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Barita Investments Acknowledge Frontally The Concerns And Disquiet Of The Market And Investing Public Caused By Various Emergent Allegations Of Fraud In The Industry.

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Our results were achieved against the backdrop of an operating environment characterised by rising inflation and tightening local and global monetary policy, which have collectively continued to challenge net interest margins and cause volatility in asset prices, especially in relation to traditional financial assets.

Our proactive decision over the past 3 years to allocate capital to real estate, private equity and private credit in our portfolio has been justified given the outperformance of these asset classes in the current economic cycle relative to traditional financial assets, consistent with sound portfolio diversification principles.

As a result, we have thus far managed to weather headwinds caused by continued inflation and the accelerated rise of interest rates related to the residual effects of two years of the COVID-19 pandemic and the ongoing conflict in Eastern Europe.

We have also continued to build the capacity of our core business through investing in our talent and the overhaul of our information technology platforms. This transcends across our Group’s ecosystem as Cornerstone has made similar investments in technology at our sister company Cornerstone Trust and Merchant Bank (“CT MB”), aspects of which are the subject of an application to the Bank of Jamaica (“BOJ”) pending approval.

We acknowledge frontally the concerns and disquiet of the market and investing public caused by various emergent allegations of fraud in the industry. This, however, should be taken in the context of the positive outlook for Jamaica’s economy as objectively assessed in the IMF’s recently published Article IV consultation. At Barita, we take the trust and confidence of our customers very seriously and recognize how critical it is to our business and by extension to the stability of our financial system. We are also proud of our resilience, prudence, and the various lines of defence that have been deliberately built & strengthened since the acquisition by Cornerstone.

This resilience – which is most apparently demonstrated through our robust capital base, heavy investment in bolstering our control environment, risk management framework, and governance – positions our business well to enhance and protect shareholder value. This gives us the confidence to unequivocally undertake to fully reimburse our customers in the event of occupational fraud. Importantly, notwithstanding our position of strength, we continue to take steps to deepen our resilience, consistent with our commitment to continuous improvement, For example, the upgrade of the technology at Barita and its sister company CTMB, not only future-proofs those businesses, but are key to the mitigation of operational risks, including fraud and AML/CFT risks.

Significantly, as it relates to internal fraud in Barita, CTMB, or Cornerstone, our internal control and governance processes are designed to detect these incidents and encourage reporting to independent internal and external parties, including our regulators and law enforcement. This is supported by our Whistle-blower Policy, our Code of Conduct, our Corporate Governance Policy and other feedback loops; which ensure that no employee, related party, executive, or director, is powerful enough to be shielded from our zero-tolerance stance on internal fraud and our strict adherence to the established process and consequence management in this regard. Barita, CT MB and the Cornerstone Board continue to operate with the highest levels of integrity, prudence, and ethical standards.

Through prudent and disciplined capital injections across its operating entities, Cornerstone has ensured, post-acquisition in September 2018, the establishment of a robust back stop against financial and operational risks, as evidenced by the exemplary capital base of Barita, standing at an industry leading $34 billion as at December 2022. This strength of capital translates into a capital adequacy ratio of 35% or $25 billion in excess reserves above the regulatory minimum of 10%. Cornerstone has also heavily capitalized Barita’s sister company, CTMB which reflected an unmatched capital adequacy ratio of 64% as at September 2022, more than six (6) times the regulatory minimum for deposit taking institutions (“DTI”).

This strength of capital, in addition to providing a cushion for various risks, including fraud, gives the company immense capacity to grow and supports Barita’s stated investment focus in real estate, private equity, private credit and infrastructure.

Cornerstone’s deliberate strategy since FY 2019 of building capital across its portfolio companies to levels significantly above industry norms was informed and complemented by the implementation of best-in-class governance and control frameworks. To further ensure the protection of shareholder value, the Group engaged world class consulting partners to overhaul our policies and procedures and implement our enterprise risk management framework, on-boarded additional top talent of unquestionable ethics and integrity across our three lines of defence, bolstered the independence of our second and third lines of defence through reporting lines to the board, and ensured the independence of the chairs of our Board and its sub-committees including the Audit and Corporate Governance & Conduct Review Committees.

As the contributing elements of the alleged fraud affecting the industry emerge, it will, in addition to our embedded frequent review of emerging risks, feed the continuous improvement of our control environment that minimizes the persistence of any vulnerabilities and accelerates detection of anomalies. As stated above, our investment in technology is a key element of the continuous improvement in our control environment. While we continue to overhaul Barita’s technology, we look forward BOJ’s approval of CTMB’s technology and core system upgrades.

We welcome the strengthening of the regulatory environment and look forward to contributing to the outcome of the consolidated regulatory oversight of DTIs and Securities Dealers (“SD”). This is especially as Cornerstone continues to advance the process of obtaining approval to reorganize Barita and its sister company, CTMB, under a Financial Group which will allow us to seamlessly serve a wider range of our customers’ financial affairs.

