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Assessing Your Board's Risk Tolerance

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Bibliographic Details
Title: Assessing Your Board's Risk Tolerance
Language: English
Authors: Griswold, John S., Jarvis, William F., Commonfund Institute
Source: Commonfund Institute. 2014.
Availability: Commonfund Institute. 15 Old Danbury Road, Wilton, CT 06897. Tel: 203-563-5000; Tel: 888-823-6246; Web site: http://www.commonfund.org
Peer Reviewed: N
Page Count: 12
Publication Date: 2014
Document Type: Reports - Descriptive
Descriptors: Governing Boards, Risk Assessment, Trustees, Committees, Portfolio Assessment, Financial Exigency, Investment, Expenditures, Administrative Policy, Decision Making, Policy Formation, Group Dynamics, Information Utilization, Educational Finance, Alignment (Education), Goal Orientation, Outcomes of Education, Risk Management
Abstract: In the wake of the financial crisis, trustees of many endowed nonprofit institutions realized that their portfolio was riskier than they thought and their own ability to tolerate loss wasn't as strong as they imagined. What can board and investment committee members do to improve their ability to assess their--and their institution's--capacity for risk? The authors of this paper assert that understanding a board's risk tolerance is not an exercise with a precise beginning and end. It is an ongoing, continuous process, both qualitative and quantitative. In times of stress fiduciaries should strive to avoid reactions that undermine their settled policies and thus are contrary to the organization's long-term interest. A candid and thoughtful evaluation of their own ability to accept risk can help them to be strong stewards of the assets that have been placed in their charge. This paper is intended for trustees and investment committee members who want to: (1) understand their own level of risk tolerance; (2) take steps to align the risk in their portfolio with their comfort level; and (3) strive to achieve a balance between risk and return that is appropriate for their institution.
Abstractor: ERIC
Entry Date: 2015
Accession Number: ED559284
Database: ERIC
Description
Abstract:In the wake of the financial crisis, trustees of many endowed nonprofit institutions realized that their portfolio was riskier than they thought and their own ability to tolerate loss wasn't as strong as they imagined. What can board and investment committee members do to improve their ability to assess their--and their institution's--capacity for risk? The authors of this paper assert that understanding a board's risk tolerance is not an exercise with a precise beginning and end. It is an ongoing, continuous process, both qualitative and quantitative. In times of stress fiduciaries should strive to avoid reactions that undermine their settled policies and thus are contrary to the organization's long-term interest. A candid and thoughtful evaluation of their own ability to accept risk can help them to be strong stewards of the assets that have been placed in their charge. This paper is intended for trustees and investment committee members who want to: (1) understand their own level of risk tolerance; (2) take steps to align the risk in their portfolio with their comfort level; and (3) strive to achieve a balance between risk and return that is appropriate for their institution.