Risk Management Best Practice

Pension Case Study

Author:
Lois Tullo, Executive-in-Residence, Global Risk Institute

Editor:
Sheila Judd, Executive-in-Residence, Global Risk Institute

This paper has been prepared by Lois Tullo, and edited by Sheila Judd, both Executives in
Residence at GRI. This is original research and applied theory authorized for GRI publication.


An Overview of GRAFT was published by GRI in October 2017. Available on our website, this article should be read before the Pension Case Study to provide the overview of the concept of the Global Risk and Trends Framework (GRAFT).

This Pension Case Study provides the process, implementation, and outputs of the GRAFT process. The complete GRAFT framework, including automated tools and a full suite of case studies, will be released later in 2018.


GLOBAL RISKS AND TRENDS FRAMEWORK CASE STUDY:

MAPLE PENSION FUND

In this case study, Maple Pension Fund reviews its fund objectives in the context of increasing risks that could result in reduced long-term performance within its existing portfolio. Using the Global Risks and Trends Framework process helped this pension fund refine its investment strategy and develop more targeted portfolio monitoring and proactive investment management practices. This increased the likelihood that the pension fund would achieve its growth objectives, remain within its risk appetite for investment decisions, and meet their liability and funding requirements.

ADDRESSING GLOBAL RISKS AND TRENDS AT “MAPLE PENSION FUND (MPF)”

Maple Pension Fund (MPF) [1] is a major player in the Canadian pension fund industry. The MPF was created by specific federal legislation that sets their mandates and assigns oversight of the activities of the pension fund to a board of directors. The organization is responsible for both assets and liabilities, the fund reports to the pension regulator that focuses on the soundness of the plans, as measured by their funding and solvency ratios, and on the protection of the rights of their members.

The board is concerned about Global Risks and Trends and how they may impact Canada and specifically MPF and its portfolio of investments and liability obligations. The board of MPF has asked their CEO, Michael Abu, to identify the implications of world events in the context of potential adverse effects on MPF’s portfolio. Michael used the GRAFT process Application Wheel [2], shown on the following page in Figure 1 (download full article to view) to outline the nine steps that their organization went through with their management team to address the board’s concerns. This was an iterative process based upon the key learnings of the team.


Footnotes

[1] Maple Pension Fund is a fictitious example of a Canadian Financial Institution created for the purpose of illustrating the GRAFT process.

[2] Lois Tullo, “A Global Risk & Trends Framework: Overview”, October 16, 2017


Download the full report:

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GRAFT-Appendix-3-Pension-Case-Study.pdf