Risk identification in practiceJurgen Boyd

Registrar of Pension FundsFSB

South Africa5 May 2011

Supervisory Landscape

• Number of active funds = 3 177• Number of Administrators = 309• Number of members = 10 Million• Asset value = $171 Billion

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Significant Features

• The Board of Fund of retirement funds should comprise of at least 4 members

• At least 50% of the board members must be elected by members

• 95% of funds are DC and the majority are occupational funds

• No preservation or compulsion

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FSB : Risk Model

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FSB : Risk ModelRisk Focus Risk Factors Risk Indicators

Fund Oversight (Governance)

Board of Management

BOT Composition BOT structures Quality, skills, experience Conflict of interest PO fit and proper, skills,

experience

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FSB : Risk ModelRisk Focus Risk Factors Risk Indicators

Funding/ Solvency

(a) Market/Investment Risk

Asset spreading/ concentration

Asset/liability mismatches Funding Levels (DB) Financial strengths of

insurers (Underwritten Funds)

Approved Investment Management

Credit Risk

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FSB : Risk ModelRisk Focus Risk Factors Risk Indicators

Funding/ Solvency

(b) Operational Risk Size, complexity of fund Outsourcing (incl.

Conflicts of interest) Risk Management Culture Statutory Returns Levels of PI cover Level of compliance –

(Legal/Regulatory risk)

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FSB : Risk ModelRisk Focus Risk Factors Risk Indicators Information

SourcesFund Oversight(Governance)

Board ofManagement

BOT Composition BOT structures Quality, skills,

experience Conflict of interest PO fit and proper,

skills, experience

Whistle blowing – PO & ActuaryPFA ComplaintsComplaints lodged with FSBOn-site reviewsFailure to submit returnsAudited A.F.SRI’sUnion’s involvement

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FSB : Risk ModelRisk Focus Risk Factors Risk Indicators Information

SourcesFunding/ Solvency

(a) Market/ Investment Risk

Asset spreading/ concentration

Asset/liability mismatches

Funding Levels (DB) Financial strengths of

insurers (Underwritten Funds)

Approved Investment Management

Credit Risk

Actuarial ValuationsRegulation 28 returnsAudited A.F.SFinancial-QualificationsRisk assessment of IM’sPFA complaintsSection 18 reportsOn-site reviewsRI’sWhistle blowing – PO & Actuary Insurance Supervision9

FSB : Risk ModelRisk Focus Risk Factors Risk Indicators Information

SourcesFunding / Solvency

(b) Operational Risk Size, complexity of fund

Outsourcing (incl. Conflicts of interest)

Risk Management Culture

Policies and procedures

Statutory Returns Levels of PI cover Level of compliance –

(Legal/Regulatory risk)

Risk assessment of administrators/fundsPF 130 assessmentOn-site reviewsAudited A.F.SPFA complaintsComplaints lodged with FSBFailure to issue benefit statementsO/S statutory returnsOn-site reviewsReporting of non or late payment of contributions

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Questions?

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