Ashmore Regulatory News (ASHM)

Risk type/owner

Description of risk

Mitigation

Strategic and Business risk

The risk that the medium and long-term profitability and/or reputation of the Group could be adversely impacted by the failure either to identify and implement the correct strategy, or to react appropriately to changes in the business environment.

Responsible body:

Ashmore Group plc Board

These include:

- A long-term downturn in the fundamental and technical dynamics of Emerging Markets;

- Ineffective marketing and distribution strategy;

- Expansion into unsuccessful themes;

- Potential market capacity issues and increased competition; and

- Impact of negative or inaccurate press comments.

These include:

- The Board's long investment management experience;

- Group Operating Committee meets regularly;

- A clearly defined Group strategy, understood throughout the organisation and actively monitored;

- A diverse range of Emerging Markets investment themes across asset classes;

- Experienced, centrally managed and globally located distribution team to access increasingly diversified sources of AuM;

- Product Committee with knowledge of the markets and related regulation; and

- Defined Media and Reputation Management Policy in place.

Risk type/owner

Description of risk

Mitigation

Investment risk

The risk of non-performance or manager neglect of duty, including the risk that long-term investment outperformance is not delivered thereby damaging prospects for winning and retaining clients, and putting average management fee margins under increased pressure; and decreased market liquidity provided by counterparties that the Group and its funds rely on.

Responsible body:

Ashmore Group Investment Committees

These include:

- That the investment manager does not adhere to strict policies e.g. in relation to market abuse;

- Funds with a similar investment theme and restrictions are not managed similarly, resulting in different positions or exposures being held;

- A downturn in long-term investment performance; and

- Insufficient counterparties.

These include:

- Investment Committees meet regularly (weekly for most investment themes across the Group) ensuring consistent core investment processes are applied;

- Allocations across funds are actively reviewed to ensure appropriate consistency;

- Dedicated Emerging Markets research and investment focus, with frequent country visits as well as a physical presence in key Emerging Markets;

- Diversification of investment capabilities by theme, asset class and location;

- Strong Compliance and Risk Management oversight of policies, restrictions, limits and other related controls; and

- Formal counterparty policy with reviews held at least quarterly.

Risk type/owner

Description of risk

Mitigation

Operational risk

Risks in this category are broad in nature and inherent in most businesses and processes. They include the risk that operational flaws result from a lack of resources or planning, error or fraud, weaknesses in systems and controls, or incorrect accounting or tax treatment.

Responsible body:

Ashmore Group Risk and Compliance Committee

These include:

- Compliance with regulatory requirements as well as with respect to the monitoring of investment breaches;

- The oversight of overseas subsidiaries;

- Availability and retention of staff;

- Fraud by an employee or third-party service provider;

- Accuracy and integrity of data, including over-reliance on manual processes;

- Errors resulting from trade execution and settlement process;

- Oversight of third-party providers, including fund administrators;

- New fund set-up or material changes to existing funds are incorrectly implemented;

- Business and systems disruption including cyber security;

- Set-up and maintenance of trading counterparties;

- Inappropriate accounting practices lead to sanctions; and

- Inadequate tax oversight or advice.

These include:

- The Group's Risk and Compliance Committee meets on a monthly basis to consider the Group's Key Risk Indicators (KRIs);

- Compliance, Legal and Finance departments to identify, quantify, monitor and manage regulatory changes;

- Conflicts of interest review performed;

- An integrated control and management framework is in place to ensure day-to-day global operations are managed effectively;

- Resources are regularly reviewed and also career development and succession planning is in place;

- IT Steering Group in place to approve and monitor progress of projects to reduce significant manual dependencies;

- Fully integrated trade order management and portfolio accounting platforms;

- Engagement letters or service level agreements are in place with all significant service providers;

- Formal procedures and sign-off in place for launch of new funds or material changes to existing funds;

- a BCP and Disaster Recovery policy and related procedures exist, and are tested regularly;

- Cyber security review performed;

- All trading counterparties are subject to strict risk, legal, compliance and operational sign-off prior to set-up;

- Group accounting policies in place and regularly reviewed; and

- Dedicated tax specialist within the Finance department.

Risk type/owner

Description of risk

Mitigation

Treasury risk

These are risks that management does not appropriately mitigate balance sheet risks or exposures which could ultimately impact the financial performance or position of the Group.

Responsible body:

Chief Executive Officer and Group Finance Director

These include:

- Group revenues are primarily US dollar-based, whereas financial results are denominated in Sterling;

- The Group invests in its own funds from time to time, exposing it to price risk, credit risk and foreign exchange risk;

- Liquidity management to meet funding obligations; and

- The Group is exposed to credit risk and interest rate risk in respect of its cash balances.

These include:

- Monthly reporting of all balance sheet exposures to the executive;

- Oversight and management of the Group's foreign exchange balances is the responsibility of the FX Management Committee which determines the appropriate level of hedging required;

- Seed capital is subject to monitoring by the Board within a framework of set limits including diversification;

- Cash flows are forecast and monitored on a regular basis and managed in line with approved policy;

- Group Liquidity Policy in place;

- The availability of US dollar S&P AAA-rated liquidity funds managed by experienced cash managers; and

- Defined risk appetite in place.