Dual Approach to Risk Management in Asset Management

As part of its commitment to the Asset Manager Code, Stellar Asset Management is reviewing its risk management practices. Recently, the firm entered into a new partnership with a technology-driven investment platform that promises to significantly enhance its quantitative risk assessments. However, the Chief Risk Officer (CRO) is concerned that the reliance on this new technology might lead to an inadequate understanding of market risks that the firm previously managed effectively.

The CRO proposes to implement a risk management strategy that includes both qualitative assessments from the experienced investment team and the quantitative outputs from the new platform. This dual approach aims to ensure comprehensive risk identification and mitigation. The firm’s leadership is seeking to understand whether this strategy aligns with the Asset Manager Code's provisions regarding best practices in risk management.