Shedding Light on Non-Financial Risks – a European Survey

Shedding Light on Non-Financial Risks – a European Survey — January 2012

Foreword

We extend our sincere thanks to our partners at CACEIS for their support of this important research on non-financial risk and performance in a changing regulatory framework for the European fund management industry. We feel that it is essential to analyse the risks those in the industry face as a result of regulation and of their practices, assess their importance and impact in terms of solvency and business models, and propose methods to attenuate them. I would also like to thank the EDHEC-Risk Institute team that worked on the study, with particular thanks to my co-authors, Samuel Sender and François Cocquemas, and to the survey team led by Mathilde Claude.

The publication that I have the pleasure to present here, “Shedding Light on Non- Financial Risks – a European Survey,” is drawn from the CACEIS research chair on “Risk and Regulation in the European Fund Management Industry” at EDHEC- Risk Institute. It follows on from a study conducted last year within the same research chair, entitled “The European Fund Management Industry Needs a Better Grasp of Non- Financial Risks,” which looked at how non-financial risks and failures have impacted the regulatory agenda in Europe and traced the management of liquidity, counterparty, compliance, misinformation, and other non-financial risks in the fund industry. By identifying the distribution of risks and responsibilities in the industry, this study examined how convergence between country regulations could be achieved and assessed how fund unit-holders could best be protected with appropriate regulations, improved risk management practices, and greater transparency. For the current paper we have surveyed European fund industry professionals for their views on non-financial risks and the possible regulatory and industry solutions. Top of their list of concerns is transparency, information and governance, followed by the financial responsibility of the fund management industry, but the survey also covers themes such as restitution and depositary liabilities, distribution and judicial powers of investors. It is troubling to note that the principal regulatory priorities for respondents are absent from recent regulatory initiatives.

I wish you a pleasant and informative read.

Noël Amenc Professor of Finance Director of EDHEC-Risk Institute

3

An EDHEC-Risk Institute Publication