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Risk management is becoming an increasingly crucial issue for many family offices (FO) across the globe as they endeavour to protect wealth for future generations, new analysis has revealed.
A Deloitte Center for Financial Services report, titled ‘The Ongoing Institutionalization of the Single Family Office’, revealed the governance structure of many FOs is now evolving to prioritise risk reduction.
There are several internal and external factors driving this change, including a desire to expand the size and complexity of portfolio assets. Changes to FO investment strategies were listed as a key influence for optimising risk management.
“For example, if an FO is expanding into alternative or international investments, it might call for a reset to a more formal and institutionalised governance structure,” the report said.
“Yet, it takes the entire organisation working together to properly manage risk. The family, the board and employees all have key responsibilities, and all must be responsible and accountable.”
Structured investments could play an important role in FO investment strategies in the future, enabling organisations to diversify their portfolios and minimise risk across a range of market conditions.
When designed and managed correctly, structures can save FOs significant time and money, while also facilitating their route to market. Unfortunately, many firms do not have the internal expertise to fully take advantage of the opportunities this asset class provides.
However, according to Deloitte, FOs will increasingly rely on outsourcing in 2015 to streamline organisational structures and manage alternative investments.
“The driver for outsourcing is often to gain access to talent, to find a more cost-effective solution, or to take advantage of the most up-to-date technology,” the company stated.
If you would like to learn more about how an independent investment boutique such as Affinity Capital could help your family office, please contact us today.
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