• Risk Appetite: The risk appetite is determined at the Board of Directors and RMC level. The goals of the risk appetite process are to define:
1. Trustfund’s risk philosophy in terms of whether the company is a loss minimiser (risk averse) or a revenue maximiser (risk aggressive)
Trustfund’s Value at Risk (VaR) figure for market risks
3. Trustfund’s Risk Acceptance Criteria for counterparty risks

 

• Risk Policies: The risk policy documents the company’s view of acceptable levels of exposure to different types of risks, investment markets and counterparties. It details the guidelines and procedures for measuring, monitoring and managing market and counterparty risks, and the roles and responsibilities of stakeholders in the risk management process. It is used by the Risk Management Department to ensure that all risk management and related activities carried out within Trustfund are done according to a set of documented guidelines.

• Risk Identification:  This process requires brainstorming on risk areas, vulnerabilities and threats with the aim of determining the market and counterparty risks faced by Trustfund Pensions Plc.
• Risk Analysis/Measurement: The Risk Management department measures the company’s exposure to identified risks (market & counterparty) using best practice standards. The department uses Value at Risk (VaR) models to measure market risks faced by the company and risk rating models (internal and/or external) to measure counterparty risks.

1. Risk Limits and Controls: The employees involved in trading and risk management understand the risks faced by Trustfund as new risks appear as the market develops. This enables the RMC create implementable risk limits that may be applied on portfolios, instruments, counterparties and geographies. Risk control deals with the escalation process when limits are broken.

Trustfund has an adequate system of internal controls over its risk management process to ensure compliance with risk management policies and procedures. Specific risk limits and controls are recommended by the Risk Management Lead and approved by the Risk Management Committee of the Board subject to the ratification of the Board of Directors. The risk limits and controls are documented in the risk policy manual and communicated to all stakeholders as required.

• Monitor Risks: This process involves monitoring Trustfund’s exposures in relation to approved exposure and risk limits. The Risk Management Lead monitors the company’s exposures and escalates non-compliance with approved limits to the appropriate parties (Head, Management & Control, Risk Management Committee (RMC), Internal Control Lead and Legal Adviser & Chief Compliance Officer).
• Produce Risk Reports: This involves the production of risk reports that show the current risk limits and their utilization. These reports are sent to the RMC and the Board who may use it to initiate a review of the risk appetite and operating practices.
• Re-assess Risk Exposure: Analyzing Trustfund’s current risk status becomes more important as the company’s operations expand and as new risks are identified. When a new risk exposure is identified, the RMC begins another iteration of the risk assessment process.