# Risk Management Risk management at Avant Protocol is a systematic framework designed to identify, measure, and mitigate risks across all protocol activities. It complements the [Operational Security](/security/operational-security.md) framework and the [Reserve Fund](/security/reserve-fund.md) by establishing clear rules and structural safeguards for capital allocation. The framework is built upon several key pillars that work in concert to ensure protocol stability and protect user assets. ## **Capital Structure & Tranches** A core element of Avant's risk design is having distinct tranches with different risk-and-reward profiles. This is a planned capital structure that segments risk and provides built-in protection for the **base assets,** `avAssets`, and their **primary yield-bearing assets,** the `savAssets`. ### Senior Tranche (`savAssets`) The `savAssets` (e.g., `savUSD`) make up the Senior Tranche. This is the most protected capital pool in the protocol. "Seniority" means that in the event of a strategy loss, all other protective layers (the Reserve Fund, the future Governance Backstop, and the Junior Tranche) must be depleted before the Senior Tranche is affected. This structural protection makes `savAssets` the lowest-risk asset for earning yield within the Avant ecosystem. `avAssets` (e.g., `avUSD`) share the same Senior Tranche position. In a loss event, they are protected by the same layers. `savAssets` are the yield-bearing, staked form of the same senior capital. ### Junior Tranche (`avAssetX` tokens) The `avAssetX` tokens (e.g., `avUSDx`) make up the Junior Tranche. This tranche is "junior" to the Senior Tranche. Its role in the capital protection hierarchy is to absorb losses *after* the protocol's Reserve Fund but *before* the Senior Tranche. In exchange for being in this higher-risk position, the Junior Tranche is compensated with a potentially higher share of the yield. This mechanism effectively creates an internal insurance layer for `savUSD` holders. ## Diversification and Allocation The protocol applies diversification across three vectors to manage concentration: * **Strategy**: Exposure is distributed across multiple yield strategies where available. * **Protocol**: Allocation to any single external DeFi protocol is limited to reduce counterparty exposure. * **Asset**: Concentration in any single asset type is actively managed. The protocol sizes allocations according to its assessment of each asset and counterparty. Concentration thresholds are calibrated to the assessed credibility of each, informed by track record, liquidity depth, and protocol maturity. ## **Real-Time Threat Monitoring** The protocol's positions and all integrated external protocols are monitored 24/7 for security threats and anomalous activity. Avant utilizes industry-leading security partners, such as [Hypernative](https://www.hypernative.io/), for real-time threat intelligence. This service provides immediate alerts for potential exploits, economic attacks, or risky governance actions, enabling a rapid defensive response to protect protocol assets. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.avantprotocol.com/security/risk-management.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.