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INTEGRATED RISK PROFILE RÉGIME DE RENTES DU MOUVEMENT DESJARDINS (RRMD). RRMD: the numbers tell the story. Over 500 employers 35 900 active members 6 600 pensioners 12 000 in 2014 $5.5 B $10 B in 2014. RRMD – Governance model. Three-year strategic plan - PowerPoint PPT Presentation
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1 ICA – 15 avril 2008
INTEGRATED RISK PROFILE INTEGRATED RISK PROFILE RÉGIME DE RENTES DU RÉGIME DE RENTES DU
MOUVEMENT DESJARDINS MOUVEMENT DESJARDINS (RRMD)(RRMD)
INTEGRATED RISK PROFILE INTEGRATED RISK PROFILE RÉGIME DE RENTES DU RÉGIME DE RENTES DU
MOUVEMENT DESJARDINS MOUVEMENT DESJARDINS (RRMD)(RRMD)
2
RRMD: the numbers tell the story
Over 500 employers
35 900 active members
6 600 pensioners 12 000 in 2014
$5.5 B $10 B in 2014
3
RRMD – Governance model
Three-year strategic plan
Annual business plan: 39 initiatives in 2008
Governance plan (internal by-laws): accountability
Financing policy
Investment policy and risk budget
Matching study
A “strong” pension committee
4
RRMD – Objectives of integrated risk profile
Even better governance
Ultimately, increase the RRMD’s viability
Ensure that all risks are known and dealt with
Keep the plan’s overall risk at an acceptable level
5
RRMD – Steps
1st step
RRMD head office creates a risk inventory (90 risks)
Search for experienced consultant
Create an integrated risk profile (2006)
2nd step (2007)
Review risk profile
Develop a trend chart
6
Risk management core concepts
What is risk?
An inherent risk is the expression of the likelihood and impact of an event or a specific set of circumstances before controls are taken into consideration. An inherent risk takes into account the organizational situation and the operating environment underlying the organization or unit.
A residual risk is the level of risk remaining with the potential to influence the achievement of an objective or outcome, once the controls and other mitigation measures have been taken into consideration.
7
Integrated risk management
Definition
Integrated risk management (IRM) is a series of management practices supported by a risk culture that make it possible to assess, communicate and manage risk according to the organization’s risk profile and the opportunities available to it.
8
Valeurs et culture en matière de gestion du risque
Ressources de gestion du risque
OPÉRATIONNALISER LA GESTION DU RISQUE
ÉTABLIR ET MAINTENIR L’INFRASTRUCTURE
DE GESTION DU RISQUE
Construire le
cadreSurv
eille
r le
cadre
Compre
ndre
les
risques
Agir face aux
risques
©
Cadre de gouvernance
Lignes directrices et
outils de gestion du risque
Identification des risques
Réponse et plans d’action face aux
risques
Réponses particulières face aux situations de
risque
Indicateurs de rendement de la
gestion du risque
Prise de décisions éclairée
Cadre de politique
Plan de gestion du risque
Affectation de ressources fondée
sur les risques
Évaluation indépendante du
cadre
Évaluation des contrôles
Évaluation des risques
Information sur
les risques
Information sur les risques
Formation et renforcement des capacités
Plans de continuité des opérations
Principaux indicateurs de
risque
Information sur les risques
Info
rmat
ion
sur
les
risqu
es
Résultats Gestion du changement
Communication
Amélioration continue
Surveillance par la direction
IRM framework
9
Integrated risk management
IRM helps take risk management beyond the level of individual activity or functional silos, such that:
• risks can be assessed horizontally throughout the plan
• risks can be assessed vertically(i.e. at multiple levels) within the plan
• all types of risks (strategic, operational, financial, etc.) are examined in such a way as to understand the full extent of the exposure to risk
• risk management is incorporated in the planning and decision-making process within the plan
10
Definition of RCSA process
Structured approach geared to specific expertise of plan stakeholders (risk and control self-assessments)
Complementarity of facilitators thanks to their experience and outward-looking approach (independence, impartiality, knowledge of what’s being done elsewhere and recognized risk management managers)
Participants are valued equally, irrespective of their hierarchy in the risk determination and assessment process
The RCSA process helps make decisions to manage risks
11
Typical steps in an RCSA
Defining the action framework
Defining the templates and scales
Collecting and analysing the information available on the plan
Defining the risk categories
Identifying, defining and classifying the risks
Identifying the assessment scales
Setting up assessment workshops (interactive votes)
Drafting the final report (risk maps, analyses, etc.)
Providing support in carrying out actions(trend charts, action plans, risk indicators, etc.)
12
Collecting and analysing information on the plan
By analysing the existing documentation and conducting
interviews, the following is identified:
• Events (cases occurring in the plan or in the industry, incidents that
almost happened,...)
