Pillar 3 Disclosure
Coronation International Limited (“CIL” and/or the “Firm”) is authorised and regulated as a limited licence firm by the Financial Conduct Authority (“FCA”). This document is the Firm’s Pillar 3 Disclosure which is required by the FCA under the requirements of the EU Capital Requirements Directive (CRD).
These disclosures have been prepared in order to provide information on the Firm’s capital position, its approach to assessing the adequacy of its capital, its risk management objectives and policies, and its exposure to market, liquidity and operational risk. They do not constitute financial statements of the Firm and should not be relied on in making investment decisions in relation to the Firm.
The disclosures are prepared on an individual basis i.e. the Firm is not part of a UK consolidation group and are based on information as at 30 September 2019.
These disclosures are published annually on the firm’s website at www.coronation.com and are not subject to audit.
As at 30 September 2019, CIL’s capital resources were £2,350,184 and consisted entirely of Tier 1 capital and no deductions.
As CIL is authorised by the FCA as a BIPRU firm, its capital requirements are the greater of CIL’s:
- Base capital requirement of EUR 50,000; or
- The sum of its market risk requirement and credit risk requirement; or
- Its Fixed Overhead Requirement.
CIL has calculated its capital requirement in accordance with the relevant FCA rules and the final level of capital is generally calculated as the sum of its market risk requirement and credit risk requirements. Both the credit risk requirement and market risk requirement are calculated using the standardised approach.
As at 30 September 2019 the firm’s capital requirement is the greater of its Fixed Overhead Requirement or the sum of its Market Risk Requirement (“MRR”) and Credit Risk Requirement (“CRR”). Accordingly, CIL’s capital requirement is the sum of its Market Risk Requirement (“MRR”) and Credit Risk Requirement (CRR) requirement of £461,519.
CIL also performs an Internal Capital Adequacy Assessment Process (“ICAAP”) to determine whether any additional capital is required under Pillar 2. The ICAAP process includes an assessment of specific risks to the Firm’s business, the likelihood of these occurring and the controls the Firm has put in place to mitigate these risks. Given the nature of CIL’s business, the Firm is mainly exposed to market and concentration risk and in line with the firm’s conservative approach, an additional capital amount of £728,881 has been provided under Pillar 2.
Risk Management Strategy
Risk is an inherent part of the Firm’s business and operations.
CIL’s board is ultimately responsible for ensuring that risks are managed effectively and is kept informed regarding risk management through ongoing interaction between executive members of the board and senior management. More formal written reporting is provided to the board at quarterly meetings.
Risk Management Process
Risk management is a multi-faceted process which involves independent monitoring, frequent communication, the application of judgement and detailed knowledge of specialised products and markets. Senior management across the group, including the Firm, take an active role in the risk management process and are responsible for the maintenance of, and ultimately compliance with, the Group Risk Management Strategy and Framework.
Responsibility for the implementation of the Group Risk Management Strategy and Framework has been delegated to the group risk management function, comprising a group risk officer and group risk assurance manager, who report to the global group head of risk and compliance. The group risk officer is responsible for ensuring that policies and procedures are established for measuring, managing and reporting risk, including in relation to the Firm. The group risk assurance manager is responsible for the design and implementation of the operational risk assurance plan that tests the adequacy and operating effectiveness of key controls implemented to mitigate risk across the group, including in relation to the Firm.
The risk identification process involves identifying exposure to uncertainty that may have an impact on CIL’s objectives and operations.
Risks are identified via the following channels:
- Formal annual business risk assessment
- Incident reporting
- Risk function representation on the Group Operations Committee and the Group Counterparty and Credit Risk Committee
- Risk function interaction with management / department heads on a day-to-day basis
- Reports issued by external and internal auditors, operational risk assurance providers and other external subject matter experts
- Risk identified by staff, management and the Audit & Risk Committee
- CIL senior management membership of the Operations Committee
The impact and likelihood of a risk materialising is assessed in accordance with the Group Risk Management Strategy and Framework. The likelihood of the risk materializing is assessed after taking current controls and actions to mitigate the risk into account. The outcome of the risk evaluation process determines the appropriate strategy of managing the identified risk, based on its residual risk rating. This includes a decision on whether the risk should be terminated, tolerated or managed.
