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The need for investor education about risk-taking and Unit Trusts

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Jeevan Sukumaran

Interview with Jeevan Sukumaran, Secretary, Unit Trust Association, Sri Lanka

What does “risk” really mean in investing, and why should the public not be afraid of it?

At the mention of the word risk in terms of investing, especially in a Sri Lankan context, there can be a significant level of fear or stigma attached to it. To some degree, this is fair given the country’s history of civil war, investment company scams (such as Golden Key/Ceylinco and Sakvithi and in more recent times, the Easter Attacks, Covid and the Economic crisis. This has led to a large majority of potential investors being afraid to venture very far beyond commercial banking products and, therefore, losing out on the earnings potential of other asset classes.

In investing, risk means the possibility that the value of your investment might go up or down and not a guarantee of loss, but more a chance of fluctuation. For example, share prices rise and fall all the time. While those movements may look worrying in the short term, history shows that markets generally grow in the long run. As such, investors shouldn’t necessarily fear risk, but should instead understand the different types of risk (both in general and based on the asset class) as well as risk’s relationship to return.

What are the main types of risks (market, credit, liquidity) that investors should understand?

Several different types of risks affect investors in terms of capital markets (and unit trusts); however these can be classified into direct and indirect risks. The three most direct risk types that can affect investors are;

Market Risk – The broadest form of risk, which can be further subclassified into systematic and unsystematic risks. Systematic risks are high (macro) level risks that tend to affect the entire economy as a whole and are harder to diversify if all investments are within the country. Examples in Sri Lanka would be the Economic Crisis of 2022 with high inflation, currency depreciation, and political instability. Entire markets were affected, with even well-run and profitable companies seeing downturns. Unsystematic risks are connected to specific sectors/industries/companies that are affected by an industry/sector/company-specific issue and can be reduced through diversification. Examples of this could be the export sector being negatively impacted by tariffs.

Credit Risks – Credit risk is the risk that arises due to a counterparty being unable to meet their obligations on time or at a lower than agreed yield or not being able to settle at all (default risk). To a large extent, reports from rating agencies such as Fitch and Lanka Ratings will enable potential investors to gauge the level of credit risk they could potentially face by investing in a specific company/instrument. This, coupled with investing in companies with strong corporate governance, clear transparency and strong regulatory oversight, will enable investors to reduce their exposure to credit risk.

Liquidity Risk – deal with how easily investments can be turned into cash. Market liquidity risk appears when assets cannot be sold quickly at a fair price, which often happens in stressed or thinly traded markets. Funding liquidity risk is slightly different: it is the danger that an investor or institution cannot meet short-term payment or redemption obligations, even if they hold valuable assets. Both forms of liquidity risk can amplify market shocks, making them especially important to watch during times of financial stress.

Secondary or indirect risks may not be visible daily, but can amplify core risks. Operational risks include failures in systems, processes, or people, as well as fraud, compliance breaches, or cyberattacks. Event and external risks stem from political changes, regulatory shifts, wars, sanctions, natural disasters, or climate events. Behavioural risks arise from investor psychology, such as overreaction, herd behaviour, speculative bubbles, or reliance on flawed models. Instrument-specific risks relate to specific products, including reinvestment or prepayment risk for bonds, concentration risk from overexposure to one asset or sector, leverage and derivatives risk that magnifies gains and losses, and custody risk where assets held by a custodian could be lost.

How do Unit Trusts help reduce or balance these risks through diversification, and what safeguards are in place to help protect investors?

There are three main ways in which Unit Trust Investments help reduce/balance risk.

Diversification – Unit trusts enable investors to diversify their investments across various assets, reducing the risk associated with putting all their eggs in one basket. This can be particularly beneficial for smaller investors who may not have the capital to build a diversified portfolio on their own. By spreading investments across different sectors, companies, and asset classes, unit trusts can help mitigate the impact of poor performance in any single investment.

Regulatory Protection – Capital market regulators set rules on how Unit Trusts must operate. These include requirements for transparency, reporting, and fair treatment of investors. Unit Trusts are heavily regulated by the Securities & Exchange Commission of Sri Lanka with strict rules and regulations (CIS Code) governing investments and fund operations. In addition, all assets of the fund are held by and invested through an independently appointed Trustee whose responsibility is to safeguard the unitholders’ funds and prevent misappropriation.

Professional Fund Management – Managed by experienced (and SEC-approved) fund management professionals and backed by dedicated research/financial analysts. Advantageous to investors who may not have the time, resources or expertise to monitor global, macro and micro conditions regularly.

How can investors identify their personal risk appetite before choosing a fund?