• Risk factors
• Inherent risks
• Controls
There is a convergence of the inherent risks with the
controls assigned to them
13
Risk and control self-assessments
Presentation of inherent risks with associated controls
Self-assessment of each risk through votes to determine:
• impact (financial, objective, clients/partners, employees, reputation, sanction)
• frequency and likelihood (number of incidents, qualitative observations)
• exposure = √(impact*frequency or likelihood)
• effectiveness of controls currently in place
• residual risk = √(exposure*effectiveness of controls)
• trend
• strategy to adopt (accept, mitigate, transfer, avoid)
14
Results of an RCSA
Once the strategies have been chosen (accept, mitigate, transfer or avoid), managers define the action plans
• An action plan includes corrective measures, the person responsible, a schedule and the strategic objective involved
Indicators (risk levels and trends, appropriateness of controls, maps,...) support the decision-making process
Development / updating of a trend chart for risks
• The trend chart is used to track changes in risks and categories based on changes in various indicators
15
Description of the 13 “major” risks (highlighted area)
ID Service Category Risk
3 Assets management Market Market volatility
15 Liabilities management Business Solvency deficiency
5 Assets management Liquidity Insufficient liquidity in certain
classes of assets
8 Assets management Strategic Poor investment strategies or
policies
9 Liabilities management Business Plan design
10 Liabilities management Business
Policies and decisions relating to human resource management
14 Liabilities management Business Funding deficiency
12Consulting services for
administratorsBusiness
Unfavourable changes in accounting standards or the CIA’s standards
16 Liabilities management Business
Reliability of actuarial assumptions (going concern valuation)
1 Assets management Credit Default by an issuer
11 Liabilities management Business Risk of pension costs
20Consulting services for
administratorsOperational Retention of expertise and
succession planning
24Consulting services for
administratorsOperational Management of suppliers and
partners
16
Definition of major risks
RRMD – Definition of the 13 major risks
Risk category
Risk priority Service category MCD category ID List of “major” residual risks
1Assets
managementMarket 3
There is a risk that performance volatility could exceed the established tolerance thresholds, thereby causing losses for RRMD and affecting its financial situation and ability to meet its commitments.
2Liabilities
managementBusiness (actuarial) 15
There is a risk that RRMD could have a solvency deficiency, affecting its ability to reach its strategic objectives, particularly contribution rate stability.
3Assets
managementLiquidity 5
There is a risk of loss due to insufficient liquidity in certain classes of assets, including real estate investments, private equity and hedge funds.
4Assets
managementStrategic 8
There is a risk that the RRMD’s investment strategies and policies will not enable it to achieve its strategic objectives and meet its commitments. Policy and strategy weaknesses can include asset allocation, diversification strategies, basic risks, etc.
5Liabilities
managementBusiness (HR) 9
There is a risk that the Plan design (e.g. overly generous benefits), which comes under the responsibility of human resources, might generate too high an ongoing cost, thus affecting RRMD’s ability to achieve its strategic objectives and meet its commitments.
6Liabilities
managementBusiness (HR) 10
There is a risk that human resource management decisions (wage increases, employment equity, mergers, acquisitions, outsourcing, etc.) might deviate from the assumptions, thus affecting RRMD’s ability to achieve its long-range strategic objectives and meet its commitments.
7Liabilities
managementBusiness (actuariel) 14
There is a risk that RRMD could have a funding deficiency, affecting its ability to achieve its strategic objectives, including its contribution rate stability, safety cushion and accountability to the regulatory authorities.
17
Definition of major risks (cont’d)
RRMD – Definition of the 13 major risks
Risk category
Risk priority
Service category MCD category ID List of “major” residual risks
8Consulting services for
administrators
Business (legal and regulatory
framework) 12
There is a risk that unfavourable changes in accounting standards or the CIA’s standards might negatively impact the RRMD’s financial situation and/or that of the members and partners.
9Liabilities
managementBusiness (actuarial)
16There is a risk that the reliability of the actuarial assumptions (going concern valuation) might affect RRMD’s financial situation and its ability to meet its commitments.
10Assets
managementCredit 1
There is a risk that the issuer of a debt instrument might not repay some or all of the principal and interest, thereby generating losses for RRMD and affecting its financial situation and its ability to meet its commitments (includes the risk of collateral associated with securities loans as well as the risk of discounting by a credit rating agency).
11Liabilities
managementBusiness (financial
health)11
There is a risk that the pension costs will be higher than forecast and/or higher year over year (which also impacts the company’s finances), affecting RRMD’s ability to achieve its long-range objectives and meet its commitments.
12Consulting services for
administrators
Operational (adequate resources)
20 There is a risk relating to retention of expertise and succession planning.
13Consulting services for
administrators
Operational (management of
suppliers and partners)
24
There is a risk that lack of performance or breach of contract by outside suppliers and by partners (asset managers, building managers, administrative managers, IT and data suppliers, asset custodian, etc.) could impact RRMD’s ability to meet its commitments and achieve its business objectives.
18
Advantages of IRM
Improves the decision-making process, strengthens the
organization’s governance, increases the ability to achieve
objectives and narrows the gap between perception (of the
plan) and reality.
Enables organizations to take advantage of optimization
opportunities, take charge of their development and protect
tangible and intangible organizational assets.
Helps improve results by managing risk proactively.
A tool to improve resource allocation according to the relative
importance of the risks
19
The IRM process is an ongoing one
The evolution of risk changes according to internal management, industry and other factors. Consequently, the plan’s risk profile is not static; rather, it evolves within its environment.
This evolution must be monitored and controlled to ensure continuity of activities.
The process gains by being continuous and dynamic. It offers tools and a flexible methodology to facilitate risk management over time.
Makes it possible to develop trend charts that help the plan track changes in risks and the impact of these risks on the ability to achieve objectives.
20
Success factors
A commitment on the part of management and the pension committees, with clear guidelines that are effectively communicated
Solid functional leadership
A risk culture shared throughout the organization
Targeting of risk areas
A method of training and support geared to “learning through action”
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