Risk management
Principal risks
The principal risks facing the Group are detailed below, as well as any change in the year-on-year risk profile.
Principal Risks
Key risks identified by the risk management framework
Change since last year Rationale for change
1. Credit risk The risk of loss arising from a client or counterparty failing to meet their financial obligations to a Brooks Macdonald entity as and when they fall due.
Unchanged
• Cash deposits with external banks • Client credit risk • Counterparty credit risk • Custodian-related credit risk • Indirect counterparty risk in respect of referrals
The risk continues to remain unchanged given the strong credit risk control environment, including ongoing monitoring and due diligence on all counterparties. The Group continues to maintain liquidity resources above its minimum regulatory requirement and internal thresholds. The Group regularly monitors forecast against actual cash flows and matches the maturity profiles of financial assets and liabilities. The Group has robust contingency funding arrangements, which are tested on a periodic basis. Market risk remains at a heightened level (unchanged, year-on-year), due to the relatively unstable political landscape; with numerous significant general elections in 2024 and ongoing conflicts in Ukraine and the Middle East, this may result in increased volatility. The Group continues to maintain capital resources above its minimum regulatory requirement and internal thresholds. The Group regularly monitors its capital resources versus capital requirements. Despite current macroeconomic and geopolitical challenges, the Group continues to post positive gross flows and record funds under management, highlighting the resiliency of its business model.
2. Liquidity risk The risk that assets are insufficiently liquid and/ or Brooks Macdonald does not have sufficient liquidity resources available to meet liabilities as they fall due or can secure such resources only at excessive cost. Liquidity risk also includes the risk that the Group is unable to meet liquidity ratios.
Unchanged
• Corporate cash deposited with external banks • Client cash deposited with external banks (CASS rules) • Failed trades • Indirect liquidity risk associated with client portfolios • Indirect liquidity risks associated with dealing • Indirect risk in respect of the liquidity of individual holdings in a fund • Indirect risk in respect of the overall liquidity of our funds • Failed trades • Indirect market risk associated with advising on client portfolios • Indirect market risks associated with dealing • Indirect market risk associated with managing client portfolios
3. Market risk The risk that arises from fluctuations in the value of, or income arising from, movements in equity, bonds, or other traded markets, interest rates or foreign exchange rates that have a financial impact.
Unchanged
4. Capital risk The risk of adverse business and/or client impact resulting from breaching capital requirements.
Unchanged
• Capital requirements
5. Strategic risk The risk of having an inadequate business model or making strategic decisions that may result in lower than anticipated profit or losses or exposes the Group to unforeseen risks.
Unchanged
• Acquisitions • Business growth
• Extreme market events • Investment performance
40 Brooks Macdonald Group plc Annual Report and Accounts 2024
Made with FlippingBook - professional solution for displaying marketing and sales documents online