Activity report 2022

Risk management

With the aim of continuously increasing awareness and responsibility for risk management at all levels, compenswiss has developed a solid framework based on three key principles: prevention, detection and response.

Its implementation is reviewed regularly to ensure that it is in line with industry best practices and has the capacity to adapt to new risks.

The Board of Directors sets the risk appetite, the resulting tolerances, and determines the management of major risks such as strategic risks.

Financial risks relating to investments

Financial risks are by their nature among the most significant risks facing compenswiss, given its activities. They include the decline in the value of assets under management due to market developments (market risk), the quality of borrowers or counterparties (credit risk) and the risk that all or part of the assets under management cannot be sold at a reasonable price due to a lack of buyers in the market (liquidity risk).

According to Article 3 paragraph 4 of the Social Security Funds Act, "the assets of the social security funds must be managed in such a manner that each social security fund is guaranteed the best possible balance between security and achieving a return consistent with market conditions in accordance with its investment and risk profile".

"The assets of the social security funds must be managed in such a manner that an optimal ratio between security and the achievement of a return in line with market conditions is guaranteed, in accordance with the investment and risk profile of the social security funds."

The Board of Directors sets investment rules in order to limit financial risks that exceed compenswiss' risk tolerance. The Management Board is responsible for the implementation of risk management and ensures that the principles of risk diversification are applied.

Market risks

Systemic market or security-specific risks may cause the value of investments and thus the assets of the funds to fluctuate. compenswiss can hedge certain of these market risks on a centralised basis.

Liquidity risks

Sufficient liquidity must be maintained at all times for each Social Security Fund in order to pay the compensation offices the account balances in their favour and to provide them with the advance funds necessary for the provision of statutory benefits.

Credit risks

Credit risks concern the creditworthiness of a counterparty. The solvency is assessed by ratings that take into account the risk of default. compenswiss sets credit limits and validates or revokes the counterparties used for monetary investments or derivative transactions.

Compliance risks

Compliance risks arise from non-compliance with legal and regulatory provisions, applicable standards of conduct and ethical management principles. They are subject to in-depth monitoring. With regard to investments, compenswiss ensures that portfolio managers comply with the defined investment limits and certain regulatory ratios as well as their contractual obligations.

In order to take into account the continuous evolution of Swiss and international laws and regulations having a direct or indirect impact on its activities, compenswiss has set up a regulatory monitoring system.

Operational risks

Operational risks are the risks of loss resulting from inadequate or failed internal processes, people or computer systems, or as a consequence of external events.

Mapping operational risks

compenswiss manages operational risks by identifying, analysing and assessing key factors such as people, processes, systems and service providers as part of a risk cartography. This is in addition to monitoring operational incidents with a qualitative and quantitative analysis, which makes it possible to optimise processes and systems including the Internal Control System (ICS).

Business Continuity Management (BCM)

BCM is a process that aims to protect the integrity of an entity. By identifying its risks, the institution can take appropriate measures and prepare responses to possible threats. compenswiss has developed a continuity plan that covers a wide range of scenarios and is tested regularly.

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