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UCITS III has direct implications on risk management activities of asset managers. On 13 February 2004, German regulators published a derivatives ordinance (German: “Derivateverodnung”, Derivate V) being the first regulatory body throughout Europe to implement the EU regulation into local law. Since the first draft was issued in late November 2003, the finance industry faced open questions implementing a reasonable approach for managing other people’s money. Until BaFin, the German regulator, held a presentation to clarify their intents, the new regulation was seen as overkill for most asset managers. Since then, opinions have changed in that many industry representatives detect opportunities in the regulation. Full compliance with the proposed qualified approach still implies further investments in the risk management architecture, but the approach is now seen as reasonable.

Historically, risk management was understood as a pure risk reporting function that included the monitoring of restrictions and portfolio management activities. More detailed analysis of customer portfolios was not necessary, and never requested. Resources were allocated to gain more capital, so it was client relationship management that drove the business. In this context, risk management has been mainly regarded as a “necessary” cost factor.