Risk Management

Our Approach

We have a very exacting approach to risk management. In fact, we regularly analyse risk parameters across all areas of our business, and we do so because we believe well-managed risk leads to improved performance.


Let's start by exploring what risk management is, and what creates investment risk for individuals and institutions.

Risk Management

The Standard Definition

Investment risks can be defined as the probability or likelihood of the occurrence of losses, relative to the expected return on any particular investment.

Put simply, risk is a measure of the level of uncertainty of achieving the returns investors expect from an individual investment, or one's whole portfolio.

Risk Management

Our Definition

diversify your investments, and spread your risk

Investment risks can be defined as the probability or likelihood of the occurrence of losses, relative to the expected return on any particular investment.

Put simply, risk is a measure of the level of uncertainty of achieving the returns investors expect from an individual investment, or one's whole portfolio.

In other words:

how much are you willing to risk losing, if things don’t go as you expect?

This is a very important assessment to make before investing in anything, specifically:


Will it change your life significantly?
Will it prevent you from being able to pay your bills?


If the answer is yes, then don’t invest heavily in medium or high-risk programs.

In Fact...

don’t invest all your money in high-risk or even medium-risk programs

...always look to diversify your investments and spread your risk.

How to Assess Investments

The Standard Definition

The first step in risk management is called the risk assessment and analysis stage. A risk assessment evaluates an organization's exposure to uncertain events that could impact its day-to-day operations, and estimates the damage those events could have on their revenue and reputation should they occur.

How to Assess Investments

Our Definition

After evaluating the questions below, you can start looking into products and the company’s approach to investment risk management.


What do I know about the people and the company I’m trusting my investments with?


Do the people and the firm itself possess the integrity to recommend investments suited to my situation?


Are they investing alongside me?


Have they been in financial services long enough to deserve my trust?


Do they have the experience and knowledge I need to make the right investment decisions?


Are they aggressive sales people, overselling their products?

5 Traditional Steps to Risk Management

  1. Evaluate the risk if everything were to go wrong
  2. Analyze the risk to see if you are prepared to invest at that level?
  3. Evaluate or rank the risk: low – medium – high
  4. Assess each investment risk against the risk to your overall portfolio
  5. Monitor and review the risk regularly

5 Crucial Characteristics of Risk Management

  1. Exercise professional skepticism
  2. Risk management should protect value, but you should also consider other opportunities. Is it worth taking the risk, or are there alternatives that could deliver the results you want to achieve with less risk?
  3. Manage risks with objectivity – leave your emotions at the door
  4. Readiness to adapt your investments to changes in your situation as well as to developments to your overall portfolio
  5. Risk management must be proactive, and regularly reviewed and updated to reflect changes to your goals, or to capitalize on trends as they emerge.

What makes an investment high-risk or low-risk?

A product can be both high risk and a low risk at the same time.

This might sound odd, but risk increases whenever leverage/gearing is used (and by how much leverage is applied).

The higher the leverage/gearing, the higher the risk, but higher too is the potential for profits.

Risk profiles according to investment class


Whether a bond is high risk or low risk depends on the type of bond you’re invested in. Government bond risk levels depend on the country which issued it (some countries have higher risk levels than others).

Convertible bonds in a company necessitate evaluating the company underwriting the bond. "Traditional" bonds are considered low-risk products which is normally also reflected in their performance.

As a rule, it is always prudent to allocate a portion of a portfolio to interest-yielding products that are liquid and easy to convert to cash, for convenience and accessibility.


Stocks can be high-risk or low-risk, depending on which company the shares come from. The level of risk depends on which stocks the portfolio is invested in (small penny shares or blue-chip stocks).

When gearing/leverage is included in the stock strategy, these investments can very suddenly go from low-risk investments to high-risk investments, with the potential to significantly impact your portfolio and should therefore be carefully selected to produce a weighted risk profile across a portfolio.

Digital Assets

Investing in digital currencies can generate significant returns but are often considered high-risk investments.

That’s why we recommend not allocating more than 10% to 20% of your portfolio to this asset class.

This is especially important given that these are all “new” products, and as such untested over a longer investment horizon.

Foreign Exchange

Investing in Foreign Exchange (FX) can be high risk, but again this depends on the amount of gearing/leverage applied.

When currency trades are executed without any leverage/gearing, then this investment class has a statistically lower risk level than investing in single stocks.

Hedge Funds

Some hedge funds have higher risk profiles than others. But just because it is called a hedge fund, this name does not describe the risks these funds hedge against.

It is the strategy within the hedge fund that needs to be evaluated, and the class of assets these hedge funds invest in (for example, some hedge funds only invest in bonds) when determining the risk of a hedge fund investment.

Private Company Investments

Investments in privately held companies can be made as a personal investment, or interest, and can carry very high levels of risk.

Once again, the risks on this type of investment must be assessed based on whether this is a start-up or an ongoing business, along with what are the terms of investing in this company?

These questions demand a lot more investigation and evaluation than most investments, and should be evaluated with your financial advisor.


A controlled hedging program is not designed to make money so much as to cover potential losses from any negative changes in the overall portfolio.

Some managers specialise in hedging facilities for a range of products, some against long-only stock portfolios, some against currency exposure and others still against interest-rate exposure.

Why are we talking about hedging under risk management?

We do so for one simple reason, if the hedge is not matched correctly to the portfolio, the hedge can end up costing more than expected, or not even covering the potential downturn it was designed to provide for.