Agenda item

This report, presented by Chris Norton, Strategy and Commissioning Manager (Treasury, Pensions, Audit, Insurance, and Risk), provided an update on the risks to the Fund and actions taken to manage them. It covered both the general risk register and the COVID-19 risk register.  

In respect of the general risk register, which was originally set before the pandemic impact, some risk assessment scores had increased as detailed in the report.

In respect of the Covid risk register which was originally set out after the pandemic impact had started, none of the risks levels had increased relative to expectations, and several had decreased in light of experience. 

In response to a query regarding the impact of Brexit, Chris Norton noted that this was a risk that was on the radar and the Pension Fund was relatively heavily weighted to UK equities.  Although Brexit was an issue causing volatility, Covid and international trade tensions were having a bigger impact.

In response to comments about the process of scoring and the mitigations in place around fraud, Chris Norton explained that scoring was undertaken by Fund Officers who reviewed the scores quarterly in accordance with the scoring matrix set out in the report.  A review of the risk framework for the County Council itself had taken place which had resulted in a revised risk management framework and it was hoped to follow that model from next year.  With respect to Fraud, there were numerous administrative checks in place as mitigation and no changes to the controls had been required as a result of the pandemic. In terms of risks with investment managers, custodian, brokers and within the administering authority (as detailed on page 23 of the pack) there were two drivers - controls not being strongly applied because of Covid impact on staffing and systems, and the potential for there to be more incentive or motivation to commit fraud if an individual’s circumstances were more difficult or desperate.  In terms of digital and wet signatures, this depended on the process.  Sometimes wet signatures were need but at other times Docusign digital signatures could be used. It was difficult to comment on whether the risk of fraud was higher or lower but in terms of actual fraud, there had not been any instances identified on the investment or administration side.  Vicky Jenks, Pension Administration Lead, commented that the Team were looking at online methods of ID verification to further mitigate against the risk of fraud.

In response to queries regarding the implications of the impact the pandemic was having on city and town centres and the associated value of commercial properties, Chris Norton advised that property investment fund managers had been foreseeing the reduction in the economy in the high street for some time and had been disinvesting in this area as a result, investing more in out of town warehouses and infrastructure for internet sales.  In terms of supporting High Streets, the Fund could, for example invest up to 5% in local impact investing, but at the time of the meeting, the investment strategy was silent on that option.  The issue for any investor and investee is to align the objectives of the Fund making the investment with the objectives of the entity seeking investment.  If it was the County Council making the investment, it would be a simple task to align with its objectives with regard to the High Street (for example economic development) but the objective of the Pension Fund is to pay pensions when due so it was more complex to make a connection with those objectives.  This topic will be explored during the next review of the investment strategy.

Resolved – that the Board noted the report.