In the face of faster trading speeds, increased volume, growing instrument complexity and greater globalization, hedge funds must manage a wider array of risks today than even five years ago, a report by Advent Software/Beacon Consulting says.
In a 2010 survey on operation risk by Beacon Consulting and Advent Software, 71 per cent of investment firms reported having planned, initiated or completed a risk assessment in the preceding six months.
The paper says firms must be prepared to meet higher investor expectations and tighter regulatory scrutiny.
Meeting these challenges begins with a risk assessment to gauge the firm’s exposure in each risk area. A key part of that assessment is a review of systems and processes to ensure that they are sufficiently robust to support best practices in risk management.
A best practices infrastructure requires a sophisticated IT platform that can track a broad range of assets, report on global positions by counterparty, and provide timely valuations and accounting for funds at multiple levels, the report says.
The right technology solution will make real-time, actionable fund data readily available and reduce operational risk through a high level of automation.
With the right combination of proven technology, built-in controls and informed human judgment, firms can have the risk management framework that is essential for competing successfully in a new and dramatically different environment, says the report.