The CEFC has established a Risk Management Framework to monitor and manage risks for the Corporation's investments and for the Corporation itself.
The Risk Management Framework establishes six functional pillars through which the Corporation manages risk, namely Governance; Strategy; Risk identification, profiling and reviews; Compliance; Controls and Assurance.
Governance is the key overarching function to effective risk management. The CEFC's objective in implementing good governance is to create an operating environment where sound, transparent and well-informed decision making is facilitated. Strategy, Risk identification, profiling and reviews, each determine key risk areas that, in addition to specific risk management plans, are fundamentally addressed through the supportive risk pillars of Compliance, Controls and Assurance.
As an entity whose primary activity is its investment function, the CEFC has a central focus on managing and pricing all types of investment risk. As a responsible investor of public funds, the CEFC is ever conscious that return does not come without risk and the levels of investment return and public policy outcomes should be commensurate with assumed risk. An investment strategy that is too risk-averse would not allow the CEFC to fulfil its objectives and public policy purpose. On the other hand, an approach that is too tolerant of investment risk could lead to capital losses. The CEFC recognises this reality and the Investment Policies are an integral part of the Risk Management Framework that embed active risk management and mitigation of risks into all areas of the CEFC's investment functions.
The portfolio benchmark return requirements under the Investment Mandate informs the Corporation's investment risk appetite which guides investment decisions where the Corporation seeks to balance risk, return and public policy outcomes in delivering the Corporation's objectives.