Reviewing and Improving your Investment Risk Management Capabilities

With the recent turmoil in the financial markets risk management has become even more a hot topic. To implement sound investment risk management in wealth management, it is imperative to have an understanding what the outcome of risk management should be, who should be the beneficiary, and how it should be implemented. Our risk management maturity review solutions allows you to gain a holistic view of the maturity of your risk management approach and derive prioritized initiatives that will have a lasting impact on the success of your organization.

Investment risk management is one of the core capabilities of any successful wealth manager. Only through sound risk management can the skills to forecast financial markets be transferred into investment performance. Actively taking risks is the foundation of generating positive excess return in a portfolio. This also means that portfolios need to be constructed in such a way that the impact of any loss stemming from a risk materializing is within the expected boundaries. Unintended risks needs to be avoided, mitigated, or transferred, as there is no need to take a given risk if there is no reward expected.

The actual definition of risk depends on the specific investment solution. It is tightly related to the underlying investment philosophy and should be managed as such. Therefore any risk management framework needs to be tailored to the specific investment solutions.

With our unique risk management maturity review solution, we offer you to gain a holistic view on your current investment risk management capabilities (red), compare them to those of your competitors (blue), as illustrated in the following figure.

Based on this review, we jointly define your target risk management maturity (green) state such that it supports your unique investment philosophy. Through prioritized initiatives transforming your organization’s risk management capabilities, we increase the value added by risk management to your investment solutions, your clients, and at the end your organization. Our collaborative approach assures early buy in and know-how transfer ensuring that the changes developed in this engagement can be successfully implemented and will have a lasting impact on the success of your organization.

To grasp the overall complexity of investment risk management we apply our proprietary risk management framework.

  • We start by analyzing the characteristics of your current risk management approach and determine its maturity. We rely on a standardized set of questions combined with customized interviews.
  • We then compare your risk management maturity level to that of your competitors.
  • We jointly define your target or desired risk management maturity state.
  • Finally, we derive an opportunity landscape and develop a prioritized roadmap transforming your current capabilities to achieve the targeted maturity level.

Embarking on any change program is only worthwhile if it leads to value creation. This is no different with our risk management maturity review solution.

The benefits of our risk management maturity review for you are twofold:

  • First, we offer you a holistic review of your current risk management approach and compare it to those of competitors and best practice
  • Second, based on your target risk management maturity level, we jointly develop and prioritize initiatives that will increase the value added by risk management for your investment solutions, your clients, and at the end your organization

In addition, our collaborative approach assures early buy in and know-how transfer ensuring that the changes developed in this engagement can be successfully implemented and will have a lasting impact on the success of your organization.

What our clients said about our risk management maturity review solution:

The innovative approach of Diderich Consulting as well as the close collaboration with Dr. Diderich has extended and deepened my understanding with respect to relevant and potential impacts for risk management in our [fixed income portfolio management] area. The results have shown us that a consistent implementation of clear risk management approach at different levels, for example with respect to governance or inclusion of stakeholders, would be a significant value generation function. The in-depth and read-world outputs are especially useful with respect to implementation in portfolio management. The review shows in detail the relevance of risk management with respect to investment performance and a set of initiatives have been proposed to align our risk management approach with our identity and investment philosophy. The outcomes and the proposed measures are structured in a transparent way, are easy to communication and allow an immediate translation into actionable measures” [Translated from German]
CONFIDENTIAL, Head of Fixed Income Portfolio Management, leading Swiss Asset Manager