@Risk

Nine out of 10 investment and operations executives in a recent survey rate risk as an “important” or “primary” consideration in their decision-making. Interestingly, though, about the same percentage feel they need additional skills and experience to effectively model, interpret and utilize the results from sophisticated risk models.

The survey, conducted earlier this year by Northern Trust, also identified changing sources of portfolio risk. Market volatility remains the greatest source of risk (no surprise there). But new this year, liquidity risk emerged as a leading concern. In a survey from early 2008, a mere 2% identified liquidity as the greatest source of risk for investment programs. This year, that number jumped up to 17%.

Here are a few other key findings:

• 93% of survey respondents generally believe risk models provide useful information. Remarkably, though more than half (55%) do not have a risk measurement system today.

• 87%  feel their organizations need additional skills and experience to effectively model, interpret and utilize the results from sophisticated risk models. (Sounds similar to the results of a recent Accenture study.)

• When it comes to purchasing a risk measurement system, nearly four in 10 said the level of experience on staff to manage the system would be an inhibitor.

• More than half (51%) feel their organizations need to improve their efforts regarding due diligence on the valuation process for their portfolios.

All of which begs the question: Why are these investment execs so spectacularly unprepared for something they consider so very important? Is this another case of limited budgets? Is it misguided priorities? Apathy?

For more details on this survey, see http://www.northerntrust.com/ntlanding/CIS/asset_servicing/index2.html