TaxTMI 
TaxTMI 
Risk Management
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....stablish processes and procedures that ensure that risks are proactively identified and mitigated throughout the investment lifecycle. 1.1 Establishing a robust risk management framework The Pension Fund shall create a formal risk management framework that is integrated into the overall governance structure of the Scheme and includes the following: a) Risk identification: The Pension Fund must establish procedures to identify all potential risks across the Scheme's operations, including financial risks (market, credit, liquidity), operational risks (process breakdowns, systems failures), and regulatory risks (compliance with laws and regulations). b) Risk assessment: Once identified, each risk must be assessed in ter....
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....ate: 2.1 Market risk a) Definition: Market risk refers to the potential for losses due to fluctuations in the market value of assets, such as stocks, bonds, commodities, or currencies, and includes the following: i. Price risk: The risk that the price of a security or asset may change in an unfavorable direction, such as the stock prices falling, or the bond prices rising; ii. Volatility risk: The risk that market volatility may increase, causing larger-than-expected price swings; iii. Interest rate risk: The risk that changes in interest rates may affect the value of fixed-income securities, such as bonds, in the portfolio; and iv. Currency risk: The risk that the value of assets, liabilities....
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....n the Pension Fund is unable to buy or sell an asset in the market without significantly affecting its price, or when the Scheme cannot meet its short-term financial obligations, such as withdrawals from pension accounts, and includes the following: i. Asset liquidity risk: The risk that assets cannot be quickly converted to cash without incurring a loss; ii. Funding liquidity risk: The risk that the Scheme does not have sufficient cash or liquid assets to meet its obligations, such as investor redemptions or operational costs. b) Mitigation: To mitigate liquidity risk, the Pension Fund must maintain a liquid buffer of cash or highly liquid assets that can be accessed easily to meet shortterm obligations, assess t....
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....vices Centre Authority, or any other relevant regulatory authority; ii. Legal disputes: Potential litigation or legal action involving the Pension Fund or the Scheme; and iii. Contractual risk: Risk of failing to fulfil contractual obligations relating to investors, custodians, or service providers. b) Mitigation: Compliance risks must be mitigated by ensuring strict adherence to all relevant regulations, including periodic reviews of legal obligations, and the Compliance Officer shall monitor regulatory changes and ensure that the both Pension Fund and Scheme are compliant with the applicable rules and regulations. 3. Stress testing and scenario analysis Given the unpredictability of market and economic con....