The big news over the summer (at least in Ireland) was the release of the Central Banks feedback statement on CP86 – see here. This was intended to clarify the designated person’s role in terms of responsibility for managerial functions. In terms of risk management given the focus on clear segregation between the front office and risk management function it was no surprise that the designated individual for risk may not also be responsible for the monitoring of investment policy, investment strategies and policy managerial function. This decision was taken on the grounds that it weakens the performance of these managerial functions and involves too many potential conflicts.

In addition the Central Bank has recognised that the management company’s operational risk is distinct from the risk management associated with its underlying investment funds. Therefore the Central Bank is separating risk management into two separate managerial functions – fund risk management and operational risk management. These separate managerial functions may, but do not need to be, conducted by a single person.

The Central Bank had also considered relaxing the two Irish director rule as it was unsure if there existed a deep enough pool of talent (particularly those with portfolio management and risk management) available for appointment as directors. In the end the Central Bank was not persuaded by this argument and has decided to keep this restriction in place.

The Central Bank also offer some guidance on delegate oversight. In particular on page 27 there is guidance on risk management and the CBI reminds us that “The board should receive and be satisfied with regular reports assessing risk levels relative to the risk appetite(s) for the investment funds under management”.

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