Liontrust Responsible Capitalism Report 2024 - Flipbook - Page 127
PROMOTING WELL-FUNCTIONING MARKETS
As an asset manager, Liontrust has spheres of influence in which it can
be a helpful influence to the market, to its employees, to stakeholders
and to the environment.
Part of this influence comes in the promotion of well-functioning
markets through its participation in the market and market-related
associations as an asset manager.
Liontrust takes several steps to play its part in ensuring markets
function as efficiently as possible. It does so, partly, by working to
mitigate risks concerning systemic or market-wide risks. Generally,
these reflect situations or conditions under which an investor may
experience a decline in value of their investment due to failings of the
wider financial system, including bank collapse or exchange failure
and may also include risks around broker-dealers placing erroneous
orders on market exchanges. These risks might also include the
collapse of an entire market or financial system.
How Liontrust identifies and assesses market-wide and systemic risks
As discussed in the Liontrust and Risk section, the Liontrust Enterprise
Risk Management Framework provides a systematic framework for
identifying, assessing, monitoring and reporting on risks. The Internal
capital adequacy and risk assessment (ICARA) process sits within the
framework and provides a top-down view of risks including harms
associated with market-wide and systemic risks. The ICARA details
the risks and controls as well as performing scenario modelling to
examine the impact of market-wide and systemic risks on Liontrust to
demonstrate the firm’s resilience.
MITIGATING THESE RISKS
To play its part and help mitigate these risks, Liontrust:
• Manages its own risks well by identifying and prioritising its own
inherent and residual risks. The Group publishes a heat map in
the Liontrust Asset Management PLC Annual Report and Financial
Statements that helps put these risks into context (with each other) and
also publishes steps the Group takes to manage several of the issues it
faces. The Board oversees this aspect of the Group’s business.
• Makes reports to the FCA on any suspicious trading activity.
Liontrust will report any suspicious trading it uncovers as part of
its monitoring processes.
• Provides training for fund managers on how to appropriately
manage and avoid inside information and on acting in collusion
to minimise the risk that either action takes place.
• Considers the material risks and opportunities (including those
that are ESG related) in many of our investment processes.
Potential exposures include, but are not limited to, climate
change; biodiversity; diversity and inclusion; supply chains;
human rights; etc.
• Is well capitalised. As of March 2023, the Group had total
shareholders’ equity of £221 million (March 2022: £184.2
million), helping to ensure the efficient running and protection of
the business.
• Monitors Credit Risk. The Group monitors the credit risk within the
overall market as well as the risk faced by our key counterparties.
This aims to alert the business to any potential instability and
proactively mitigate any significant risks, such as primary bank
failure.
• Controls direct market exposure. The Group has limited foreign
exchange and interest rate exposure due to the fact that the
business has no debt and largely deals within the UK.
• Works to minimise systemic risks through industry participation.
Liontrust does this, in part, by:
– Being members of industry associations to promote good market
regulation and behaviour
– Participating in specialist committees addressing market issues
– Responding to market consultations on new regulations
• Assesses and is working to reduce its emissions. Liontrust will
continue to report via its TCFD entity level and product level
reports on its emissions levels and will also report in 2024 on
its progress against (investment-related) carbon reduction targets.
Liontrust also continues to offset its emissions.
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