Rethinking Investment Risk Management: Anticipated Changes to Investment Risk Management Practices in a New Era of Due Diligence

In the wake of the recent financial crisis, many families are re-evaluating their processes for managing investment risk and are searching for new safeguards for mitigating the impact of extreme volatility. This paper, intended to facilitate discussions of investment risk management processes between ultra-wealthy families and their advisors, examines behavioral risks, manager and advisor risks, and investment process risks as well as the near- and long-term ramifications of these risks to investors. Additionally, the paper looks at risk measurement frameworks and tools that investors can use in tandem with, or in place of, their existing risk management systems and procedures.