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Risk Management

We are committed to providing secure pensions to our members by investing in a broad range of assets in a manner that strives to earn superior returns without taking undue risk. It is our objective to ensure that the value of the net assets of the Plan is sufficient to pay all pensions promised to members. Our ability to meet this objective is affected by two factors: fluctuations in the value of the

investment portfolio, which are driven by changes in investment markets (primarily market, credit and liquidity risk); and
changes in the value of the Plan’s accrued benefit obligation, which is driven by both economic and demographic factors.

Risk management is an essential part of our corporate and investment strategy as it can mitigate the negative impact of the above factors on the investment portfolio and the accrued benefit obligation. Risk management is supported by our system of internal controls, procedures and corporate policies including our Code of Conduct and Statements of Investment Policies and Procedures. We continually strive to improve our enterprise-wide approach which involves our AC Board, management and employees. All employees are required to adhere to policies, procedures and standards that a prudent person would reasonably exercise when managing the assets of others.

The value of the Plan’s accrued benefit obligation is sensitive to movements in interest rates and inflation rates similar to changes in the value of a portfolio consisting of real return bonds and nominal bonds. However the Plan invests in a combination of equities, infrastructure, real estate and a broad range of interest bearing instruments. While this investment strategy diversifies the investment portfolio and assists in maintaining stable and cost-effective contribution rates, it produces a mismatch between the economic characteristics of the accrued benefit obligation and the investment assets. This exposes the Plan to various risks that must be closely monitored and managed.

Risks Affecting the OMERS Pension Plans

The Enterprise Risk Management program has identified four categories of risks that could potentially have an adverse effect on the OMERS Pension Plans.

First, there are investment risks (market, credit and liquidity risk) that are an inherent part of investing in capital markets;
Second, there are an array of operational risks that we face as a business operation;
Third, there are strategic risks inherent in the execution of our longer-term plan; and
Finally, there are legal and compliance risks that we deal with in the management and administration of the OMERS Pension Plans under the laws of Canada as well as laws and regulations of the various countries where we invest.