Investors first need to understand the different risks applicable to different asset classes clearly. As such, knowledge of the various asset classes and the risks that can affect those assets is the most crucial step for an investor. After this point, the investor should identify their own risk appetite and how much of a risk taker they are (from conservative to aggressive). This should also be coupled with their investment horizon and both short- and long-term liquidity requirements.

What types of Unit Trusts are best suited for conservative, balanced, or aggressive investors?

Conservative investors – Money market funds or government security-based funds. These fund types are generally low risk and offer high liquidity whilst offering steady, regular returns.

Balanced – Longer-term Income/Bond/Corporate Funds as well as Balanced funds (Equity and Fixed Income). These funds offer better returns whilst attempting to reduce significant volatility and capital erosion.

Aggressive investors: Growth/ Equity funds/Sector Funds, which invest mainly in listed equities. Given the nature of the stock market, higher volatility is to be expected; however, significantly higher returns can also be obtained.

6. Why is investor education about risk essential for building long-term confidence in Unit Trusts?

Investor education about risk is essential because it transforms fear into informed decision-making. Many people avoid investing simply because they don’t understand how risk works, or they overreact to short-term market fluctuations. By learning about different types of risk, investors can gain a realistic view of what to expect and/or how to respond.

Education also helps investors understand how Unit Trusts mitigate risk through diversification, professional management, and regulatory safeguards. Knowing that their money is being managed according to clear rules and spread across multiple assets gives investors confidence that short-term volatility is normal and manageable.

Finally, educated investors are more likely to stick to their long-term investment plan instead of making impulsive decisions during market swings. This discipline is key to benefiting from the compounding effect of investments over time and achieving financial goals. In short, risk education builds trust, reduces anxiety, and empowers investors to make smarter, more confident investment choices in Unit Trusts.



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European Union mobilises 2.6 million Euro to strengthen civil society in Sri Lanka

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Representatives from govt, policy makers and social acitivists

The European Union (EU)-funded “Together We Rise” initiative, implemented by World Vision and SAFE Foundation in Sri Lanka, is a €2.6 million project designed to strengthen civil society and promote human rights, inclusion and accountable governance. Over three years, the project will support 50 civil society organisations (CSOs) by providing targeted training and resources, while also engaging government institutions, policymakers and 250 social activists to enhance transparency, accountability and civic participation.

The initiative is expected to reach 701,100 people across nine districts, with a focus on underserved and conflict-affected areas. Participating organisations will include women-led, youth-led and those representing persons with disabilities. In addition, more than 350 CSO staff will benefit from tailored capacity-building and technical support to strengthen their effectiveness and long-term sustainability.

To achieve this, the project will begin by conducting a Capacity Development Needs Assessment (CDNA) to better understand the strengths and gaps of selected CSOs. Based on these findings, tailored Capacity Development Plans will be developed for each organisation, ensuring support is relevant, targeted, and impactful. Furthermore, through a capacity-building approach, CSOs will be strengthened in key areas including governance and leadership, financial management and compliance, inclusion, safeguarding, and gender equity, civic engagement and advocacy, digital capacity and innovation, as well as resilience and long-term sustainability.

Dr. Johann Hesse, Head of Cooperation at the European Union in Sri Lanka, noted, “With this EUR 2.6 million programme, the EU is investing in a stronger partnership with civil society for inclusive and sustainable development. Civil society organisations work alongside public institutions, helping to reach communities, mobilise citizens, and support the implementation of activities that are both national and EU priorities”.

In addition, selected CSOs will receive small grants to implement their development plans and respond to community needs, ensuring that learning is translated into action. The project will also create platforms for dialogue and engagement between communities, civil society, and government stakeholders, supporting advocacy efforts and influencing policy change.

Highlighting the importance of addressing structural inequalities, Nirosha Hapuarachchi, Project Manager for Together We Rise at SAFE Foundation, noted, “Youth unemployment (ages 15–29) stands at 34.5% in 2025, according to the Department of Census and Statistics. This highlights a critical gap between the skills possessed by young people and the demands of the labour market. Similarly, women and persons with disabilities continue to face social, economic, and structural challenges that limit their ability to access their rights and opportunities. In response to these challenges, the ‘Together We Rise’ project aims to promote inclusive development by addressing the needs and rights of youth, women, and persons with disabilities, enabling them to achieve sustainable, improved well-being”.

The initiative was introduced through a stakeholder engagement platform that brought together representatives from the EU, government institutions, civil society organisations, and community leaders, highlighting the importance of partnerships in driving sustainable development.

Chandrarathna D. Vithanage, Director General of the National Secretariat for Non-Governmental Organisations, emphasised the role of partnerships, stating, “A country can only truly develop when the government, business sector, and civil society work together. Together We Rise is a timely initiative with clear goals to strengthen the NGO sector, and I look forward to being part of this journey, building knowledge, fostering trust, and empowering village-level communities to take charge of the challenges they face.”

