This article is republished from the chapter “Managing the Portfolio” in the GIC Report FY2022/23. You may read the full report here.
As a global investor, GIC is affected by significant market events that occur around the world and is exposed to a myriad of investment and non-investment risks that arise from these events.
To ensure operational resilience and our continued ability to manage the portfolio through a range of different stress scenarios arising from these market events, we have put in place appropriate policies and control processes to enhance our preparedness. GIC conducts scenario planning on a regular basis to identify potential enterprise risk events that can negatively impact the portfolio. The potential portfolio and operational impact of these events are evaluated through different stress tests and bottom-up assessments. For scenarios with potentially significant operational impact to GIC, operating manuals and contingency plans have been established to guide departments on the appropriate actions, laying out clear roles and responsibilities. To assess the robustness of these plans, cross-departmental table-top exercises are carried out regularly. During these exercises, dedicated workgroups, comprising representatives from relevant departments, will test the rigour of these plans to identify any gaps or areas of improvement.
In the past year, the Russian invasion of Ukraine and subsequent war tested GIC’s operational capabilities and preparedness. The range, complexity, and extent of sanctions applied, and operational challenges encountered were difficult to predict and constantly changing.
To safeguard our investments, each GIC employee had to be vigilant, agile, and remain steadfast to GIC’s mission, in order to navigate the complexities and challenges. Preparatory work before the war, such as the mandatory e-learning course on sanctions compliance and the table-top exercise on the impact of sanctions, proved to be invaluable. These preparations allowed us to achieve a high level of collaboration across various departments amidst the volatile and evolving situation.
Recent US bank failures and stresses in the European banking systems have also put our operational readiness to the test and affirmed GIC’s prudent approach in managing counterparty risks. Banks that were vulnerable to potential contagion were identified and precautionary actions were taken. Cyber security surveillance was also stepped up in the uncertain environment to prevent rogue actors from taking advantage of the many rerouted payment and settlement instructions that ensued.
We recognise that it is not possible to predict the full range of scenarios that may arise in a crisis. Nonetheless, we remain fully vigilant in monitoring the external environment for potential events and preparing our appropriate contingency measures. We will continue to sharpen our ability to respond to and manage the portfolio through such events in a prudent manner, in order to deliver the best possible outcome for our Client.