IGS defines risk as the possibility of losses or profits foregone, which may be caused by internal or external factors. We use different methods to measure and manage the various types of risk to which the Company is exposed. Our activities expose us to a variety of risks such as financial (market risk, credit risk and liquidity risk), operational, regulatory and compliance risks.
Our overall risk management programme focuses mainly on the unpredictability of financial markets and seeks to minimise potential adverse effects on our financial performance. The Company’s business involves taking on risks in a targeted manner and managing them professionally. The risk management unit identifies, evaluates and manages financial risks in close co-operation with other operating units. Risk management is carried out within the limits of policies and procedures approved by the Board of Directors.
Liquidity risk is the risk that the company is unable to meet its obligations when they fall due as a result of client deposits or investment placement being withdrawn and also inadequate liquidity to meet operational needs.
IGS ensures that liquidity is managed to ensure customer demands are met and that there are no material liquidity gaps. Also, we ensure that clients’ deposits are properly matched with investments, hence there are no material liquidity gaps in respect of assets and liabilities. The only exception is investments in equities where it might take a longer time to redeem an investment in order to meet the withdrawal requests.
We ensure liquidity is managed to ensure there is adequate liquidity to meet operations and regulatory requirements as required by Sections 22 & 23 of the Securities and Exchange Commission Regulations, 2003 ( L.I 1728). In this respect, we ensure customer demands are met and that there are no material liquidity gaps.
Credit risk is the risk of suffering financial loss, should any of the Company’s customers or market counterparties fail to fulfill their contractual obligations to the Company. Credit risk arises mainly from deposits with banks and financial institutions, clients’ investment funds, as well as receivables.
Detailed due diligence is conducted on all potential borrowers by assessing credit quality of the institution by taking into account its financial position, past experience and other factors. Also, existing borrowers are continuously monitored to ensure credit quality has not deteriorated. Such risks are monitored on a periodic basis by the Risk Management and Compliance Units. Limits on the level of investments by the Company are approved periodically by the Board of Directors.
Our exposure to credit risk is managed through regular and thorough credit analysis of the ability of the borrowers and potential borrowers to meet interest and principal repayment obligations. The Company also structures the levels of credit risk it undertakes by placing limits on the amount of funds that can be invested with a particular institution and the concentration in a particular sector; this is to ensure diversification of the investment portfolio.
We regularly ensure that exposure to market risk such as interest risk, foreign exchange, and price risks are virtually eliminated by monitoring investments to ensure compliance with clients’ instructions, and also taking perfectly correlated offsetting positions. Currently, the exposure to price risk is immaterial as significant portions of our investments are into fixed deposits.
Operational and Compliance Risks
Operational risk refers to potential losses resulting from inadequate systems, management failure, faulty controls, fraud, and human errors, whilst compliance and regulatory risk includes the risk of non-compliance with regulatory requirements.
There are systems for ensuring adequate and appropriate policies and procedures are in place for the management of operational risks. As part of our risk control measures and in addition to the mandated insurance policies, we have proceeded to add two additional policies (Professional Indemnity and Fidelity Guarantee). These policies are in place to secure the investments of our cherished clients and our business. We are one of a few investment management companies in the country with these two additional policies.
The compliance and risk management units are responsible for establishing and maintaining an appropriate framework of the company’s compliance policies and procedures. Compliance with such policies and procedures is the responsibility of all managers. However, the compliance unit is responsible for monitoring compliance with the risk management policies and procedures and also ensuring compliance with regulatory requirements.
IGS Financial Services Limited is pleased to inform our clients and prospective clients that the company has taken two very important insurance policies, Professional Indemnity Insurance and Fidelity Guarantee (Fraud Cover) Insurance Policies, in compliance with international standards and best practices, and to emphasize what IGS stands for. The acronym IGS means: Invest, Grow, and Secure. To ensure investors actualize their dreams, we assist our clients and prospective clients to Invest, Grow, and Secure their investments.
It is best practice that any professional services business must be certain that their clients and businesses are covered against anything that could occur in the course of their business that could do damage or cause loss to their clients. Although, the Professional Indemnity Insurance and Fidelity Guarantee (Fraud Cover) Insurance Policies are not required by the Securities and Exchange Commission in Ghana, we have taken the above policies because of our commitment to adhering to international standards and best practices. Therefore, these policies shall secure the investments of our clients and also protect our clients and our business from unforeseen and unlikely events resulting from the actions and inactions of our company and employees resulting in any loss, damage, or injury to our cherished clients.
Professional Indemnity Insurance
The Professional Indemnity Insurance provides cover from potential threats, such as claims for alleged negligence or breach of duty arising from an act, error or omission in the performance of our professional services. It really provides comprehensive protection for your assets against claims for financial loss, loss of documents/data, injury or damage arising from an act, error or omission in the performance of our professional services.
Fidelity Guarantee Insurance
The Fidelity Guarantee Insurance, on the other hand, protects IGS and our clients from loss of money, securities, and documents resulting from employee dishonesty, embezzlement, forgery, robbery, safe burglary, computer fraud, wire transfer fraud, counterfeiting, and other criminal acts. However, the company is regulated by Securities and Exchange Commission, registered by the National Pensions Authority, has designed and implemented internal controls, and its employees are professionals, so the likelihood of loss, damage, or injury to our cherished clients resulting from our actions and inaction’s are very remote. The policies are to provide extra protection and security to clients and able to enable us comply with international best practice.
We are indeed very proud to inform our clients and prospective clients that we are one of the very few investment management companies in the country with these two policies.
Total Return Approach
A total return approach to setting return requirements looks first at the individual’s investment goals and then identifies the annual after-tax portfolio return necessary to meet those goals. That return is then reconciled with the individual’s separately determined risk tolerance and investment constraints. The reason being that each investor is different and has peculiar investment goals or objectives (risks and returns), and faced with different investment constraints. Therefore, the investment strategies to be adopted must be appropriate to satisfy the unique investment goals of the individual investor. In the light of the above, we subscribe to the Total Return Strategy which allows us to have a very good understanding of the client’s needs, risk tolerance level, constraints, and unique circumstances. This ensures that investors are better helped to achieve their investment needs.
The total return strategy tends to blend both the risks and return characteristics of both the capital appreciation and current income strategies. The strategy seeks to grow a portfolio by both capital gains and the reinvesting of current income. In addition, it is a highly flexible investment strategy which offers investors the chance to earn higher returns than capital preservation strategy, while striving to minimise the risk of losing investments. The strategy also enables us to switch between investment products (bonds, cash, equities, etc) depending on which asset class is expected to perform the best in the prevailing economic, financial, and market environments.