Risk identification in practice Jurgen Boyd Registrar of Pension Funds FSB South Africa 5 May 2011

Supervisory Landscape Number of active funds=3 177 Number of Administrators= 309 Number of members= 10 Million Asset value= $171 Billion 2

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 3

FSB : Risk Model FSB Appropriate and effective regulatory and supervisory model Fund Oversight Board of Management Funding/Solvency Market/ Investment Risk Operational Risk 4

FSB : Risk Model Risk FocusRisk FactorsRisk Indicators Fund Oversight (Governance) Board of Management  BOT Composition  BOT structures  Quality, skills, experience  Conflict of interest  PO fit and proper, skills, experience 5

FSB : Risk Model Risk FocusRisk FactorsRisk 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 6

FSB : Risk Model Risk FocusRisk FactorsRisk 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) 7

FSB : Risk Model Risk FocusRisk FactorsRisk Indicators Information Sources Fund Oversight (Governance) Board of Management  BOT Composition  BOT structures  Quality, skills, experience  Conflict of interest  PO fit and proper, skills, experience Whistle blowing – PO & Actuary PFA Complaints Complaints lodged with FSB On-site reviews Failure to submit returns Audited A.F.S RI’s Union’s involvement 8

FSB : Risk Model Risk FocusRisk FactorsRisk Indicators Information Sources 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 Actuarial Valuations Regulation 28 returns Audited A.F.S Financial- Qualifications Risk assessment of IM’s PFA complaints Section 18 reports On-site reviews RI’s Whistle blowing – PO & Actuary Insurance Supervision 9

FSB : Risk Model Risk FocusRisk FactorsRisk Indicators Information Sources Funding / 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/funds PF 130 assessment On-site reviews Audited A.F.S PFA complaints Complaints lodged with FSB Failure to issue benefit statements O/S statutory returns On-site reviews Reporting of non or late payment of contributions 10

Questions? 11