Managing Risk and Volatility Within a Family Office Structure: 10 Areas to Watch

Managing risk and volatility within a family office structure is a timely and complex topic. During a recent Katten webinar, we assembled a group of industry experts to share insights on three key topics: investment risk, governance and intra-family volatility. What follows are 10 areas we are watching closely. 

1. Geopolitical risk is typically a non-event in portfolio success over the medium to long term. However, managing emotions in investment decisions is crucial.
2. Families should revisit their strategic asset allocation and investment policy statement regularly to reflect changes in their lives and the capital markets.
3. Diversification is necessary to manage investment volatility. This includes diversifying investments across geographic markets to mitigate risks associated with local currency volatility in emerging or frontier markets.
4. Governance should be robust and flexible, with clear communication and decision-making roles within the family office. The concept of risk should be broadened to include factors such as liquidity, underperformance, and not accomplishing financial objectives.
5. Family offices play an indispensable role in navigating conflicts within the family. A common narrative around the family's wealth and values is important, as is the role of philanthropy and reputation management.
6. Data and information are vital in making informed decisions, and flexibility is needed in response to changing circumstances.
7. Cybersecurity is increasingly important in family offices due to the rise in cyber-attacks, and families should view data as an asset that can be leveraged for strategic decision-making.
8. The family office can act as a neutral party in family conflicts, providing a platform for discussions and decision-making.
9. Involving the next generations in the governance process and understanding their values can help ensure the longevity of the family office and its structures.
10. The narrative around the origin and purpose of the family wealth can help in educating and aligning the family members.

Watch a video of the discussion. 

Hosted by Katten Private Wealth Partner Kathryn von Matthiessen, panelists included Tom McGinness, Group Director – Private Client Services, JTC Private Office in London; Shelly Meerovitch, Senior National Director, Global Families, Bernstein Private Wealth Management in New York; and Michael Zeuner, Managing Partner WE Family Offices in New York.