1. ICA – 15 avril 2008 1 INTEGRATED RISK PROFILE RÉGIME DE RENTES DU MOUVEMENT DESJARDINS (RRMD)

2. 2 RRMD: the numbers tell the story  Over 500 employers  35 900 active members  6 600 pensioners 12 000 in 2014  $5.5 B $10 B in 2014

3. 3 RRMD – Governance model  Three-year strategic plan  Annual business plan: 39 initiatives in 2008  Governance plan (internal by-laws): accountability  Financing policy  Investment policy and risk budget  Matching study  A “strong” pension committee

4. 4 RRMD – Objectives of integrated risk profile  Even better governance  Ultimately, increase the RRMD’s viability  Ensure that all risks are known and dealt with  Keep the plan’s overall risk at an acceptable level

5. 5 RRMD – Steps 1 st step  RRMD head office creates a risk inventory (90 risks)  Search for experienced consultant  Create an integrated risk profile (2006) 2 nd step (2007)  Review risk profile  Develop a trend chart

6. 6 Risk management core concepts What is risk?  An inherent risk is the expression of the likelihood and impact of an event or a specific set of circumstances before controls are taken into consideration. An inherent risk takes into account the organizational situation and the operating environment underlying the organization or unit.  A residual risk is the level of risk remaining with the potential to influence the achievement of an objective or outcome, once the controls and other mitigation measures have been taken into consideration.

7. 7 Integrated risk management Definition  Integrated risk management (IRM) is a series of management practices supported by a risk culture that make it possible to assess, communicate and manage risk according to the organization’s risk profile and the opportunities available to it.

8. 8 IRM framework

9. 9 Integrated risk management IRM helps take risk management beyond the level of individual activity or functional silos, such that: risks can be assessed horizontally throughout the plan risks can be assessed vertically (i.e. at multiple levels) within the plan all types of risks (strategic, operational, financial, etc.) are examined in such a way as to understand the full extent of the exposure to risk risk management is incorporated in the planning and decision-making process within the plan

10. 10 Definition of RCSA process  Structured approach geared to specific expertise of plan stakeholders (risk and control self-assessments)  Complementarity of facilitators thanks to their experience and outward-looking approach (independence, impartiality, knowledge of what’s being done elsewhere and recognized risk management managers)  Participants are valued equally, irrespective of their hierarchy in the risk determination and assessment process  The RCSA process helps make decisions to manage risks

11. 11 Typical steps in an RCSA  Defining the action framework  Defining the templates and scales  Collecting and analysing the information available on the plan  Defining the risk categories  Identifying, defining and classifying the risks  Identifying the assessment scales  Setting up assessment workshops (interactive votes)  Drafting the final report (risk maps, analyses, etc.)  Providing support in carrying out actions (trend charts, action plans, risk indicators, etc.)

12. 12 Collecting and analysing information on the plan By analysing the existing documentation and conducting interviews, the following is identified: Events (cases occurring in the plan or in the industry, incidents that almost happened,...) Risk factors Inherent risks Controls There is a convergence of the inherent risks with the controls assigned to them

13. 13 Risk and control self-assessments  Presentation of inherent risks with associated controls  Self-assessment of each risk through votes to determine: impact (financial, objective, clients/partners, employees, reputation, sanction) frequency and likelihood (number of incidents, qualitative observations) exposure = √(impact*frequency or likelihood) effectiveness of controls currently in place residual risk = √(exposure*effectiveness of controls) trend strategy to adopt (accept, mitigate, transfer, avoid)

14. 14 Results of an RCSA  Once the strategies have been chosen (accept, mitigate, transfer or avoid), managers define the action plans An action plan includes corrective measures, the person responsible, a schedule and the strategic objective involved  Indicators (risk levels and trends, appropriateness of controls, maps,...) support the decision-making process  Development / updating of a trend chart for risks The trend chart is used to track changes in risks and categories based on changes in various indicators

15. 15 Description of the 13 “major” risks (highlighted area) IDServiceCategoryRisk 3 Assets management MarketMarket volatility 15 Liabilities management BusinessSolvency deficiency 5 Assets management Liquidity Insufficient liquidity in certain classes of assets 8 Assets management Strategic Poor investment strategies or policies 9 Liabilities management BusinessPlan design 10 Liabilities management Business Policies and decisions relating to human resource management 14 Liabilities management BusinessFunding deficiency 12 Consulting services for administrators Business Unfavourable changes in accounting standards or the CIA’s standards 16 Liabilities management Business Reliability of actuarial assumptions (going concern valuation) 1 Assets management CreditDefault by an issuer 11 Liabilities management BusinessRisk of pension costs 20 Consulting services for administrators Operational Retention of expertise and succession planning 24 Consulting services for administrators Operational Management of suppliers and partners

