Risk groups produce tons of pertinent information that can be used by portfolio managers to generate superior returns, says a recent report from Woodbine Associates. Yet, because risk management is often viewed purely for control or regulatory purposes, a lot of great information that is produced is simply overlooked and wasted.
Risk management groups that calculate VaR for regulatory and/or control purposes also produce a host of timely information that could benefit groups charged with investment return generation, writes Jerry Waldron, director of risk and portfolio analytics at Woodbine. “But in firms that treat risk management as a control function, this information is walled off from the investment process. The result is missed opportunities – day after day after day.”
The risk management function aimed at regulation misses the upside opportunity in its focus on potential loss, he added.