1509-1642230_Family_office_risk
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Family office risk review A primary goal of most family offices is to protect the family from damage and loss, whether that is financial, physical or reputational. Risks arise from a variety of sources, including the business, investments or from operations. In our work with families around the globe, we have identified seven categories of risk faced by most family offices as depicted in the graphic on the left. EY Family Office Advisory Services (FOAS) can assist you with a risk review to help identify current risks, following this process: 1. Gather and review existing procedures and documents (from a detailed data request) 2. Customize our risk interview guide to the unique needs of your family 3. Interview key family office staff, family members and advisors 4. Meet with key staff (such as operations, investment and technology) to observe and understand their processes Based on these activities, we will identify risks in a high-level heat map, with supporting detail and specific recommendations for improvement. Below is an example of this map. Family office risk management Risk diagnostic Risk category Inherent risk Control environment Residual risk Vision and legacy High risk Medium risk High risk Operations High risk Low risk High risk Technology High risk Medium risk Medium risk Estate and regulatory High risk Medium risk Medium risk Business Medium risk High risk Medium risk Investment Medium risk Medium risk Medium risk Disaster Medium risk High risk High risk Family office risk Estate and regulatory Investment Technology Operations Vision and legacy Disaster Business Hard to implement Easy to implement Average difficulty to implement
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Transcript of 1509-1642230_Family_office_risk
Family office risk review
A primary goal of most family offices is to protect the family from damage and loss, whether that is financial, physical or reputational. Risks arise from a variety of sources, including the business, investments or from operations. In our work with families around the globe, we have identified seven categories of risk faced by most family offices as depicted in the graphic on the left.
EY Family Office Advisory Services (FOAS) can assist you with a risk review to help identify current risks, following this process:
1. Gather and review existing procedures and documents (from a detailed data request)
2. Customize our risk interview guide to the unique needs of your family
3. Interview key family office staff, family members and advisors
4. Meet with key staff (such as operations, investment and technology) to observe and understand their processes
Based on these activities, we will identify risks in a high-level heat map, with supporting detail and specific recommendations for improvement. Below is an example of this map.
Family office risk management
Risk diagnostic
Risk category Inherent risk Control environment Residual risk
Vision and legacy High risk Medium risk High risk
Operations High risk Low risk High risk
Technology High risk Medium risk Medium risk
Estate and regulatory High risk Medium risk Medium risk
Business Medium risk High risk Medium risk
Investment Medium risk Medium risk Medium risk
Disaster Medium risk High risk High risk
Family office risk
Estate and regulatory
Investment Technology
Operations Vision and legacy
Disaster Business
Hard to implement Easy to implement Average difficulty to implement
1. Written procedures2. Family charter3. Strategic planning4. Disbursement controls5. System passwords6. QuickBooks automation7. Vendor management
8. Family financial reviews9. Technology security10. Family intellect11. Estate planning12. Philanthropic donations13. Investments14. Disaster recovery
Sample recommendations:
Developing a plan
Hig
hLo
w
HardEase of implementation
Exp
ecte
d im
pact
Easy
1 2
3 4
5
6
8
9
1213
14
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Once we identify the risks, our team then works with you to prioritize the risks and develop a risk management plan. Such a plan may encompass:
• Adding controls to reduce or eliminate risks
• Building governance mechanisms to better manage some risks
• Creating strategic plans or activities to reduce future risks
• Working with advisors to transfer or insure some risks
• Developing reporting processes to monitor ongoing risks
Additionally, we will work with your team to prioritize the recommendations based on the impact they will make, as well as the ease of implementing them.
Family
Family office/business
Effective taxmanagement
Culture and responsibility
Balancing risk
Managing and retaining talent
Next- generation
planning
Managingcapital
Sustaininggrowth andprofitability
Future management
structure
Sample results
Our approach to designing and delivering family office services is rooted in a review of eight key areas that, if addressed effectively, determine long-term success. The major advantage of this approach is the way we scrutinize subject areas with a holistic view to operational, regulatory, tax, strategic and family-related aspects. This enables us to uncover hidden opportunities and risks, which might have been missed if each area were examined individually.
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Interested?Please contact EY’s Family Office Advisory Services for assistance with strategic planning for your family.
Robert (Bobby) A. Stover, Jr., Partner EY Americas Family Office LeaderPrivate Client Services | Family Office AdvisoryErnst & Young, LLP [email protected] | +1 214 969 8321
Charlie J. Carr, Executive DirectorPrivate Client Services | Family Office AdvisoryErnst & Young, LLP [email protected] | +1 214 754 3280
Jon Carroll, Executive DirectorPrivate Client Services | Family Office AdvisoryErnst & Young, [email protected] | +1 561 955 8240
Paul McKibbin, Executive DirectorPrivate Client Services | Family Office AdvisoryErnst & Young, [email protected] | +1 215 448 5420
EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US.
© 2016 Ernst & Young LLP. All Rights Reserved.SCORE no. YY3760 BSC No. 1509-1642230 SW ED None
Operations Operations
Disaster
Disaster
Technology
TechnologyVision and
legacy
Vision and legacy
Business
Business
Estate and RegulatoryEstate and Regulatory
Investment
Investment
Family Office Risk
Family Office Risk
Family Office Risk
Operations
Investment
Disaster
Estate and Regulatory
Technology
Vision and legacy
Business
