Risk Management Practices

5.1 Proprietary Risk Framework Scoring

Rumi Finance employs a proprietary risk framework scoring system to evaluate protocols, pools, and assets in order to determine maximum exposure levels. This framework helps the platform to maintain a balanced risk profile across all strategies and investments.

5.2 Investment Committee and Governance

An investment committee oversees the approval of strategies and portfolios, ensuring that they align with the platform's overall objectives and risk tolerance. The governance system allows for community input and decision-making, promoting transparency and accountability.

5.3 Risk Management Operations Engine

The risk management operations engine includes over 100 alerts and procedural action protocols, covering financial risks (liquidity, debt ratio health, asset concentration, rebalances, stable coin depeg) and system risks (keeper, bots, missing data, data source failures). This engine continuously monitors the platform and triggers necessary actions to mitigate risks.

5.4 Automated Kill Switches

Rumi Finance has implemented automated kill switches that can be activated in response to predefined risk levels or events. These switches help to protect the platform and users' funds by immediately halting affected strategies or operations when necessary.

5.5 Real-time Analytics Dashboard

A real-time analytics dashboard allows the team to monitor strategy performance and platform-wide risk exposure, enabling them to make informed decisions and take prompt action when needed.

5.6 Weekly Strategy Reviews

Rumi Finance conducts weekly strategy reviews to monitor the performance of its strategies and identify any potential risks. During these reviews, the team evaluates the effectiveness of the strategies, assesses their risk-adjusted returns, and makes necessary adjustments to maintain optimal performance and risk management.

5.7 Risk Reporting and Monitoring Framework

Rumi Finance has developed a comprehensive risk reporting and monitoring framework that includes key risk metrics such as C-Var, Sharpe, volatility, and drawdowns. This framework helps the team to track and manage risks effectively.

5.8 Drift and Portfolio Allocation Rebalances

Rumi Risk committee performs drift and portfolio allocation rebalances to ensure that the investment strategies remain aligned with the target risk profiles and asset allocations.

5.9 Risk Committee Monthly Reviews

Rumi Finance has a dedicated risk committee that meets monthly to review the platform's overall risk management practices and identify areas for improvement. The committee consists of experts in risk management, finance, and DeFi, who work together to ensure that Rumi Finance's risk management framework remains robust and effective.

During these meetings, the committee discusses the platform's risk exposure, reviews risk metrics, and evaluates the effectiveness of the risk management practices in place. They also assess the performance of the platform's strategies and make recommendations for adjustments or modifications as needed.

5.10 API Services for Reporting Financial and Risk Metrics

Rumi Finance offers API services to its institutional clients that enable users to access financial and risk metric data for both internal and external reporting purposes, promoting transparency and accountability.

5.11 MPC Wallet Management and Client Controls

Rumi Finance utilizes multi-party computation (MPC) wallet management on its Vault governance and treasury. For our institutional vaults, it allows clients to share control over their vaults' governance, ensuring security and collaboration in decision-making processes.

5.12 Smart Contract Security Audits and Bug Bounties

To maintain the highest level of security, Rumi Finance's smart contracts will constantly undergo thorough audits by external security firms, and the platform also runs bug bounty programs to incentivize the identification and resolution of potential vulnerabilities. First Audit has been done by Hacken, in 2023, Second audit with Blaize in March 2024

In addition to the regular risk management meetings and reviews, Rumi Finance has a proactive approach to identifying and mitigating risks as they arise. The team continually monitors the platform's operations and the broader DeFi ecosystem, allowing them to identify potential risks and take prompt action to address them.

This proactive approach to risk management ensures that Rumi Finance can respond quickly to emerging risks, protecting users' funds and maintaining the platform's stability.