Lead Manager

SECTION 4
BOARD, MANAGEMENT AND CORPORATE GOVERNANCE
Babcock & Brown does not and cannot hedge against these risks, but seeks to mitigate them through active
management. Again, these investments tend to be event driven situations where a level of control and active
management will mitigate against the impact of general business risks.
4.9.5.3 Credit risks
Credit risk refers to the loss that Babcock & Brown would incur if a debtor or other counterparty fails to
perform under its contractual obligations. Babcock & Brown seeks to limit its exposure to such risks as follows:
• Conducting appropriate due diligence on counterparties before entering into arrangements with them
• Obtaining collateral with a value in excess of the counterparties’ obligation to the Group – providing a
“margin of safety” against loss
4.9.5.4 Regulatory risks
A number of investment products developed by Babcock & Brown for its clients, or investment structures used by
the Group or its clients to acquire or invest in assets may be adversely affected by changes in laws or accounting
and tax policies and regulations.The development of certain infrastructure and property assets require regulatory
approvals or are reliant upon the continuation of certain policies such as those that encourage the construction
of sources of renewable energy, or the development of public infrastructure by the private sector. Changes to
existing laws, regulations or policies could negatively impact Babcock & Brown’s revenues or the value of its
investments. Babcock & Brown monitors the legal and regulatory environment both through its internal staff and
a regular dialogue with external advisors, regulatory authorities and other policy-setting bodies. Babcock &
Brown also takes into account the potential for prospective regulatory change in designing its investment products
and structures, and is experienced in restructuring products, investments and other transactions to address changes
in regulations or policies.
4.9.5.5 Compliance risks
Babcock & Brown actively manages compliance risks across its businesses. Compliance risks include the risk
of breaches of applicable laws and regulatory requirements, breaches of obligations contained in investment
mandates or trust structures, unenforceability of counterparty obligations or the inappropriate documentation
of contractual obligations.
Risk Management and Compliance Departments assess compliance risk from a Group perspective and implement
in consultation with each business the relevant Group compliance policies and procedures to ensure that
appropriate standards are consistently applied.
The development of new business initiatives and regulatory and legal changes are key areas of focus in the
management of compliance risks.
4.9.5.6 Operational risks
Babcock & Brown faces operational risks which could lead to reputational damage, financial loss or
regulatory/compliance risk in the event of an operational failure or error. Responsibility for the management of
operational risk lies in the first instance with each Business Unit.The Risk Management and Compliance
Departments assist businesses in identifying, managing and monitoring operational risks.
Procedures and controls over operational risks are also designed to ensure that investments and transactions are
appropriately approved and are accurately recorded and properly reflected in internal systems and records on a
timely basis.
4.9.5.7 Summary
In summary, a key part of the Group’s strategy for managing risk is to hire qualified professionals and retain them
through competitive remuneration and a good working environment.
4.10 DEEDS OF ACCESS, INDEMNITY AND INSURANCE
The Group has entered into deeds of access, indemnity and insurance with each Director which confirms the
Director’s right of access to Board papers and requires the Group to indemnify the Director for liability incurred as an
officer of the Group, subject to the restrictions imposed by the Corporations Act, and the terms of its Constitution.
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