Practical guidance and clarity around the risk tolerance decision for nonprofit healthcare organizations
Risk is a multi-faceted concept and cannot be distilled into one singular measure. When coupled with the complex nature of a health system, the subject of investment risk tolerance can be daunting. To bring clarity to the process, Pavilion’s Healthcare Strategic Research Team (SRT) developed the framework outlined in this paper. It is built upon Pavilion’s Comprehensive Analysis of Risk Exposure (CARE)* philosophy which takes a holistic view of how a system’s organizational risk factors influence its investment strategy. Once the connection is made, it is important to integrate those factors into the determination of investment risk tolerance.
The matrix defines risk tolerance as the intersection of ability and appetite to take risk, both of which are influenced by a combination of enterprise-specific factors and conventional inputs. It is intended to serve as a practical starting point for identifying risk capacity.
In this paper, we will describe the elements of this risk framework in further detail and examine how health systems can apply it to their unique needs and circumstances and determine their organization’s investment risk tolerance.
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I’d like guidance and clarity around the risk tolerance decision and how to apply it to my investment strategy.
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Services to be provided by Mercer Investments LLC, which is one of several, associated legal entities that provides investments services to clients as part of a global investment advisory and investment management business (collectively referred to as “Mercer”).
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