Compliance Solutions for Investment Advisers

The Need for a Risk Assessment

The SEC has made it clear time and time again that the first step toward developing strong written policies and procedures is for an investment adviser to identify all areas that create risk exposure or the potential for risk exposure. Accordingly, a risk assessment should serve as a mechanism for an investment adviser to identify its unique set of risks based on the investment adviser’s business model, affiliations, conflicts of interest, etc.

The components of the risk assessment are as follows:

  1. Identify risks
  2. Measure the risks identified
  3. Map the risks
  4. Prioritize the risks
  5. Monitor the risks

 

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