Key Takeaways
- • The Management Board of Georgia's Pension Fund approved a new Risk Management Framework that took effect immediately upon publication.
- • The framework adopts a "three lines of defence" model, with the Risk Management Department under the Chief Risk Officer serving as the independent second line.
- • A zero-tolerance policy applies to serious non-investment risks, including fraud, corruption, money laundering, deliberate misconduct, major regulatory violations and personal data breaches.
- • The fund must conduct regular stress tests and scenario analyses and submit monthly and quarterly reports to the National Bank of Georgia and its Management Board.
Summary
The Management Board of the Georgian Pension Fund has approved a new Risk Management Framework, effective immediately upon publication. The document sets out procedures for managing, monitoring and reporting both investment and non-investment risks arising from the fund's operations.
The framework establishes a "three lines of defence" structure. The first line comprises the fund's departments, which manage risks within their daily activities. The second line is the Risk Management Department, which operates under the Chief Risk Officer and independently monitors compliance with risk limits. The third line is the Internal Audit Department, which oversees the effectiveness of internal controls and reports directly to the Management Board and the Audit Committee.
The framework defines investment risks as market, credit, currency, liquidity, concentration and asset valuation risks. Non-investment risks include operational, strategic, cybersecurity, legal and reputational threats. A zero-tolerance policy applies to serious non-investment risks, specifically fraud, corruption, money laundering, deliberate misconduct, major regulatory violations and personal data breaches.
To assess the potential impact of economic shocks on the investment portfolio, the Chief Risk Officer and the Risk Management Department will conduct regular stress tests and scenario analyses. The framework requires monthly and quarterly reporting to the National Bank of Georgia and the Management Board. The National Bank remains the regulator and supervisor of the fund's activities.
The framework establishes a "three lines of defence" structure. The first line comprises the fund's departments, which manage risks within their daily activities. The second line is the Risk Management Department, which operates under the Chief Risk Officer and independently monitors compliance with risk limits. The third line is the Internal Audit Department, which oversees the effectiveness of internal controls and reports directly to the Management Board and the Audit Committee.
The framework defines investment risks as market, credit, currency, liquidity, concentration and asset valuation risks. Non-investment risks include operational, strategic, cybersecurity, legal and reputational threats. A zero-tolerance policy applies to serious non-investment risks, specifically fraud, corruption, money laundering, deliberate misconduct, major regulatory violations and personal data breaches.
To assess the potential impact of economic shocks on the investment portfolio, the Chief Risk Officer and the Risk Management Department will conduct regular stress tests and scenario analyses. The framework requires monthly and quarterly reporting to the National Bank of Georgia and the Management Board. The National Bank remains the regulator and supervisor of the fund's activities.
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