FAQ

Who are you?
What do you do?
How do you do it?
Why are you doing it?
How can we comply with UCITS III requirements of each jurisdiction in which we operate by February 2007?
How can we establish a transparent process that is easy to implement alongside our current operation without a large investment in IT, a long project and extra staff to operate it?
How can we demonstrate that the risk monitoring process is truly independent?
Some of the risk measurement techniques used are highly specialised. If we are going to exercise effective oversight how can we be clear on what the numbers mean?
We want to be able to take advantage of new instruments to improve fund performance. How can we be sure that any new process will be able to measure the risks associated with these new products?
We are happy with the risk models we use. If we decide to take a third party service, will we have to change them?
How can we be sure that if we invest in a new service, it will support the business?

To learn more about how we help solve these problems call us on +44 20 7324 1400 or

Who are you?

Independent Risk Monitoring Limited (IRML) is a dedicated, independent, portfolio risk monitoring service for the asset management community.

What do you do?

IRML provides a comprehensive risk reporting service for fund trustees, fund managers and scheme sponsors that empowers them through the provision of clear and actionable information. The service allows clients to implement an independent process that

responds to investor demands for greater transparency of the risk profiles of investment products in which they invest
allows participants in the European marketplace to meet the increasing requirements of regulators regarding investor protection and the monitoring of risk.

How do you do it?

We take responsibility for the

collection and cleansing of data
selection of the right engine for each risk measured
calculation of risk
detection of deviations from pre-determined risk profiles
expert commentary on analytical output
delivery of exception reports and alerts
retention of audit trails
security of access and data storage.

Why are you doing it?

Investment management companies face increased competitive pressure within their peer group and from alternative providers such as hedge funds. In response they are increasingly using the full range of instruments recently allowed under regulation, including derivatives.

At the same time, the regulators are applying increasing pressure on them to establish appropriate risk controls and ensure the protection of the investor.

The result is increased compliance and monitoring costs and a need for greater expertise in these areas. The mechanical and exhaustive review of portfolios is an inefficient and time consuming process which all too often frustrates portfolio managers and supervisors and does not necessarily help detect or avert disasters. The view of Independent Risk Monitoring Limited is that, regardless of the diversity and uniqueness of each manager's style, the effectiveness of the monitoring process can be dramatically improved and costs significantly cut through the adoption of an exception based process anchored in an appropriate risk profile.

How can we comply with the UCITS III requirements of each jurisdiction in which we operate by February 2007?

IRML has an intimate knowledge of the regulatory environment in Europe. We have built up practical experience of how to implement solutions that meet the needs of clients and the requirements of their regulators.

"When we started to look for a risk monitoring system we found that IRML had already spoken to our supervisory body (CSSF) about the RiskRadar™ service; it saved us a lot of time."

Malou Gehlen, Head of Product, Operations - Banque de Luxembourg.

How can we establish a transparent process that is easy to implement alongside our current operation without a large investment in IT, a long project and extra staff to operate it?

The RiskRadar™ service is delivered over a secure, non-invasive internet link which is both transparent to the IT infrastructure and provides users with full accessibility independent of time and geography. At the close of business each day, IRML will collect portfolio and market data, cleanse it and source the benchmarks prior to overnight processing. To satisfy business continuity, audit and compliance requirements, the service is operated within a secure and resilient environment and all audit trails and report outputs are retained for a minimum of 6 years.

"The main benefit for [us] is that we do not need to manage the database of information in-house. This saves money on a software application, the set up costs and people to maintain the data."

How can we demonstrate that the risk monitoring process is truly independent?

IRML operates independently of the client organisation, collecting portfolio, market pricing, volatility and benchmark data from source and calculating the risk values in-house, which are then reported back to the individual users.

Some of the risk measurement techniques used are highly specialised. If we are going to exercise effective oversight how can we be clear on what the numbers mean?

Our staff have a particular aptitude in communicating complex risk measures for a non-specialist audience. In particular, the Exception reports identify the cause of the change in risk profile and provide a first level analysis so that the recipient can very quickly see whether the exception warrants any action. IRML makes no judgement on exceptions - the purpose of the analysis is to provide clear factual information upon which our client can base a decision.

We want to be able to take advantage of new instruments to improve fund performance. How can we be sure that any new process will be able to measure the risks associated with these new products?

IRML is dedicated to the subject of risk and the provision of risk monitoring services. We use multiple, diverse models. Our skilled and experienced risk analysts will, if required, add risk measurements for new instrument types pending their development by the risk engine supplier.

"Our internal systems for asset management are very sophisticated but the VaR calculations fall short of the group's needs. [Ampega] wanted to get into Hedge funds, commodities and other complex derivatives. IRML is able to provide the risk measurement for these instruments."

Roland Werner, Chief of Investment - Ampega.

We are happy with the risk models we use. If we decide to take a third party service, will we have to change them?

IRML is model agnostic. The RiskRadar™ service will use any model the client chooses. This avoids any debate on the measurement process and the resultant risk number. IRML places the emphasis on interpretation of the numbers, not on their generation. This allows the risk oversight function to focus on the implication of the figures and, in particular, on any change in risk profile identified. If the client prefers, they can supply their own risk values.

How can we be sure that if we invest in a new service, it will support the business?

The IRML service goes beyond the production of numbers to understand what they mean so that an analysis of potential future risk of the portfolios monitored can be provided.

Each user is empowered to use the service to support their individual role and improve their own performance. They can monitor risk for strategic, tactical, investigative or preventative as well as oversight purposes. They can fine tune the service to meet their regular and transient needs (such as closer monitoring of new fund types). The structure of the reporting means that users can concentrate on the exceptions, which, potentially, represent the biggest impact on the business.

"The collection and validation of data does not help in making decisions. I need to concentrate on the portfolio volatility and VaR. This is where IRML are very helpful. [The service] does not just satisfy regulation but adds value to the business as well."

Dieter Hein, Head of Risk - Banque de Luxembourg.