Mark Myers, Chairman Of Barita Investments Limited

Barita Investments Limited (BIL) Unaudited Financial Statements For The First Quarter Ended December 31, 2022

 

Leadership Conversations

To Be Wise, You Must Be A Reader….Charlie Munger

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How did Munger become the sage that he was? Being a voracious reader played a significant role. Munger viewed reading as necessary for developing wisdom: “In my whole life, I have known no wise people who didn’t read all the time—none, zero. You’d be amazed at how much Warren reads—and how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”

Munger thought reading beyond just one discipline was necessary to become a world-wise person. He noted, “You must know the big ideas in the big disciplines and use them routinely — all of them, not just a few. Most people are trained in one model — economics, for example — and try to solve all problems in one way. You know the old saying: to the man with a hammer, the world looks like a nail. This is a dumb way of handling problems.” Source for

In Munger’s view, to be a great investor, you’d be better off reading 100 biographies than 100 books about how to invest. The key is to immerse yourself in ideas across disciplines to create your latticework of mental models. He admonished people to “Develop into a lifelong self-learner through voracious reading; cultivate curiosity and strive to become a little wiser every day.”

Charlie Munger, the vice chairman of Berkshire Hathaway and Warren Buffett’s business partner, died November 28 — less than a month short of his 100th birthday.

Source: John Jennings Forbes Contributor
I write about investments and issues that affect wealthy families.

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Leadership Conversations

Beware Of Making Decisions Based On Predictions of the Future…..Charlie Munger

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Given Berkshire Hathaway’s great success, you’d think that Munger and Buffett had an uncanny ability to predict the future. The opposite is true: A pillar of their success is their ability to admit they cannot predict the future.

Munger has noted that he’s “never been able to predict accurately. I don’t make money predicting accurately. We just tend to get into good businesses and stay there.” Moreover, Munger didn’t place much stock in experts’ predictions either: “People have always had this craving to have someone tell them the future. Long ago, kings would hire people to read sheep guts. There’s always been a market for people who pretend to know the future. Listening to today’s forecasters is just as crazy as when the king hired the guy to look at the sheep guts. It happens over and over and over.” Source for quotes.

I think about Munger’s perspective whenever I’m tempted to click on some investment guru’s prediction about what the stock market will return or the path of interest rates. If Munger and Buffett, two of the greatest investors of all time, don’t think they can predict the future or listen to expert predictions, why should we behave any differently?

Charlie Munger, the vice chairman of Berkshire Hathaway and Warren Buffett’s business partner, died November 28 — less than a month short of his 100th birthday.

Source: John Jennings Forbes Contributor
I write about investments and issues that affect wealthy families.

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Leadership Conversations

Know The Other Side’s Arguments……Charlie Munger

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Munger cautioned against having an opinion unless you are fully educated on all sides of the issue, which is a specific application of the concept of inversion.

In 2007, Munger gave the commencement speech at the USC School of Law, and in his talk, he warned of “extremely intense ideology because it cabbages up one’s mind.” He told the attendees that whenever he “drifts toward preferring one ideology over another” he forces himself to consider the other side by telling himself, “I’m not entitled to have an opinion on this subject unless I can state the arguments against my position better than the people do who are supporting it. I think only when I reach that stage am I qualified to speak.”

The underlying concept is that it takes work to have an informed opinion, and ideological thinking is lazy thinking. Instead of looking for facts that support your ideological leanings, having a valid opinion involves the often painful task of researching facts that support the other side.

Charlie Munger, the vice chairman of Berkshire Hathaway and Warren Buffett’s business partner, died November 28 — less than a month short of his 100th birthday.

Source: John Jennings Forbes Contributor
I write about investments and issues that affect wealthy families.

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Leadership Conversations

The Power Of Inversion……Charlie Munger

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“Invert, always invert.” – Carl Jacobi, 19th century mathematician

A compelling mental model Munger espoused is inversion, based on Jacobi’s belief that a powerful way to solve math problems is to restate them in inverse form. Munger’s insight is that inversion is robust beyond mathematics; thinking is clarified by considering issues both forward and backward ways.

Most of us think of our goals in a forward direction, as in, “What do I need to do to accomplish my goal?” But it can be powerful to look at it backward by thinking about what we should do to ensure we won’t meet our objective. For example, if you want to lose weight, instead of just thinking about what you need to do to lose weight, it’s also instructive to ask yourself, “What would I do if I didn’t want to lose weight?” Those things might include not exercising, overeating, avoiding fruits and vegetables, and consuming many highly processed foods loaded with sugar. That inverted list can help you decide how to behave to achieve your goals.

Also, as I wrote in “Five Ways to Be a Terrible Investor,” inversion is a mental model that is valuable in shaping good investment behavior.

Charlie Munger, the vice chairman of Berkshire Hathaway and Warren Buffett’s business partner, died November 28 — less than a month short of his 100th birthday.

Source: John Jennings Forbes Contributor
I write about investments and issues that affect wealthy families.

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Leadership Voices

We Always Should Look At Things On A Net Basis.

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“When I elongate the relationship that I have had personally with Dennis and Patrick, and when I think about the relationship that these two gentlemen have had with the organisation, against the background of what we were going through at that moment I said to myself (as I said to Dennis in a WhatsApp chat), ‘We always should look at things on a net basis. You don’t judge a relationship by the ups or the downs in the short run, you look at the net positive over the long run.’ So it was with that in mind I reached out to Patrick,” Lee-Chin noted.

“We’ve had disagreements [in the past] but it was more because we were debating. We’ve never had any emotional angst with each other, never!” he posited.

Michael Lee-Chin, chairman of NCB Financial Group

Source: https://www.jamaicaobserver.com/business/golden-handshake/

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