Investing involves prudent risk-taking. Identifying and managing risk is a core responsibility of all at GIC. Each employee has individual accountability and clearly defined responsibilities within our risk management framework.
We focus on building a portfolio that generates good long-term real returns with risks that are consistent with our Client’s risk tolerance. This is characterised by the Reference Portfolio, which comprises 65% global equities and 35% global bonds.
- The Reference Portfolio is not a performance benchmark for GIC. The Reference Portfolio is not a performance benchmark for GIC. There may be significant differences in performance between the GIC Portfolio and the Reference Portfolio from time to time.
- The risk exposure of the GIC Portfolio and the Reference Portfolio may differ occasionally. We are able to lower our risk exposure when markets are exuberant, or increase our risk exposure when opportunities arise, as part of our disciplined, long-term approach.
Risk management objectives
Our risk management objectives ensure that the risks we take are:
Risks taken are in line with our mandate, and within defined bounds authorised by our Client, Board and Management.
Key risk attributes and potential downside risks for the portfolio and each strategy are well-understood by our Client, Board and Management.
Risks taken are commensurate with the expected returns and efficiently allocated to optimise the risk-reward ratio of the portfolio.
Three lines of defence
Our risk management model operates along ‘Three Lines of Defence’ for clarity and transparency in risk ownership and accountability.
First Line of Defence
Risk management by business operations – all operating units are responsible daily for maintaining an appropriate risk and control environment as well as robust processes. Our forward-looking risk assessments are central to our long-term approach.
Second Line of Defence
Risk management and control functions, independent of risk-taking business units, provide appropriate checks and balances through day-to-day risk oversight and control. These include our legal, compliance and finance functions.
Third Line of Defence
Our Internal Audit Department provides an independent assessment and assurance on the adequacy of our internal risk management controls. It reports functionally to the Chairperson of the Audit Committee, and administratively to the Chief Executive Officer.
Our approach to risk management is multi-pronged. This does not mean that there are no risks within the portfolio, but that risks are well-identified and managed within our established risk tolerance.