RT Journal Article
SR Electronic
T1 Business Process Analytics
JF The Journal of Alternative Investments
FD Institutional Investor Journals
SP 76
OP 84
DO 10.3905/jai.2007.695270
VO 10
IS 2
A1 Jill Eicher
A1 David Ruder
YR 2007
UL https://pm-research.com/content/10/2/76.abstract
AB The article proposes a new approach for measuring, understanding, and managing risk in the asset management industry. Consider the recent failures of Amaranth, MotherRock, and Bayou, as well as the still-cited failures of Long Term Capital Management, Lipper, and Beacon Hill. Each of these failures ignited great debate about sources of risk and breakdowns in detecting risk. After each failure, numerous constituencies looked for forensic evidence to identify the root cause that triggered the failure. Was it market, credit, liquidity, operational or geopolitical risk? The approach in this article is based on utilizing business process analytics to quantitatively understand manager skill and risk discipline. By approaching asset management firms as holistic businesses rather than silos of securities and risk, investors and managers alike can work from a transparent, efficient, quantitative framework to understand the risk of investment portfolios, business infrastructures, and counterparties as a wholeTOPICS: Quantitative methods, risk management, financial crises and financial market history