Imagine my surprise when I opened a fortune cookie this week to read “You will find what you lost but first you must remember where you left it.” At first blush, the words don’t seem to make sense. However, I have had luck in being reunited with errant umbrellas, hats and so on by retracing my steps. The lesson learned is to keep a better grip going forward, leading me to write today’s blog post about the importance of investment roadmaps.

It is true that knowing what you want to achieve is paramount when it comes to investment management and related risk control. While it is not always straightforward to identify the unknowable with exact precision, it is possible to create parameters about what you want to avoid and blueprint accordingly. For example, some traders and corporations hedged against a drop in the British pound several weeks or months ahead of the BREXIT vote to stay or leave the European Union. This kind of tactical activity makes perfect sense for an investor with a strategy to minimize significant foreign exchange volatility and a commitment to ongoing analytical analysis to support decisions about hedge size, hedging instrument and choice of counterparty when the “right” time comes.

Although used often for purposes of evaluating employee performance, SMART goals that are Specific, Measurable, Achievable, Relevant and Time-Bound can apply to investment management and the containment of uncompensated risks. A realistic and relevant objective(s) must be identified at the outset, accompanied by an awareness of “worst case” events (to the extent possible) and risk control restrictions. Appropriate metrics must be likewise identified with the understanding that the process of risk mitigation is ongoing even though interim actions such as financial reporting and trade rollovers occur.

The BREXIT hedgers acknowledged their goal of avoiding currency depreciation and then implemented positions to reflect what they were allowed to do and how much protection was deemed necessary. Those who work in a regulated environment know that legitimate (versus rogue) trading takes place only after various authorities (such as trading limits and operational processing) are approved and functional.

As the distinguished writer Ray Bradbury said “Living at risk is jumping off the cliff and building your wings on the way down.” For asset managers and other stewards of other people’s money, a careless attitude towards risk-taking is likely to spell trouble later on.