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Risk management is one of the key focus areas for us at UTI AMC. We have established processes and systems in place to ensure a robust company-wide risk management. Our Board of Directors formulates and periodically reviews our risk management policies, procedures and processes. These entail delegation of investment and financial responsibilities, establishing prudent investment norms, approving and disseminating guidelines and restrictions, and establishing counter-party limits. The Board also reviews the performance of funds against the relevant benchmark and competing funds. Besides, we have a well-qualified team of professionals with rich experience, which reports to the Board.

Description Mitigation Measures

Market : The risk of uncertainty is associated with any investment decision. Price volatility often arises due to unanticipated fluctuations in factors that commonly affect the entire financial market.

Market risk is the possibility of loss arising from changes in the value of a financial instrument due to changes in market variables such as equity prices, interest rates, exchange rates or other asset prices, or higher volatility of funds or returns as compared to the benchmark or competing funds.

  • Position limits
  • Price movement alerts
  • Stress Tests and Value at
    Risk (VaR)
  • Risk adjusted performance

Operational : The risk of loss from inadequate or failed internal processes and systems or from external events, including employee errors, improper documentation of transactions, failure of operational and information security procedures, computer systems, software or other equipment, business interruptions and inappropriate behaviour of employees or vendors.

  • Straight through processing
  • Segregation of front office and back office
  • Inbuilt systems control
  • Concurrent Audit (Dealing and NAV)
  • Internal Audit Function
  • Adequate risk disclosures and trained sales team
  • Offsite DR Centre
  • Business Continuity Planning and periodic DR Drills
  • Comprehensive Insurance
  • Board of Trustees and Compliance Officer

Credit : The risk of loss in the market value of debt securities due to downgrading by credit rating agencies or default in payment by issuers.

  • Counter-party exposure limits
  • Committee’s approval above predefined limits
  • Independent review of external credit ratings
  • In-house Credit Research Team
  • Early warning signal framework and system
  • Investment in high rated debt securities
  • Restrictions on unrated investments
  • Review of Credit VaR

Investment : Our funds are exposed to underperformance risk with respect to both the relevant benchmarks and competing funds due to investment related risks, which include market risks and credit risks.

  • Comprehensive Investment Manual
  • Benchmarking
  • Regular monitoring of funds
  • Quantitative investment restrictions
  • Inbuilt System Control
  • Review of Performance Research Fund
  • Independent dealing room
  • Performance-based Incentive
  • Independent risk management

Liquidity/Concentration :This risk mainly arises in respect of open-ended funds, which typically allow investors to redeem their units at any time. If a significant number of investors opt for redemption from a particular fund simultaneously, the fund may face liquidity risk. The risk is particularly high in respect of Income Funds, considering the low level of debt securities actively traded in Indian markets and the high concentration of investors in select funds.

  • Review of equity holdings
  • Review of portfolio concentrations
  • Review of investors’ concentration
  • Position limits for single positions
  • Line of credit
  • Minimum regulatory liquid assets

Covid-19 impact: As a part of our response to the Covid-19 pandemic, we reinforced our operational risk management and enhanced our business continuity programme. It helped us scale beyond the physical office premises and enabled our employees to work from home with secure remote access (including usage of virtual private networks and two-factor authentication for software as a service-based application). Additionally, we also adopted certain policies and procedures to manage various risks applicable to our operations. Even under a digital environment, the basics of the risk management process remain the same. Hence, even during these testing times, we continue to operate within strong governance structures, and we will continually endeavour to enhance and strengthen it.