We take risks in order to achieve our purpose. We acknowledge that risk events will always happen – our focus is to ensure we have appropriate mechanisms in place to respond to these events.
Our Risk Appetite Statement and Risk Assessment Framework provide clear guidance about the Guardians' tolerance for enterprise risk. We believe that having great culture, governance, people and processes is critical to managing these risks.
Risk Appetite Statement
The Risk Appetite Statement outlines our approach to risk to achieve our strategic goals and those of the NZ Super Fund. It outlines four categories of risks:
Accountability for risk identification and mitigation rests across all parts of the Guardians' team. The Risk Appetite Statement aligns with the Guardians' purpose statement. It recognises that we needs to take risk to achieve our purpose – ‘Sustainable investment delivering strong returns for all New Zealanders’. It shows the Board’s expectation that we continue to use all reasonable measures to manage our response to risk, the questions we need to ask in assessing risks and what our core expectations are in managing risk.
Our Risk Appetite Statement
The Guardians of New Zealand Superannuation has developed into, and has a strong ambition to remain, a world class organisation with a purpose that reflects its intergenerational focus.
In setting out its risk appetite the Board recognises that risk, internal and external, to its business is likely to come from a range of causes. For these risks, how we respond falls into four broad categories: Culture, Governance, People, and Processes.
The Board is willing to take risk to achieve its purpose; it expects the Guardians to continue to use all reasonable measures, without imposing excessive costs or constraints, for its management of the four categories.
Our risk appetite will be determined by the Guardians’ purpose and vision, with Investment Risk managed by the adoption of the Reference Portfolio and approved Investment Constraints; and Enterprise Risk is managed by the Risk Assessment Framework.
Performance against this statement is measured and reported to the Board on a regular basis.
Risk Assessment Framework
The Risk Assessment Framework assists us in determining our risk appetite and how we should respond to risks we identify in the four categories detailed in the Risk Appetite Statement.
The Risk Assessment Framework ensures:
- risk categories are defined
- we consider the questions we need to ask ourselves
- the Guardians' core expectations are followed
- there is appropriate monitoring and reporting of our risk-appetite assessments.
The Board and management of the Guardians are responsible for managing these risks. The Guardians’ risk management framework is reviewed and approved by the Board. The Audit Committee reviews the reports of management, and of the Guardians’ external and internal auditors, on the effectiveness of systems for internal controls and financial reporting. The Board delegates day-to-day management of risk to the Chief Executive Officer.
Inherent in this delegation is a desire to ensure that day-to-day responsibility for risk management is at the business unit level, where risk is seen as part of the overall business process, and a robust framework of identification, evaluation, monitoring and control exists.