Risk management and controls

The management of other people's assets is not undertaken lightly

  • The management of other people's assets is not undertaken lightly. The risks involved include but are not limited to;
    • Company specific (operational, processes and procedures);
    • Asset/property specific (revenue drivers, vacancy, quality of property, deal structuring and financing);
    • Financial portfolio and liquidity (returns, leverage);
    • Market risk due to financial portfolio (cost of borrowing and credit risk); and
    • Concentration (diversification).

Company specific risks

  • Financial:
    • Capital adequacy is maintained in accordance with the DFSA requirement.
  • Communication:
    • External communication is reviewed by authorised accountable personnel.
    • Internal communication is delivered through structured, timely meeting of various operational groups.
    • Shareholder reporting is done quarterly.
  • Business processes:
    • Processes are structured, applied universally and include procurement, investment decisions, payments and disposal decisions. All processes are supported by checklists that require sign-offs prior to execution.
    • Approvals and authorities are strictly controlled and push accountability for accuracy and quality to the team active on the specific project, while management maintain tight oversight.
    • Compliance Officer reports directly to the Board.
    • The DFSA requires reporting significant issues on a timely basis.

Counterparty risks

  • All third party service providers undergo thorough selection process. Selection reports are delivered to all involved parties. Typically two or more providers of a service are utilised to reduce any over dependence.
  • Counterparty risk extends to sellers in the PE space and master developers in the RE space.
  • Thorough due diligence of counterparties includes but is not limited to: credit ratings, balance sheet analysis, market reputation, government affiliations/accreditations.

Macro-economic risks

  • Research analysts and support staff from the IR department are responsible for circulating major news headlines to the entire firm on a daily basis.
  • We map leading indicators across other established/mature markets around the world (London, New York, Singapore) to identify possible drivers in geographies across the GCC. Tracking of such indicators is carried out on a quarterly basis.

Asset specific risks

  • Investment selection:
    • Investment decisions are made incorporating all departmental disciplines.
    • All financial models are independently reviewed.
    • Technical due diligence is carried out and third party market research is validated through in-house primary research.
  • Investment monitoring:
    • DCG meet and report every week to share knowledge, highlight/discuss new or prevailing risks and come up with constructive risk mitigation strategies. DCG's report weekly on major performance drivers including costs, program (time), revenues, financing (leverage) and return analysis.

Financial portfolio and liquidity risks

  • Leverage:
    • SinoGulf maintains an understanding of the latest track of trends in the debt markets.
    • Leverage is typically obtained at the asset level only.
    • Loan to Value ratios are targeted at below 60%.
    • Debt Services Coverage Ratios of 1.3 to 1.5 are targeted.
  •  Liquidity:
    • Development assets are staged. Each stage being fully financed prior to commencement.
    • Contingencies are incorporated in funding plans.

Market risk

  • Cost of borrowing trends are tracked on a weekly basis. Financial models are continuously updated to reflect current market expectations.
  • Modeling is performed on a conservative basis.
  • Flexibility in fund/asset structures, funding requirements and delivery expectations are maintained.

Concentration risk

  • Investment Committee (IC) members of each Investment Vehicle are selected from different geographies, disciplines, backgrounds and risk perspectives.
  • Criteria for concentration risk are agreed with the IC of each investment vehicle.

CAPABILITIES