Risk by Design

Risk management has evolved far beyond a periodic compliance exercise. For fund administrators, it operates as a continuous discipline embedded into systems, operations, and governance. Although administrators tailor these practices to their specific responsibilities, the underlying principles apply broadly across service organizations in the investment fund sector.

Administrators operate in complex, highly regulated environments, which positions them well to design and implement risk frameworks that other service providers can learn from and adapt to their own operations. When organizations apply these principles thoughtfully, they strengthen internal controls, improve operational resilience, and support stronger audit and compliance outcomes.

At Pinnacle, disciplined risk assessment sits at the core of how the firm protects its operations and reinforces its control environment. Fund managers and their investors rely heavily on that control environment, making risk management a foundational element of client service.

Why This Matters to Fund Managers

Fund managers increasingly view their administrators as extensions of their own control environments. When an administrator maintains a strong risk framework, managers gain greater confidence during investor due diligence, achieve stronger audit outcomes, reduce operational risk exposure, and scale more effectively as funds grow.

In this way, disciplined risk management does more than protect operations—it delivers tangible value. It supports institutional credibility, enhances resilience, and enables long-term growth.

A Holistic Approach to Assessing Risk

Effective risk assessment starts with a comprehensive understanding of the administrator’s role. Pinnacle evaluates risk across several interconnected areas:

• Technology and systems, including investor portals, accounting platforms, integrations, access controls, and data flows
• Operational processes, such as NAV production, capital activity, reconciliations, investor reporting, and treasury workflows
• People and governance, including segregation of duties, role design, escalation paths, and training
• Third-party dependencies, including hosting providers, cybersecurity vendors, and other outsourced services

For each identified risk, Pinnacle assesses both likelihood and potential impact, with particular attention to areas that affect financial reporting integrity, data security, regulatory compliance, or service continuity.

The Role of a Multidisciplinary Risk Team

Strong risk programs rely on teams with diverse experience. Pinnacle’s risk function brings together professionals with backgrounds in fund administration, internal controls, compliance, cybersecurity, and operations.

This multidisciplinary structure allows the team to evaluate risks in context. Rather than simply confirming that controls exist, the team assesses whether those controls operate effectively within real-world workflows. As a result, findings remain practical, relevant, and closely aligned with how fund managers interact with their administrator day to day.

Testing Frequency and Continuous Improvement

Risk assessments must evolve alongside the organization. Systems change, teams grow, vendors shift, and threat landscapes continue to expand. To keep pace, Pinnacle performs:

• Formal annual risk assessments aligned with SOC 1 and audit cycles
• Targeted testing throughout the year when systems or processes change
• Ongoing monitoring of access controls, cybersecurity events, and operational exceptions

Pinnacle does not treat assessment results as static documentation. Instead, the team uses findings to enhance controls, refine procedures, improve training, and strengthen incident response. Over time, this approach reinforces a culture of continuous improvement rather than reactive compliance.

Supporting SOC 1, Cybersecurity, and Privacy Audits

A disciplined risk assessment framework directly supports successful audits across multiple areas:

• SOC 1 Type II reporting benefits from clearly defined risks, well-designed controls, and consistent evidence of operating effectiveness
• Cybersecurity audits improve through regular testing of access controls, monitoring, and incident response
• Privacy and data protection reviews gain support from risk-based assessments of data handling, retention, and third-party access

Because Pinnacle embeds risk management into daily operations, audit readiness becomes a natural outcome of strong governance rather than a last-minute effort.

Conclusion

Fund administrators can no longer treat disciplined risk management as optional in today’s regulatory and investor-driven environment. A continuous approach to assessing and strengthening systems, controls, and operations not only supports SOC 1, cybersecurity, and privacy audits—it directly benefits fund managers by reducing risk, improving audit outcomes, and enhancing institutional credibility.

While designed for fund administration, these principles extend across professional services organizations seeking stronger governance and long-term resilience.

To learn more about Pinnacle’s approach to risk management, contact David Smith at [email protected] or 1-604-559-8920.