- Dealing with the market crisis;
- Threats to the reputation of the industry;
- Accelerated pace of change in the industry;
- Geopolitical, macroeconomic or regulatory shocks;
- Poor execution of globalization strategies;
- Competition from other areas of financial services;
- Model risk;
- Missing growth opportunities;
- Poor execution of M&A; and
- Prolonged reduction in investors' risk appetite.
In addition to the discussion of the ten items above, the report offers some advice as to some of the processes a fund's leadership should engage to create and maintain an effective "risk radar."
We believe that company leadership must:
- Conduct an annual risk assessment that defines key risks and weights probability and impact on business drivers. The risks in this report can provide the start of that process.
- Assess risks beyond financial and regulatory risk to consider the wider environment in which the organization operates and the full extent of its operations.
- Conduct scenario planning for the major risks that they identify and develop a number of operational responses (possibly as part of the planning cycle).
- Evaluate the organization’s ability to manage the risks that they identify — in particular ensure that the risk management processes are linked to the actual risks that the business faces.
- Have effective monitoring and controls processes to give both earlier warning and improved ability to respond.
- Keep an open mind about where risks can come from.
The full text of E&Y's 2009 Business Risk Report for Asset Managers is available at: https://eyaprimo.ey.com/natlmktgaprimoey/Attachments/SBR_Asset_Mgmt_2009.pdf