SD-07.7 — Investment Risk Reporting & Limits Governance

Business Domain: BD-07 Investment Risk (Middle office) · Applies: BOTH

Purpose

Maintains the risk-limit framework and produces the consolidated risk reporting that turns the measurements of SD-07.1 to SD-07.6 into governance and action. The risk function does not only measure risk — it translates the firm’s risk appetite into operative limits, detects and escalates breaches, and reports the consolidated risk picture to the portfolio managers, the risk committee and the board. This Service Domain owns that limit framework and that reporting.

Service Operations

• Maintain the risk-limit framework — define the risk-appetite-derived limits per portfolio, mandate and strategy: value-at-risk, tracking-error, concentration, liquidity and sensitivity limits.
• Operate hard and soft limits — the hard limits not to be breached and the soft trigger points for review, and their utilisation.
• Translate the risk appetite — render the firm’s risk-appetite statement into the operative monitoring thresholds and breach points.
• Detect and escalate breaches — identify limit breaches, escalate them, and manage remediation or the formal approval of a temporary exception.
• Produce risk reporting — the consolidated risk reporting to portfolio managers, the risk committee and the board.
• Govern the risk-policy framework — the roles, responsibilities and the periodic review of the risk framework.

Inputs and outputs

• Inputs: the risk measurements from SD-07.1 to SD-07.6 (Risk Measurement, E-19); the risk-appetite statement; the mandate limits.
• Outputs: the limit framework (Risk Limit, E-16), the breach records (Limit Breach, E-18), the escalation records and the risk-committee and board reporting — consumed by BD-05, SD-16.1 and the governing bodies.

Entities

• Consumes: Risk Measurement (E-19, any risk_type — consolidated reporting across market / credit / counterparty / liquidity / concentration / scenario / stress / climate), Scenario (E-17), Portfolio / Mandate (E-03); the SD-07.1 risk measurements; the SD-07.6 risk measurements.
• Owns: Risk Limit (E-16) — the configured, versioned risk constraints — and Limit Breach (E-18) — the event record of a measured risk crossing a limit. SD-07.7 is their authoritative source.

Standards

• The Financial Stability Board Principles for an Effective Risk Appetite Framework — the risk-appetite, tolerance and capacity distinctions; the GARP Risk Principles for Asset Managers on risk governance. The CRO and risk committee operate within the firm’s risk-appetite and governance framework (BD-14 SD-14.1 maintains the enterprise risk-appetite the investment risk-appetite operates within; BD-16 SD-16.1 maintains the board and risk-committee structure).

Open extensions

• The boundary with SD-10.1 / SD-10.2 — SD-07.7 governs risk-appetite-derived limits; the mandate- and regulatory-derived limits are BD-10’s. A position can breach both.
• The boundary with SD-16.1 Corporate & Fund Governance on the risk committee.