RFG Says Hedge Funds Must Improve Operational Due Diligence by Adopting an Enterprise Risk Management Approach Managers, institutions need to focus on closing the "operational due diligence gap" to attract investors
NEW YORK, Jan. 16, 2013 /PRNewswire/ -- Alternative asset managers must move beyond what currently passes for operational due diligence and adopt a comprehensive enterprise risk management approach or risk being left behind by institutional investors, according to Deborah Prutzman, CEO and founder of The Regulatory Fundamentals Group (RFG). The mission-critical implications of this "operational due diligence gap" will be the focus of a dedicated session conducted by RFG at GAIM USA 2013, to be held January 21-24, 2013, in Boca Raton, FL.
"Ready or not, we have entered a new era for hedge funds in which institutional investors, foundations and endowments are demanding business-wide risk intelligence and impact analysis – and that means enterprise risk management," says Prutzman.
This new era is characterized by three major trends, according to Prutzman: regulatory complexity reflecting the financial crises of the recent past; increasing enforcement intensity; and growing allocations from institutional investors who are themselves fiduciaries for their retail investor clients.
"These trends reflect the fact that, in a post-Madoff world, a narrow focus on customary compliance and operational due diligence is not enough to address the larger business exposures that hedge funds must contend with," Prutzman says.
By focusing on 'check-the-box' compliance limited to specific regulations, the traditional approach fails to look at a firm's health from an overall enterprise point of view. Instead, today's environment requires a comprehensive understanding of business risks and opportunities, which in turn can be used to maximize the return to the investor, as well as the manager, while minimizing down-side risks.
"Enterprise risk management focuses on identifying and managing the full range of risks that an enterprise faces in a fully coordinated, thoughtful, and strategically aligned manner," says Prutzman. "It empowers team members to respond within clearly defined parameters and, in doing so, provides the freedom to analyze and respond to emerging risks and opportunities in innovative ways."
Prutzman and her team designed RFG's comprehensive Operational Due Diligence immersion session, the first of its kind held at GAIM USA, in order to provide managers with a preliminary framework for implementing a robust enterprise risk management system designed to save time, money and gain the confidence of institutions, foundations and endowments. Investors, meanwhile, will learn how to materially enhance the depth and breadth of due diligence reviews in order to identify a wide range of risks that need to be managed and to achieve enterprise-wide transparency on core business functions.
RFG's Operational Due Diligence immersion session will take place on Thursday, January 24, at 10:25 AM. Details and registration for GAIM USA 2013 are available at www.gaimusa.com.
RFG pioneers cost-effective business solutions for alternative asset funds, advisors and investors in a heavily regulated world. Through a cloud-based risk management platform, RFG identifies key opportunities and vulnerabilities from business and regulatory perspectives and provides counsel, insights and creative solutions. RFG Pathfinder® is an intuitive platform that simplifies and explains legal and contractual requirements and tags them to relevant roles in an organization, which enables managers and investors to identify key risks. RFG Watch® is an interactive regulatory and risk assessment update service that allows clients to determine whether a change applies to them and, if so, how to respond. For more information, call RFG at (212) 537-4058 or visit www.RegFG.com
A complimentary copy of RFG's new white paper, The Unasked Question: Fund Directors – Worth It or Not? Why Alternative Funds Are Not Receiving the Value They Should from Their Directors can be downloaded here.