Read the FiRM Whitepaper!
Form a Risk Working Group (RWG) to support all functions of Inverse Finance, including DOLA expansion, focusing on providing sound risk analysis, risk management, and risk monitoring for existing products and for the efforts of the other working groups.
Full proposal on Inverse Forum Here: https://forum.inverse.finance/t/proposal-to-form-a-risk-working-group/119
Compared to traditional finance, significantly more risks are present in DeFi for individual users and protocols: malicious actors, esoteric smart contract risks, unknown correlations between tokens and projects, short track records, unproven and experimental economic theories, anon teams/devs, and the irreversibility of transactions to name just a few. The DeFi landscape is a perilous one and perhaps few feel this more at the moment than our DAO. It is of vital importance that we address the topic of risk comprehensively. The RWG’s directive is to ensure this.
Due to the early stage of risk management modeling in DeFi, RWG will approach its objectives using a mosaic approach – select risk research and best practices from TradFi will be adapted and coupled with leading DeFi research and best practices. Given the strong investment acumen and expertise at Inverse Finance, we are well poised to innovate risk management practices for our own community members and the wider DeFi ecosystem.
The RWG will remain open to new ideas and continually search for improved, research-backed methods of analyzing, managing, and addressing risks. In time, the RWG will become an asset, and will ensure that value-add to the DAO is accompanied with an elevated and on-going degree of risk awareness.
Following months of discussion with core team members, and utilizing the foundational work of past DAO contributors, RWG will spearhead building out Risk Governance, which is comprised of:
A critical component in achieving our goals is establishing internal partnerships within Inverse. The table below lays out how Growth, Treasury, Operations, Analytics and Risk groups might interact. Even if daily operations of these groups are decentralized, a certain level of coordination will be necessary to ensure Inverse-wide objectives are met.
|Collaboration||Scope of interaction (includes, but is not limited to)|
|RWG <> All Groups||Identify and define risks to build the risk register|
|RWG <> GWG||Score the various components of existing and prospective lines of business according to the risk assessment methodology to corroborate decision making|
|RWG <> TWG||Score the various components of existing and prospective lines of business according to the risk assessment methodology to corroborate decision making|
|RWG <> AWG||Create tools in the forms of queries, Dune dashboards, and eventually The Graph, to streamline reporting the various forms of risk undertaken by Inverse as it grows as a business|
|RWG <> OWG||Build policies, procedures, and/or controls to help prevent and mitigate risks|
As RWG directives are being developed, analytical tools devised to streamline the risk assessment framework can be repurposed to serve the Feds’ unique and innovative characteristics. In time, these will allow for automated mechanisms to manage interest rates via supply per our Fed contracts, as well as a more comprehensive monitoring process - integrating safety measures into the lending/borrowing properties via the Fed system.
Once established, the RWG will work towards gradually assuming management responsibilities for new and existing DOLA Feds in close collaboration with Nour Haridy. Through the use of a multisig-based AMO, the Fed management process will involve a team of core contributors and thus resolve one of the single points of failure that has most DAO members concerned. This process will take place in stages over the course of 2022 as the RWG and Risk Governance take shape. The specifics of the multisig (including number of members, approval threshold, whether Nour will have final word or be an equal voter) are outside the scope of this proposal.
Form Risk Working Group
The importance of a robust risk management function within Inverse Finance is hard to overstate at this moment. From providing ongoing due diligence for new lending opportunities, risk assessment of new liquidity strategies, to managing an increasingly complex and disparate array of DOLA Fed lending facilities, a solid Risk Management team is essential to the success of Inverse going forward.
To scale Inverse from a risk standpoint ultimately requires a multi-person team that is available to act 24 hours per day, 7 days a week. In addition, redundancies are required to review the work of members of the risk team and decisions with regard to the DOLA Fed, etc.
With this in mind, we propose the RWG be composed of at least one full-time contributor, hired on as a Risk Manager, and a part-time contributor at launch. Myself (Edo), and Karm, a trusted DAO member, are nominating ourselves for the Risk Manager and Risk Contributor positions. Depending on the growth prospects of the business in the next ninety (90) days, an assessment of the team’s progress should occur which may warrant the onboarding of additional full time contributors. In the interim, the DAO should make efforts towards hiring a Head of Risk.
Below are job descriptions for the aforementioned job positions -
The Head of Risk position will have the following responsibilities in addition to those laid out in the Risk Manager job description:
A Risk Manager will have the following responsibilities:
Prevent and Mitigate Risks
In summary, the role of a Risk Manager will be to identify, assess, prevent, mitigate, and report on risks pertaining to existing and new lines of business. Managers will also advise on recovery actions for the DAO in the event of an exploit, breach, and/or loss of confidence.
Areas of focus for a part-time contributors include (but not limited to):
All RWG contributors will be responsible for creating, monitoring, and updating the Risk Governance framework. To perform such duties, they will need extensive industry knowledge, as well as a thorough understanding of the various working environments (e.g. Etherscan), and the ability to read smart contracts. A commitment to stay up-to-date with the latest advancements in the space is required. Previous experience in TradFi or DeFi risk management is preferred.
The following table summarizes the budget spend for the RWG for an initial ninety (90) day period. Table figures are in $DOLA.
Enact the Risk Working Group into existence.
Allocate a total of $15,000 per month to compensate 2 contributors:
Edo (Risk Manager, full-time) 10,000 DOLA per month
Karm (Risk Manager, part-time) 5,000 DOLA per month.
To incentivize the interest of the above members to the newly formed Risk Working Group and align their compensation with existing core contributors on the payroll, we propose an allocation of vested INV tokens. Per standard, vesting is over a period of 24 months from the date of calculation, and continues automatically unless the Funding Committee votes to confirm that the core contributor is no longer providing productive input to Inverse Finance, or if the DAO votes to terminate the contributor.
INV Allowance action needed before the 2 new vestings actions, per @theAlienTourist, otherwise they will fail.
Allocate 500 INV tokens to Edo (Risk Manager, salaried, 0xED9376094Ce37635827E0Cfddc23bFbb6D788469); calculated from 01/03/2022
Allocate 200 INV tokens to Karm (Risk Manager; salaried, 0x2723723FDd3Db8ba2D6f0e1B333e90A7E60A0411); calculated from 15/04/2022
Per @Nour's and @CryptoHarry's suggestion, transfer partial April compensations to Edo and Karm leading up to April 21st (the assumed date of execution of this proposal). This would eliminate the need for an additional proposal requesting contributors' April salaries from the Growth Working Group's allowance.
Transfer 7000 DOLA to Edo (0xED9376094Ce37635827E0Cfddc23bFbb6D788469)
Transfer 3500 DOLA to Karm (0x2723723FDd3Db8ba2D6f0e1B333e90A7E60A0411)
Members allowed to make Drafts can sign the fact that they reviewed the Draft Proposal
Inverse is building a suite of DeFi tools. Everything we do is a community effort, which means you too can participate in the decision-making process. Join us!