Our Approach to Risk
Risk Management is a cornerstone of LMI’s investment process, informing
decision-making at every stage, from strategy to execution and deal-level diligence.
LMI takes a proactive, structured approach to managing risk, ensuring alignment with its goals for creating and compounding long-term capital so Liberty can meet its commitments today and expand its capacity over time.
Our approach begins with a carefully designed risk budgeting framework that establishes clear risk parameters for asset allocation and outlines procedures for monitoring key risks. Additional guidelines, along with evaluations of risks inherent in the company’s strategies and transactions, further support this framework.
By developing a deep understanding of Liberty’s overall risk profile, LMI can effectively align portfolio risks with the company’s broader risk tolerance and goals. A suite of advanced analytics, governance frameworks, oversight, and reports transforms these insights into actionable strategies for managing and mitigating risks. This thorough and informed approach to risk management plays a central role in enabling our investors to identify the best investments that aim to drive strong returns and long-term outcomes.
We provide an independent, objective perspective and foster a culture of constructive inquiry.
Risk Management Frameworks
Managing Risk with Discipline and Intent
Risk tolerances. We operate within clearly defined risk tolerances, which outline acceptable levels of risk across various exposures of interest. These tolerances are designed to reflect Liberty’s tolerance for risk, while allowing flexibility to leverage capital growth opportunities. Regular reviews and adjustments to these risk tolerances ensure they remain relevant and aligned with changing market conditions and Liberty’s evolving goals.
Risk budgeting. Our risk budgeting process is designed to allocate and manage the primary sources of investment risk, including overall market risk and capital usage as well as factors such as interest rate and credit. These risk budgeting guidelines are regularly reviewed and adjusted to stay aligned with market changes and Liberty’s evolving priorities, keeping each decision within well-defined risk boundaries.
Supplementary guidelines. Alongside our risk budgeting framework, we use supplementary guidelines to monitor additional risks in the portfolio, beyond our core risks. These guidelines include specific parameters for risks related to currency, country exposure, and sector-specific factors, helping us track and manage a broader range of potential risks. By establishing these extra layers of oversight, we can have informed discussions about risk and respond proactively to changes.
Risk monitoring, governance, adherence, and transaction support. Beyond establishing risk tolerances as represented through our guideline frameworks, LMI has developed a comprehensive approach to risk monitoring, governance, adherence, and transaction support. This includes robust governance processes, scenario analysis, detailed transaction reviews, and in-depth risk assessments. Our risk governance framework ensures that we adhere to established guidelines, with any significant issues escalated to senior leadership, including Liberty’s Executive Leadership Team and Liberty’s Board of Directors.
We continuously refine our risk management practices to stay responsive to industry changes, ensuring our approach remains effective, thorough, and aligned with Liberty’s investment goals.
Compliance
Enabling Confident, Responsible Investing
Our compliance team turns complex regulatory standards into practical, day-to-day practices that guide LMI. We design and maintain policies, implement controls, and provide real-time guidance to ensure investment activity, and all activities supporting investments, are conducted with integrity, in alignment with laws and regulations, and supportive of LMI’s reputation as a responsible steward of capital and trusted partner. By embedding compliance into operations, we help the firm meet its obligations while creating the foundation for capital generation that fulfills policyholder commitments and drives strategic aspirations.
We oversee the full spectrum of compliance responsibilities, including securities compliance, trading and statutory obligations, audit and examination management, and investment adviser compliance program oversight. This involves supporting deal due diligence; interpreting and enforcing global regulatory mandates; monitoring investment restrictions; guiding audits, examination, and governance processes; ensuring strong segregation of duties; mitigating conflicts of interest; and managing filings and statutory deposits. By reducing regulatory and operational risk, we enable the investment teams to focus on strategies that expand capacity, maintain portfolio flexibility, and scale operations to support growth.
Most importantly, we partner with LMI’s investment teams to ensure Compliance is a partner, not a barrier, to investment and operational success. Through training, proactive risk assessments, and practical advice on topics like deal structures, conflicts of interest, process and control effectiveness, employee responsibilities, and ethical decision making, we help create the confidence needed to pursue opportunities responsibly. In doing so, we strengthen LMI’s ability to build strategic partnerships, invest responsibly, and generate capital in support of Liberty’s long-term financial goals.