Risk is monitored using various business metrics. Managers assume the responsibility of managing the risks in their areas. Management information which is used to monitor the risk is included in the monthly reporting of business area managers to the Group Executive Committee, quarterly reporting to CIL’s board and quarterly reporting to the Group Audit & Risk Committee.
To monitor the effective management of risk, we have implemented a combined assurance model which recognises multiple lines of assurance. This approach promotes an efficient and holistic approach to the design and management of assurance activities across the firm, which is overseen by the group risk assurance manager.
The third and fourth lines of assurance, includes a broad range of assurance providers and subject matter experts best suited to each particular assurance requirement, thereby maximising the value added to the group. This is achieved through the development of an annual operational risk assurance plan (plan), which includes planned assurance activities throughout the financial year. The plan is developed in close consultation with senior management, analysis of the risk register and the results of previous assurance activities.
The fourth line of assurance includes independent external assurance, the results of which are publicly available, and is therefore primarily directed towards shareholders and clients. This includes the annual financial audit, conducted by the external auditor, EY, as well as assurance in accordance with the International Standards on Assurance Engagements – Assurance Reports on Controls at a Service Organisation (ISAE 3402 type II) also conducted by EY.
The Firm has adopted the following definitions of risk:
i. Market risk
Market risk is analysed as market priced risk, interest rate risk and currency risk.
Market risk is the risk that the fair value of a financial instrument will fluctuate due to changes in market prices other than due to currency or interest rate risk.
Interest rate risk consists of cash flow interest rate risk (the risk that future cash flows of a financial instrument will vary due to changes in market interest rates) and fair value interest rate risk (the risk that the value of a financial instrument will vary due to changes in market interest rates).
Currency risk is the risk that the value of assets and liabilities denominated in a foreign currency will fluctuate due to adverse movements in exchange rates.
ii. Concentration risk
Concentration risk is the risk arising from over-exposure to individual sectors, geographical areas, liabilities and asset concentrations.
iii. Operational risk
Operational risk is the risk of material loss or other adverse impact resulting in inadequate internal processes, people or systems or from external events and is inherent in our business.
iv. Credit risk
This is the risk of loss if another party fails to perform its obligations or fails to perform them in a timely fashion.
v. Liquidity risk
Liquidity risk is the risk that a financial entity won’t be able to meet its liabilities as they fall due.
The Firm has adopted a remuneration policy that complies with the requirements of chapter 19C of the FCA’s Senior Management Arrangements, Systems and Controls Sourcebook (“SYSC”). As a BIPRU Limited Licence firm, the Firm falls within proportionality level 3. The Group Remuneration Committee, based in South Africa, meets twice a year. Its policy is to set remuneration levels which ensure that employees are fairly and responsibly rewarded in return for high levels of performance.
The Firm currently sets the variable remuneration of its staff in a manner which takes into account a number of criteria, including staff and Firm performance. As permitted for firms falling within proportionality level 3, the Firm takes into account the specific nature of its own activities (including the fee based nature of its revenues) in conducting any ex-ante risk adjustments to awards of variable remuneration and, given the nature of its business, has dis-applied the requirement under the remuneration code to make ex-post risk adjustments.
The Firm only has one "business area", namely its investment management business. All of the Firm's Code Staff fall into the either the senior management, Risk Taker or Control Function category of Code Staff pursuant to BIPRU 11.5.18R (7) (disclosure requirement).
The remuneration payable to the Firm’s Code Staff in respect of any accounting period is determined at the time the accounts for that period are finalised. The aggregate remuneration awarded to the Firm's Code Staff during the financial year end on the Firm’s account reference date has been disclosed in the Firm’s accounts.
Any queries regarding this document should be addressed to the Compliance Manager at Coronation International Limited, 7th Floor, St Albans House, 57-59 Haymarket, London, SW1Y 4QX
Company Number: 04027812