Risk management is a process that is underpinned by a set of principles as set out in the approved enterprise risk management policy and framework and is supported by a risk governance structure. Relevant policies and procedures are in place to regulate and guide the activities of the Corporation.
The Risk and Compliance division is responsible for the ongoing measurement, monitoring and reporting of portfolio risk, counterparty risk, compliance risk and operational risk. The focus is on anticipatory risk management which enhances the chance to achieve the Corporation’s objectives, namely to deliver risk-adjusted returns for the clients.
The compliance function is a statutory position which has been put in place by the provisions of section 17 of the The Financial Advisory and Intermediary Services ( FAIS) Act, 2002 (FAIS Act). In addition to ensuring compliance with appropriate legislations, laws, regulations, policies and best practice standards, the Risk and Compliance division ensures that Portfolio Managers manage the investment portfolios within the risk parameters as set out in the clients’ mandates.
The risk related to the potential returns of investments is measured by using two metrics. The first of these is the total measure of risk, which measures the volatility in any given asset class. Different asset classes have different volatility and are exposed to different types of risk. The second metric for the measurement of risk is known as the tracking error, which is a measure of the extent to which a portfolio tracks a selected benchmark.
Counterparty risk is managed by the use of exposure limits and minimum counterparty credit rating requirements. Operational risk is managed in accordance with enterprise risk management policy and framework.