Thursday, June 25, 2009

Forum Holds Groundbreaking Conference on Risk Governance

On Tuesday, the Mutual Fund Directors Forum held a one of a kind single-day program at Columbia University designed to educate fund directors on their responsibilities for and roles in their funds' risk governance.  This unique program, "Risk Principles for Fund Directors," provided a forum in which risk experts and practitioners engaged in discussions with fund directors about, not simply their legal responsibilities to oversee their funds' risk management processes, procedures, and culture, but also some of the critical lessons the industry has learned from the market turmoil of the last year and half.  These discussions, moderated by Columbia University Professor and former SEC Commissioner and General Counsel Harvey J. Goldschmid, were a rare opportunity for fund directors to discuss effective risk governance and tools and lines of inquiry boards might use to assure themselves that management has instituted practices, procedures, responsibilities, and structures such that risk is considered routinely, future risks are identified and anticipated, and the board is kept properly informed and consulted.

Lunchtime remarks were delivered by Johnathan S. Sokobin, the director of the SEC's Office of Risk Assessment.  Dr. Sokobin's address focused on the role risk awareness and assessment will play in the SEC's activities going forward, and how the systematic risk regulator proposed by the Administration may operate.  He also touched on some of the theroretical aspects of economic risk, and some of the risks that ultimately aggregated resulting in this unprecedented market downturn.  Following his speech, Dr. Sokobin used part of his time to answer questions from the attendees. 

While "risk management" has become a buzzword as a result of recent market events, much of the guidance floating around about risk management is more general in nature, and it can be difficult for fund directors to pick out what is relevant, and what applies to their job as overseers and investors’ advocate.  Tuesday's conference on risk was a unique one, indeed, because it focused, as do all Forum programs, on the needs of fund directors, and independent fund directors especially.