RAND WATER PROVIDENT FUND ANNUAL REPORT 2022-2023

An Active risk management Framework ensures our Fund’s long-term viability and growth, as well as our ability to create long-term value for all our stakeholders. Our risk management process is designed to continuously monitor the internal and external environment for the purpose of identifying any conditions or changes that may require us to mitigate the related risks. This ensures that we remain within our risk tolerance, achieve our business plans and realise our strategic objectives. The fund ensures that the framework considers the risks, opportunities, and other significant matters connected to the context in which the fund operates. It emphasises the legitimate and reasonable needs, interests and expectations of material stakeholders. In the year under review, the organisation held a risk assessment workshop that was internally facilitated by Fund consultants. The workshop reviewed the organisation’s business strategy and undertook an internal and external environmental scan to identify the risks that would impact the fund’s operations.

Top Residual Risks

No Risk Name

Risk Description

1

Market risk (capital loss and volatility)

Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in the market. Market risk applies to all investments accounted for at fair value. The Fund’s tolerance for volatility risk will be assessed when setting the investment strategy. The risk is recognised by the Board in setting the investment strategy. Increased volatility typically results in increased chances of incurring a capital loss over the short term, and there is a risk that this is not adequately captured in the approach to investment for members approaching retirement. Not being able to provide members with an appropriate Replacement Ratio. Not understanding the impact of decisions affecting the RR factors and not being able to provide benefits to dependents upon the death of a member. Lack of business continuity and institutional intellectual capital/ loss of skills due to no succession plan being in place. Inadequate training to equip trustees to fulfil duties. Lack of understanding of Fund’s objectives. Risk that inadequate investment returns are achieved compromising potential RRs that could be achieved. The risk that there are too many portfolios to choose from and/ or the portfolios selected are not risk profiled to suit the Fund members.

2

Negative real returns This arises if the nominal returns fall below the rate of inflation, and the real value of assets declines over time. This will impact dramatically on the ability to achieve targeted Replacement Ratio.

3

Not achieving the Fund’s main objective

4

Inadequate and loss of knowledge of trustees

5

Inadequate investment returns

6

Member Choice

Investment

16 Rand Water Provident Fund Annual Report | 2022-2023