The management of risks is fundamental to the Fidante business. The Board of Fidante Partners Limited (FPL) and Fidante Partners Services Limited (FPSL) recognises the broad range of risks that apply to FPL and FPSL each as a responsible entity including, but not limited to, operational risk, investment and market risk, liquidity risk, reputational risk and licence and regulatory risk. The Board is ultimately responsible for Fidante’s risk management framework and oversees its operation by Management.
Fidante’s risk management framework is aligned with International Standard ISO 31000 2018 Risk Management – Guidelines. It promotes the ownership of risk in the business, whilst maintaining an appropriate level of independent monitoring and review. Fidante has embraced the ‘three lines of defence’ approach to risk management. The first line of defence is at the business level, whereby Management is responsible for the implementation and ongoing maintenance of the risk management framework. Independent oversight of the framework is provided by Fidante’s designated risk management function, which forms the second line of defence. Thirdly, internal audit provides a comprehensive review of the risk management controls, process and systems.
Similarly, Fidante parent company, Challenger Limited’s risk management framework is based on the principles in ISO 31000:2018. A key component of Challenger's approach to risk management is that the heads of business units have accountability for the risks within their divisions. To learn more about risk management at Challenger Limited click here.
Liquidity risk management
Liquidity risk is the potential inability to meet our financial obligations either at a responsible entity (RE) level or at a scheme level. In relation to schemes, this includes the risk that the securities in which the scheme is invested, or the scheme itself, may become illiquid. The absence of an established market or shortage of buyers for an investment may result in a loss if the holder of an investment needs to sell within a certain timeframe. Liquidity risk is managed though our board approved liquidity risk policy and associated processes.
Liquidity risk policy and risk appetite
The policy outlines:
- the monitoring and management of liquidity risk at both the RE and scheme level (including the specifications of stress testing and scenario analysis);
- the reporting of liquidity risk to the Fidante Partners Limited (FPL)/Fidante Partners Services Limited (FPSL) Board, the Compliance Committee, the Executive Risk Management Committee (ERMC) and Investment Managers (as relevant); and
- the relevant actions and responsibilities should FPL/FPSL encounter a liquidity crisis (a formal contingency plan).
Responsibility for the day to day management of liquidity is delegated to the Global Head of Fidante, Fidante Partners, under the oversight of the FPL and FPSL Boards and Directors. To ensure the prudent management of liquidity risk, quarterly liquidity reports (including details of stress testing and scenario analysis performed) are provided to the FPL and FPSL Boards, the FPL and FPSL Compliance Committees, senior management and Investment Managers (where relevant).
Scenario analysis and stress testing
FPL/FPSL’s liquidity risk management framework models the ability to fund under both normal market conditions and during a ‘stressed’ state. This approach ensures that liquidity risk is considered under a range of market conditions. The scope of the stress testing and scenario analysis is subject to ongoing review to ensure that it remains relevant and appropriate for FPL and FPSL and the schemes they operate.
Liquidity contingency plan
FPL/FPSL maintain a contingency plan that details the actions to be taken when liquidity is not deemed to be satisfactory. The contingency plan is reviewed every two years, in line with the policy review cycle and approved by each Board. It outlines the key stakeholders that are required to form the Funds Management Liquidity Management Team (FMLMT) and allocates responsibility for key tasks.
FPL/FPSL’s liquidity policy and associated processes are reviewed every two years.