We spoke with Callum Osei, a governance consultant who reviews investment policy statements for corporate treasury departments and family offices across Canada.
The gap between policy and practice
Osei sees the same problem repeatedly. A firm writes a detailed investment policy statement covering risk tolerance, asset allocation bands, and rebalancing triggers. Then a market event occurs and the policy is quietly set aside.
In a 2023 survey of 280 Canadian corporate treasury teams, 54% reported deviating from their stated investment policy at least once in the prior two years. Of those, 71% cited market volatility as the trigger.
Why policies fail under pressure
Osei is specific about the mechanism. Written policies reduce friction during calm periods. They do not eliminate the emotional response to loss. When a CFO is facing a 15% drawdown and board pressure simultaneously, the policy document does not carry the same weight as the anxiety in the room.
The policy was written by a calm version of the same team that is now panicking. That gap is where emotional investing enters.
What actually holds
Osei has observed that policies with pre-defined escalation procedures perform better under stress. If the policy specifies that any deviation requires sign-off from an external advisor and a written rationale filed with the audit committee, the friction of deviation increases. Not every firm follows through, but the additional steps slow the emotional response enough that rational review sometimes catches up.