Page 115 - KWAP_AR2022

FoR betteR GoveRnAnce Annual Report 2022 113

RISK MANAGEMENT
AND COMPLIANCE

In managing risk, KWAP adheres to the three lines of defence model in which:
In line with KWAP’s i. Primary responsibility, or the first line of defence, is with the individual business
expanded role in units;
both investment
and non-investment ii. The second line of defence comprises risk management, compliance and control
functions; and
activities over
the last 16 years, iii. The third line of defence is the internal audit function.
KWAP’s risk profile We remain very prudent in risk management of our investment and non-investment
has evolved, as activities, guided by the tone from the top as articulated in the KWAP’s Risk Appetite
the organisation Statement Policy.
grew both in size
and complexity. No. Risk Appetite Main Guiding Principles and Statement
Correspondingly 1 The Board and Investment Panel has general oversight and responsibility over
through the years, the Fund and approves the Risk Appetite Statement, which is presented as high
KWAP has invested level, broad, principle-based statements, to support the complex, multifaceted,
in building risk dynamic, and overlapping nature of risks in KWAP. The Investment Panel is
responsible for KWAP’s investment decisions while the Board is responsible
management for the overall level of risk that is undertaken by KWAP. The Investment Panel
capacity and and KWAP Board will take cognisance of this when carrying out activities.
capabilities.
2 The Board and Investment Panel recognise that there is a need to actively
manage the Fund’s investments with the objective to grow the fund size, achieve
sustainable long-term risk adjusted return on investments while ensuring
safety and sufficient liquidity in the Fund portfolio. This is to be achieved
through dynamic investment strategies balanced with sound risk management
practices, coupled with the need to balance its return expectations and risk
appetite. These risks should be reported to the Board and Investment Panel
on a periodic basis.
3 The Board and Investment Panel recognise that there is a willingness and
capacity to take on risks. The level of risk KWAP is willing to take should take
into consideration KWAP’s strategic objectives, stakeholder expectations,
financial goals and compensation strategies. This is assessed and considered
in KWAP’s Strategic Asset Allocation, Investment Strategies and Risk
Management Framework.