MINNEAPOLIS (HedgeWorld.com)–The Professional Risk Managers’ International Association said it plans to adopt a position that firms should keep separate the staff involved in each of: risk oversight, trading and portfolio management, trading and portfolio back office and internal auditing.
Operational independence for those groups is a minimum standard for investment operations, PRMIA says. Firms that allow staffers to double up in these roles or that allow staff in one of these roles to control pay or other forms of support unacceptably compromise the independence of each role and raise the inherent risk in the organization,” according to a statement from PRMIA, which was formed early in 2002 following a schism from the Global Association of Risk Professionals, Previous HedgeWorld Story.
In particular, the PRMIA standards call for budgets for risk management systems to be set at very high levels of an organization, and not by the individual business units being monitored, the statement says.
The risk separation statement is the first in a PRMIA series that will take a position on specific issues and best practices for risk managers.
This first statement on standards is not final, and can be viewed at PRMIA’s web site, www.prmia.org, where PRMIA members also can post comments on them.