US Asset Management Survey Shows the Influence of Risk Management is Increasing

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Ernst & Young’s 2012 survey of risk management leaders at US asset management firms shows that despite increased influence, firms must address key challenges, especially in the areas of monitoring and risk reporting.

Ernst & Young
Regulators, boards, clients and senior management are demanding greater transparency, reporting and insight into how asset managers are managing risk across the enterprise.

Risk management has gained traction at US asset management firms following the global financial crisis, but many risk managers report they lack the resources and structure to be fully effective, according to Ernst & Young LLP ’s “A Growing Sphere of Influence” 2012 survey of risk managers at 44 of the largest US asset management firms.

“Regulators, boards, clients and senior management are demanding greater transparency, reporting and insight into how asset managers are managing risk across the enterprise,” said Alan Fish, partner, Ernst & Young LLP. “As result, the influence of risk management appears to be increasing as its overall stature and role becomes more prominent and elevated with the organization.”

Yet, many risk managers surveyed cited a lack of resources, measurement tools, and clear roles and responsibilities. For example, one-third of respondents said their function is under-resourced while only 71% reported having a well-defined mandate.

These challenges are especially pronounced for risk managers at “smaller firms” with less than $500 billion of assets under management, especially in the areas of technology and personnel/headcount.

“Risk management is an evolving discipline,” said one survey respondent. “The more we learn about markets and the behavior of market participants, the more we can anticipate what is needed.”

To address these issues and build a strong risk management culture, Fish recommends US asset management firms take the following three steps:

  •     Develop a well-defined mandate. The mission of the risk management function should be agreed to and supported by the boards and executive management, and should include clear, measurable objectives.
  •     Focus more on monitoring and managing strategic risk. Having the right business model, product suite and people in place is critical to meeting the overall goals of the organization.
  •     Encourage a strong partnership between risk management and compliance. This move will help organizations more effectively manage risk and prioritize critical initiatives, including delivering greater insights on regulatory compliance risks.

“Not everyone thinks about risk in the same way,” said Fish. “Establishing each organization’s ‘highest common denominator’ in risk management across the world amid a shifting regulatory landscape and economic climate will continue to be a key challenge for the asset management industry.”

To read the full report, view an infographic about the findings and watch the accompanying video, please visit:

About the Ernst & Young’s Global Asset Management Center
The asset management sector is facing a number of fundamental challenges. These include changing customer demand, the need to innovate, downward margin pressure, the rising tide of regulation and investors’ increasing focus on governance. In response, the sector is restructuring, developing new products, improving risk management and seeking greater efficiency. Ernst & Young’s Global Asset Management Center brings together a worldwide team of professionals with deep technical and business experience to help you achieve your potential. The Center works to anticipate market trends, identify the implications and develop points of view on relevant sector issues that support our assurance, tax, transaction and advisory services. Ultimately, it enables us to help you meet your goals and compete more effectively. It’s how Ernst & Young makes a difference.


About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 152,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.
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Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.
This news release has been issued by Ernst & Young LLP, a US client-serving member firm of
Ernst & Young Global Limited.

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