After a year of Common Supervisory Actions (CSAs) with regard to risk management that were carried out by ESMA and National Competent Authorities in 2020, and the publication of the results by ESMA, the CSSF issued its own findings on one of them in June 2021. It concerns the CSA on the compliance with the UCITS liquidity risk management requirements and provides observations and recommendations for improvements on particular aspects, such as pre-investment forecasts and analyses of liquidity, the alignment of redemption policies and liquidity profiles, liquidity risk measurement and data reliability as well as governance and control mechanisms. Further to its report, the CSSF asked all UCITS managers to conduct by end of 2021 a comprehensive assessment with regard to the compliance of their liquidity risk management set-ups in relation to the observations of ESMA and of the CSSF and to take, if applicable, the necessary corrective measures.

The respective ALFI Risk Management working groups were subsequently busy with elaborating the practical implications that arose for ALFI members further to the CSAs and the CSSF’s findings. Additional challenges that the industry faced in the context of regulatory requirements were shared in the working groups and also with the CSSF, e.g. on sustainability risks and liquidity stress testing. In addition, the working groups have contributed and continue to contribute to the ALFI position on the EU Commission proposal concerning the Alternative Investment Funds Managers Directive, e.g. on liquidity management tools and loan-originating funds.

In order to reflect, from a helicopter perspective, the relevant regulatory developments of the past years in the area of risk management, the ALFI Risk Management Guidelines were updated beginning of 2022. The updated Chapter I of the Guidelines provides considerations for the industry on key principles and common practices for the organisation of the independent risk function of an investment fund manager.

In addition to the continuing efforts in the working groups, the ALFI risk management experts contributed to the 15th edition of the ALFI European Risk Management Conference that took place on 15 June 2021 and was organised in association with ALRiM, the Luxembourg Association for Risk Management. The conference attracted more than 300 risk management professionals, the highest-ever recorded participation for this event. The conference provided insights and updates on themes pertinent to risk managers, such as the management of sustainability risks, the LIBOR transition, liquidity risk management, delegation risks and regulatory developments.

More recently, ALFI working groups have provided a forum for risk managers to discuss the developments in Ukraine and share questions and practices on valuation and liquidity matters. The expert risk views collected have fed into the advocacy and dialogue with the regulators.

Gildas Blanchard, Industry Affairs Adviser