To NEO Investimentos, Risk Management is an essential activity. Its objective is to ensure consistent returns for every client. To accomplish this effectively, risk management must assess not only market risks, but also the operational risks inherent to the investment process.

Market Risks
Market risks originate from (i) price fluctuations, and (ii) asset liquidity. The management of such risks is carried out in a two-fold process. First, the expected risk for each component of the investment is calculated. Second, each investment’s risk level is monitored on a daily basis, in order to ensure the current risk does not exceed its previously determined expected risk. The result of this system is a well calibrated risk assessment of the entire portfolio, assuring every risk is under control.

Operational Risks
Operational risks are those that could somehow hinder NEO Investimentos from providing its services with the appropriate quality level. There are three sources of operational risks: (a) facilities, (b) operations, and (c) people. The operations of any company can be compromised by malfunctioning facilities; to prevent this from happening, NEO Investimentos has invested heavily in infrastructure and risk management processes: redundant servers and internet access, data backup and voice-recording systems, structured cabling are just some of the features that NEO Investimentos has at its disposal to manage operational risks. NEO Investimentos also has a contingency site and a well-defined plan to allow for continued operations in case of an emergency. Another source of operational risk includes potential mistakes in data processing (e.g. fund share calculations and confirmation of trades). To minimize such risks, NEO Investimentos outsources certain activities to specialized firms: Itaú Bank for custody services and Mellon Brascan for fund administration. In addition, NEO Investimentos has developed internal controls to perform its own NAV calculation in order to monitor the information provided by the administrator and the custodian on a daily basis. Finally, if a member of the NEO Investimentos’ team is not able to perform his or her activities, the investment process should not be jeopardized. This is the reason why NEO Investimentos believes in and encourages teamwork, so that both the portfolio management as well as the sales areas can remain functional, despite any absences.