Risk Management and Reporting Practices
Risk reporting is necessary; risk management is the practice that turns reports into action.
Key takeaways
- —Risk reports describe; risk management decides.
- —Concentration risk, behavioural risk, and counterparty risk are the under-modelled categories.
- —Tabletop exercises against drawdown scenarios stress-test plans before markets do.
- —Risk decisions belong in committee minutes, not just in inboxes.
The standard quarterly risk report — VaR, factor exposures, concentration analysis, scenario stresses — is a necessary input to a meaningful risk conversation. It is rarely sufficient on its own. Concentration risk often hides in correlated managers rather than headline single positions; behavioural risk lives in how the family responds under stress; counterparty risk needs deliberate review, not assumed-safe defaults. Each requires a conversation the report alone does not produce.
Working risk management uses the report to drive a structured committee conversation each quarter. Decisions get made — on hedging, rebalancing, counterparty diversification — and recorded. Annual tabletop exercises take a 30% drawdown scenario and ask: where would liquidity actually fail, where would governance crack, where would the family's confidence wobble? Plans get adjusted based on what surfaces. The discipline is unglamorous; the alternative is rediscovering risks during the moment they manifest.
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