Underscoring the importance of inclusive, community-driven approaches, Glattes Rosairo, Project Manager for Together We Rise at World Vision Lanka, remarked, “Together We Rise is not just a phrase – it is a commitment to building strong, collaborative relationships that empower CSOs. This initiative prioritises listening to communities, amplifying the voices of persons with disabilities, youth, and women, and strengthening grassroots leadership to ensure sustainable and meaningful impact across Sri Lanka.”

Grounded in a rights-based, inclusive, and locally led approach, the project prioritises listening to communities, amplifying marginalised voices, and strengthening grassroots leadership – ensuring sustainable and meaningful impact across Sri Lanka.

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CINEC invites students to build future careers as social scientists

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Professor Prasad Sethunga

Students interested in understanding society, education, communication and human behaviour now have an opportunity to pursue that path through CINEC Campus, which is promoting its Faculty of Humanities and Education as a gateway to becoming tomorrow’s “social scientists.”

As economies and workplaces rapidly change through technology and automation, demand is rising for graduates who can analyse human needs, improve communication, strengthen communities and guide institutions through social change. CINEC says its programmes are designed to develop these skills through a combination of academic learning and practical training.

The institution offers a range of diploma and degree programmes including Early Childhood Education, English, Information Technology, and Sports and Physical Education. While diverse in subject matter, these courses share a common focus on producing graduates equipped to work with people, solve real-world challenges and contribute to national development.

CINEC places particular emphasis on careers linked to teaching, research, language development, communication and community leadership. Graduates may find opportunities as educators, trainers, social researchers, communication specialists, administrators and development professionals in both the public and private sectors.

According to the institution, its programmes are approved by the University Grants Commission and the Ministry of Higher Education. Prospective students should independently verify current recognition and course details before enrolment.

The campus also highlights a supportive learning environment with experienced lecturers and flexible study options for selected programmes, helping students balance education with work or other commitments.

At a time when technical skills alone may not be enough, fields connected to the humanities and social sciences are gaining renewed importance. Employers increasingly value communication ability, leadership, empathy, critical thinking and cultural understanding—qualities often developed through these disciplines.

For school leavers and working adults seeking meaningful careers that influence society and improve lives, CINEC says it is positioning its programmes as a pathway to becoming a new generation of social scientists.

By Sanath Nanayakkare

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Pride in hospitality: Ranil Asanka’s story at ‘City of Dreams’ Sri Lanka

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Ranil Asanka

Ranil Asanka, who hails from Matugama, is a dedicated team leader at Quizine Restaurant in City of Dreams Sri Lanka.

He speaks with pride and passion about his long journey in the hospitality industry. He spent 15 years at Cinnamon Lakeside and later joined Cinnamon Life from its inception, becoming part of one of Sri Lanka’s most exciting hospitality developments from the very beginning.

“Our restaurant is the biggest in the city,” Ranil says proudly. “At one time, more than 600 guests can dine here.”

Quizine Restaurant is famous for its impressive buffet experience, offering breakfast, lunch, and dinner buffets every day, along with à la carte options. However, Ranil explains that buffet dining remains their main focus.

“What makes us special is the largest variety of buffet dishes,” he says. “We serve Indian, Western, Chinese, Sri Lankan, and Japanese cuisine.”

Among all the options, Ranil notes that guests especially love Indian and Sri Lankan food.

“Mostly Indian and Sri Lankan guests come here, and they enjoy those cuisines the most,” he explains. “Sri Lankan food is a little spicy, and some Indian dishes are spicy too.”

Ranil’s career path is also a story of growth and smart decisions. He first pursued his highest studies in the science field, but later chose to switch to AAT and CIMA qualifications to build better prospects in the hospitality sector.

This move helped him combine academic knowledge with practical business and management skills.

Ranil feels honored to be part of such a prestigious hotel.

“This is the heart of the Cinnamon Hotels,” he says. “It is the biggest one, and I am proud to work here.”

The restaurant remains busy every day, welcoming a constant flow of guests from many countries, especially India, Sri Lanka, and China.

When asked what advice he would give to young people hoping to join the hotel industry, Ranil shares a simple but powerful message:

“When you work in any hotel, work with your heart. Always gain knowledge. That is how you come to the next level.”

From Matugama to one of Sri Lanka’s premier hospitality destinations, Ranil Asanka’s story reflects dedication, adaptability, and pride in serving others—qualities that make hospitality truly special at City of Dreams Sri Lanka.

By Ifham Nizam

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