16. 16 Definition of major risks RRMD – Definition of the 13 major risks Risk category Risk priorityService categoryMCD categoryIDList of “major” residual risks 1 Assets management Market3 There is a risk that performance volatility could exceed the established tolerance thresholds, thereby causing losses for RRMD and affecting its financial situation and ability to meet its commitments. 2 Liabilities management Business (actuarial)15 There is a risk that RRMD could have a solvency deficiency, affecting its ability to reach its strategic objectives, particularly contribution rate stability. 3 Assets management Liquidity5 There is a risk of loss due to insufficient liquidity in certain classes of assets, including real estate investments, private equity and hedge funds. 4 Assets management Strategic8 There is a risk that the RRMD’s investment strategies and policies will not enable it to achieve its strategic objectives and meet its commitments. Policy and strategy weaknesses can include asset allocation, diversification strategies, basic risks, etc. 5 Liabilities management Business (HR)9 There is a risk that the Plan design (e.g. overly generous benefits), which comes under the responsibility of human resources, might generate too high an ongoing cost, thus affecting RRMD’s ability to achieve its strategic objectives and meet its commitments. 6 Liabilities management Business (HR)10 There is a risk that human resource management decisions (wage increases, employment equity, mergers, acquisitions, outsourcing, etc.) might deviate from the assumptions, thus affecting RRMD’s ability to achieve its long-range strategic objectives and meet its commitments. 7 Liabilities management Business (actuariel)14 There is a risk that RRMD could have a funding deficiency, affecting its ability to achieve its strategic objectives, including its contribution rate stability, safety cushion and accountability to the regulatory authorities.

17. 17 Definition of major risks (cont’d) RRMD – Definition of the 13 major risks Risk category Risk priority Service categoryMCD categoryIDList of “major” residual risks 8 Consulting services for administrators Business (legal and regulatory framework) 12 There is a risk that unfavourable changes in accounting standards or the CIA’s standards might negatively impact the RRMD’s financial situation and/or that of the members and partners. 9 Liabilities management Business (actuarial) 16 There is a risk that the reliability of the actuarial assumptions (going concern valuation) might affect RRMD’s financial situation and its ability to meet its commitments. 10 Assets management Credit1 There is a risk that the issuer of a debt instrument might not repay some or all of the principal and interest, thereby generating losses for RRMD and affecting its financial situation and its ability to meet its commitments (includes the risk of collateral associated with securities loans as well as the risk of discounting by a credit rating agency). 11 Liabilities management Business (financial health) 11 There is a risk that the pension costs will be higher than forecast and/or higher year over year (which also impacts the company’s finances), affecting RRMD’s ability to achieve its long-range objectives and meet its commitments. 12 Consulting services for administrators Operational (adequate resources) 20There is a risk relating to retention of expertise and succession planning. 13 Consulting services for administrators Operational (management of suppliers and partners) 24 There is a risk that lack of performance or breach of contract by outside suppliers and by partners (asset managers, building managers, administrative managers, IT and data suppliers, asset custodian, etc.) could impact RRMD’s ability to meet its commitments and achieve its business objectives.

18. 18 Advantages of IRM  Improves the decision-making process, strengthens the organization’s governance, increases the ability to achieve objectives and narrows the gap between perception (of the plan) and reality.  Enables organizations to take advantage of optimization opportunities, take charge of their development and protect tangible and intangible organizational assets.  Helps improve results by managing risk proactively.  A tool to improve resource allocation according to the relative importance of the risks

19. 19 The IRM process is an ongoing one  The evolution of risk changes according to internal management, industry and other factors. Consequently, the plan’s risk profile is not static; rather, it evolves within its environment.  This evolution must be monitored and controlled to ensure continuity of activities.  The process gains by being continuous and dynamic. It offers tools and a flexible methodology to facilitate risk management over time.  Makes it possible to develop trend charts that help the plan track changes in risks and the impact of these risks on the ability to achieve objectives.

20. 20 Success factors  A commitment on the part of management and the pension committees, with clear guidelines that are effectively communicated  Solid functional leadership  A risk culture shared throughout the organization  Targeting of risk areas  A method of training and support geared to “learning through action”