Family offices can assess the operational risk of private debt managers by taking the following steps:
- Regular assessments: Family offices should conduct regular assessments of the manager’s risk management plan to ensure that it is up-to-date and effective 1 .
- Understand the risks: Family offices should have a clear understanding of the risks associated with private debt investments and the strategies that the manager has in place to mitigate those risks 2 3 .
- Evaluate the manager’s expertise: Family offices should assess the manager’s expertise in the private debt market and their ability to manage operational risks 2 3 .
- Assess the quality of the manager’s partners: Family offices should evaluate the quality of the manager’s partners, including their back and middle office operations, to determine if they are exposed to additional risks 3 .
- Understand the manager’s investment strategy: Family offices should have a clear understanding of the manager’s investment strategy and how it aligns with their risk management plan 2 .
In summary, family offices can assess the operational risk of private debt managers by conducting regular assessments, understanding the risks, evaluating the manager’s expertise and risk management framework, assessing the quality of the manager’s partners, and understanding the manager’s investment strategy.