A Culture of Risk Management

Managing risk is our business. It’s integral to our fiduciary role in managing our clients’ funds and fulfilling our promise. It’s how we identify, evaluate, control, monitor, and communicate the risks and opportunities associated with our operations and investments.

Our clients expect to be compensated for taking on additional investment risk. Risk management allows BCI to address uncertainty and manage associated risks and opportunities. Guiding principles inform our approach, which also requires communication and judgement. Effective risk management calls for knowledge of capital markets and legislation, as well as an understanding of investment products, business practices, and internal controls.

We take an integrated approach to risk governance. Doing so ensures that our management and Board of Directors have enhanced oversight of enterprise and investment risk management.

Our Framework

Our primary mandate is to create long-term client wealth and protect the value of our clients’ funds. Our investment risk management framework addresses:

Concentration Risk

This is the risk of loss arising from exposure, either directly or indirectly, within or across different risk types such as region, issuer, sector, investment partner, or investment type. BCI limits risk by diversifying holdings within and across these exposures.

Credit and Counterparty Risk

Credit risk is the potential for loss from the deterioration or outright default of an issuer or guarantor’s ability to honour payment obligations. We monitor credit quality across pooled funds, asset classes, and specific strategies. Counterparty risk is the potential for loss from a counterparty not honouring its contractual obligations. We mitigate this risk by only engaging with high quality counterparties after we complete a thorough review of their creditworthiness. BCI uses approved brokers, dealers, and derivative counterparties for all trading.

ESG Risk

This includes any ESG factor that could positively or negatively affect the risk and/or return of an investment, sector or fund. ESG matters are evaluated and prioritized based on how large an impact they have on financial performance and/or the reputation of the specific company, BCI, or our clients. Systemic ESG risks, especially climate change, are assessed using scenario analysis to measure potential portfolio impacts. BCI evaluates and monitors ESG risk in all stages of the investment process. We conduct ESG risk analysis prior to making investment decisions and actively track and manage identified risks throughout the portfolio.

Liquidity Risk

BCI and our clients are exposed to market and funding liquidity risks. Market liquidity risk is the risk that an investment position cannot be unwound or offset in a timely fashion without enduring a significant loss attributable to market liquidity. Funding liquidity risk is the risk that a company will not be able to meet its payment obligations, both expected and unexpected, because of an inability to obtain funding. We manage liquidity risk by setting liquidity coverage ratio targets and diversifies sources and uses of liquidity by type, maturity, and counterparty.

Market Risk

This is the potential for loss resulting from adverse movement in market prices or factors such as interest rates, exchange rates, or credit spreads. We follow best-in-class industry practices to measure, manage and monitor market risk, and ensure that the risk is appropriate to each client and their expected return. We knowingly take on risk, assess the consequences of macro trends, and continually re-evaluate market conditions.