Operational risk has become a centerpiece of investor due diligence and a focal point of regulatory interest.  See “Legal and Operational Due Diligence Best Practices for Hedge Fund Investors,” Hedge Fund Law Report, Vol. 5, No. 1 (Jan. 5, 2012).  Operational excellence is more difficult to discern than good performance; performance can be quantified and compared across managers while operations are often unique to a manager’s business practices and investment strategies.  At the same time, operational failures typically pose a greater threat than investment shortcomings.  Everyone understands that generating returns requires assuming risk, but it is often difficult to articulate a coherent explanation for operational shortcomings.  In short, in the area of hedge fund manager operations, best practices are critical, but challenging to identify.  Recognizing that the supply of best practices information on hedge fund manager operations generally falls short of the demand for it, SEI recently published the first of a series of papers entitled “Top 10 Operational Risks: A Survival Guide for Investment Management Firms.”  In a three-part series, Hedge Fund Law Report is summarizing the key takeaways from the full Guide.  This first installment addresses a hedge fund manager’s attitude and approach towards operational risk; the need for effective oversight of firm functions; and the imperative of appropriate training and staffing to minimize operational risks.