August 22, 2017
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General Disclosures

Summary

KAMCO’s primary business activity is asset management and investment banking, which is essentially a customer-driven activity where the substantial risk is the impact of the capital markets on the risk profile of its corporate, institutional and retail customers. To a significant extent, KAMCO is also exposed to market risk arising from the pricing, maturity and mismatches of securities and their impact on KAMCO’s assets and liabilities. Investment banking activities, which include the marketing and as the case may be, underwriting of equities and bonds also expose KAMCO to market risks including interest rate, currency and equity risks. The provision of financial advisory services to customers also exposes KAMCO to operational risks arising from the failure to meet the general standards expected of such financial advisory activities.

In the course of conducting its businesses, KAMCO handles a large number of financial transactions. It is inherently exposed to the operational risk of failure of internal processes and systems, deficiencies in people and management, or operational failure arising from external events.

Risk Disclosure

In the course of their operations, Investment Companies are invariably faced with different types of risks that may have a potentially negative effect on their business. Risk management in Investment Companies includes risk identification, measurement and assessment, and its objective is to minimize negative effects risks can have on the financial result and capital of the company.

The risks to which an Investment Company is primarily exposed in its operations are: risk from change in market price of securities, financial derivatives and commodities, investment risks, liquidity risk, credit risk, interest rate risk, foreign exchange risk, exposure risks, country risk, operational risk, legal risk, regulatory risk, reputational risk and strategic risk.

Market risk is the risk of change in the market price of securities, financial derivatives or commodities traded or tradable in the market.

Investment risks include risks of the company’s investments in entities and in fixed assets.

Liquidity risk is the risk of negative effects on the financial result and capital of the company caused by the company’s inability to meet all its due obligations.

Credit risk is the risk of negative effects on the financial result and capital of the company caused by borrower’s default on its obligations to the company.

Interest rate risk is the risk of negative effects on the financial result and capital of the company caused by changes in interest rates.

Foreign exchange risk is the risk of negative effects on the financial result and capital of the company caused by changes in exchange rates.

Exposure risks include risks of the company’s exposure to a single entity or a group of related entities, and risks of company’ exposure to a single entity related with the company.

Country risk is the risk of negative effects on the financial result and capital of the company due to the company’s inability to collect claims from such entity for reasons arising from political, economic or social conditions in such entity’s country of origin. Country risk includes political and economic risk, and transfer risk.

Operational risk is the risk of negative effects on the financial result and capital of the company caused by omissions in the work of employees, inadequate internal procedures and processes, inadequate management of information and other systems, and unforeseeable external events.

Legal risk is the risk of loss caused by penalties or sanctions originating from court disputes due to breach of contractual and legal obligations.

Regulatory risk is risk of loss caused by penalties and sanctions pronounced by a regulatory body or the risk of loss caused by an unexpected change in the regulations resulting in changes to the business model.

Reputational risk is the risk of loss caused by a negative impact on the market positioning of the company.

Strategic risk is the risk of loss caused by a lack of a long-term development component in the company’s strategy.