, "Without much liquidity, it was much more difficult to bounce back during early years of recovery. In times of less certainty and greater volatility, family offices can employ proper risk management and well-coordinated advisory processes to best preserve assets. Also, by looking at the investment world today, there are still many risk management flaws in even the most sophisticated investment institutions from which family offices can learn, exemplified by the bankruptcy of MF Global and the $6bn in losses at JP Morgan."

According to him, a comprehensive risk management structure should have the following: strong risk metrics, frequent monitoring, exceptionally formalized risk management and well operating risk governance procedures. He said the structure should be able to prevent even the simplest areas of risk, such as improper authorization of investment executions or insufficient techn......................

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