If family offices fail to properly assess the risk management procedures of private debt managers, they may face several consequences, including:
- Losses: Family offices may suffer losses if the manager’s risk management procedures are inadequate or ineffective 1 .
- Increased risk exposure: Family offices may be exposed to additional risks if the manager’s partners, including their back and middle office operations, are of low quality 2 .
- Magnified losses: Losses due to financial fraud, intrusions of privacy, personal security, etc., are magnified when the family office’s risk management response efforts are inadequate 3 .
- Missed opportunities: Family offices may miss out on attractive private debt investment opportunities if they fail to properly assess the risk management procedures of private debt managers 4 .
In summary, if family offices fail to properly assess the risk management procedures of private debt managers, they may face losses, increased risk exposure, magnified losses, and missed opportunities.