{"id":8436,"date":"2020-07-08T12:35:00","date_gmt":"2020-07-08T12:35:00","guid":{"rendered":"https:\/\/iqeq.com\/?p=8436"},"modified":"2023-09-19T10:52:52","modified_gmt":"2023-09-19T10:52:52","slug":"family-office-risk-management-6-steps-effective-risk-mitigation","status":"publish","type":"post","link":"https:\/\/iqeq.com\/insights\/family-office-risk-management-6-steps-effective-risk-mitigation\/","title":{"rendered":"Family office risk management: 6 steps to effective risk mitigation"},"content":{"rendered":"
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By Stephan Schilken, Director of AIFM and Head of Delivery, Luxembourg<\/em><\/p>\n

The family office space continues to evolve with pace around the world. Part of that evolution is a convergence of focus between family wealth preservation and succession and institution-like governance.<\/strong><\/p>\n

The recent disruption and reflection caused by COVID-19 has added further impetus to this convergence, particularly in the context of risk management. Family offices across the globe are realising the importance of understanding all risks that they face and ensuring a proper risk mitigation framework is in place to cover any eventuality.<\/p>\n

With this in mind, the timing seems right to share and discuss a holistic, multi-step risk management approach that family offices may wish to consider as part of their overall wealth stewardship role.<\/p>\n

Step 1: define long-term goals<\/h2>\n

The first step towards ensuring sound risk management is to define the family\u2019s long-term goals. (Indeed, this step is key to all areas of family wealth oversight.) The fundamental question to be considered is, \u201cWhat do you want to accomplish with your wealth?\u201d Answers to this question will vary, but will become a part of the family\u2019s, and therefore family office\u2019s, collective voice and ethos.<\/p>\n

Step 2: identify the risk spectrum<\/h2>\n

With purpose and ethos established, the second step in the risk management process is to identify the broad range of risks that might prevent the family and family office from achieving those goals.<\/p>\n

This lays the foundation for risk mitigation and may in fact be the most difficult stage in the process. While certain risks are more general, foreseeable and may already have been addressed, other risks might be unique to the specific family or region and must be resolved in line with individual circumstances and preferences.<\/p>\n

As a guide, the classic portfolio risk management approach, derived in most part from the institutional asset management world, consists of the following risk monitoring categories:<\/p>\n