BR Guide Second Edition

44 DUE DILIGENCE Professional Indemnity Cover If advisers are extending their advice to include BR services, they will need to ensure that they have relevant and sufficient PI cover and this will mean that they do need to notify their current PI providers. 4.2 Hedging Some managers may use derivatives to hedge portfolios against market downturns, as is common with many mainstream funds. Of course, hedging is not foolproof and carries its own risks, such as counterparty credit risk or a mistake in implementing the strategy. Costs can also be significant, but are unlikely to be visible to end users. The extent of sector and asset diversification within a Business Relief service will influence the risk level that investors are exposed to. In order to evaluate risk, it is important to consider a number of factors including portfolio diversification, asset security, investee company profitability and the potential use of gearing. HENNY DOVLAND TIME INVESTMENTS 45 Case Studies