The identification, assessment, and prioritization of risks followed by an effort to minimize, monitor, and control the probability of undesired outcomes.
One of our firm's core principles is "Risk Management First". Most people think this only applies to investments. What is not apparent to most people is that risk management applies to every aspect of your life that affects you financially.
Every step in the wealth management process should take risk management into consideration. Whether it pertains to individual investments, the entire portfolio, protection from catastrophic loss, income loss, personal information security, or the risk of losing out on opportunity to make your life better. We look at all risks and determine how to mitigate them, and whether the reward is worth the risk taken.
Innovative Advisory Group specializes in alternative investments inside retirement accounts (IRA, 401k or similar retirement plans). One of our services is a position audit. This is where we will assess one or more individual investments to determine if they are set up properly, if there is a risk of a prohibited transaction, or if corrective action needs to be taken. If you have already invested in alternative investments in your IRA, 401(k), or similar retirement account, you will want to consider this service.
Investment Risk Management
While risk will always exist with any investment of your capital, we look to mitigate it as much as is possible. One of the items we analyze with an investment is the risk-to-reward trade-off. With every investment, there is always a risk of losing money. The risk which exists in an investment can range anywhere from risk-free (i.e. US Treasury Bonds) to purely speculation (i.e. buying a lottery ticket). While US Treasuries are not without risk, in the investment community, they are the closest thing to a risk-free rate of return in the world today.
There are a number of ways to reduce risk in an investment. First, we perform extensive research and due diligence to ensure we fully understand all the risks involved with the investment. Next, we try to implement strategies to reduce, mitigate or transfer the known risks while entering the investment. Then, we utilize additional risk management tools while the investment is active. Finally, we look at the exit strategy for the investment.
We prefer investing in areas where the reward is asymmetric to the risk taken. This means that the reward would be potentially much higher than the risk taken compared to other similar investments. While this type of investment is not common, they do exist, and we look for opportunities like this.
Portfolio Risk is assessing how each individual investment correlates to one another and assessing how that will perform in different environments under certain conditions. We actively manage risk for existing portfolios utilizing different tools which assess these correlations.
Income Disruption Risk Management
Income disruption is the risk of an individual or family losing part of all of their active or passive income to maintain their current lifestyle. The loss of a job or income source is challenging for anyone, but we integrate this potential risk into our financial planning process to help minimize the effects of
Catastrophic Risk Management
Catastrophic risk management is preventing risks that are highly unlikely, but if they occur, the impact is too much to bear. An example of this is fire insurance. The odds favor someone not needing it, but if it happens, people are glad they have it. We assess these types of risks as well to ensure that even in highly unlikely scenarios, our clients have adequate protection.
Information Security Risk Management
In today's society, technology is a blessing. All the advancements and efficiency that it provides, allow us to do more, better and faster. It allows information to flow fast to anyone who wants it. However, technology also provides some concerns for people who are concerned about their privacy and want to protect their personal information. Innovative Advisory Group takes this concern seriously and has implemented thorough risk management procedures to protect our client's privacy.
General Risk Management
Risk management affects all aspect of your life. Most risks effect your life financially, but not all of them. We review all aspects of your life for risks you may not be aware of to mitigate as many as possible to help make your life better.