Financial Times Guide to Investing in Funds

Business continuity plan 167

have varied greatly but according to our standards an appropriate level

would be 1 per cent of AUM.

Normally insurance is taken in relation to professional indemnity,

directors’ and officers’ liability, or key person’s risk. Asking for evi-

dence of the level of cover is very useful. Reviewing the fact of any

cover will provide you with information on the limit of liabilities and

what exactly the manager is insured against. You could also check

whether the manager has ever claimed on any of its insurance policies

as this may be indicative of past complaints.

Insurance, with its role as part of good corporate governance and com-

pliance, should be reviewed and is an easy way again to gain some

useful insights.

Business continuity plan

Business continuity plans are often required as part of the regulatory

context. They are also good to have in place for any business. I like to

know about them and the approach taken by managers when it comes

to setting up and monitoring their business continuity plan. To under-

stand and check such aspects of the manager may seem mundane but

again reveals a lot about understanding the potential risk management

and culture in place at the manager.

First off it is useful to find out if there is any plan at all. I don’t mean

some soft plan based on an undocumented idea of a back up being

effected on a local laptop. I would expect a proper plan to be designed

to save the manager’s data at any time ahead of an unforeseeable

catastrophe. I would also expect the plan to be kept in hard copy as

opposed to being kept on the company’s server, as what good is that

in the case of IT failure! The existence of intelligent planning is always

reassuring and shows good corporate governance. To properly guard

against disaster and ensure business continuity, a manager should

have in place a step-by-step plan that outlines the procedure to be fol-

lowed in the event of a disaster. It should detail, among other things,

the people responsible for actioning the plan, where the manager can

relocate on a temporary basis as well as how to return to the place of

business after the disaster.