Over and above fraud risk management, the Authority recognises that it faces other risks in its operations and has put in place robust risk management framework. NSSA’s approach to manging its risks is designed to provide fairness, transparency and accountability in our operations and ensure an appropriate balance between the rewards and risks taken across all its operations and investments. The Authority has adopted an Enterprise Wide Risk management framework supported by a commensurate risk appetite statement and risk management policies. The risk management framework is implemented in conjunction with broad strategies set by the Board of Directors and forms part of the Authority’s operating philosophy.

NSSA uses a three line defence mechanism in which the primary responsibility for risk management lies with the relevant business heads monitored by the independent risk management function and independent assurance from internal and external audit. Board oversight on risk management is executed through the Audit and Risk Committee which meet regularly to review the Authority’s risk profile and the effectiveness of risk management strategies.

The Authority recognises the following risks as critical to its delivery of service and have therefore put in place mechanisms to mitigate them:

Nature and extent of risks arising from financial instruments:

Liquidity risk

This is defined as the risk that the Authority is unable to meet its payment commitments such as pension payments when they fall due every month due to the failure by employers to remit contribution on time. Employers are reminded that it is a legal requirement to remit all contributions collected from employees to NSSA on time. Where possible employers are encouraged to approach the Authority to arrange for payments instead of waiting until legal action is taken against them. Employees are encouraged to report any abuse of NSSA contributions on the hotlines provided under the tip-of anonymous.

Internally, NSSA endeavours to reduce the likelihood and impact of such liquidity risk through matching the maturity profile of its investments to benefits payments cycle, maintaining sufficient liquidity buffer, diversifying funding base and management of short term and long term cash flows. The Authority carefully and prudently analyses the contributions and premium collections and invests in short-term investments that ensure that the portfolio duration tallies with the benefits payment cycle.

Funding risk

This refers to the risk that the Authority’s financial resources may not be enough to enable to Authority to keep on paying benefits. It may be caused by increase in fraudulent claims, falsification of records by employers and employees and non-remittance of contribution by employers. Employers are reminded that it is a legal requirement to remit all contributions collected from employees to NSSA on time. Where possible employers are encouraged to approach the Authority to arrange for payments instead of waiting until legal action is taken against them. Employees are encouraged to report any abuse of NSSA contributions on the hotlines provided under the tip-offs anonymous.

Market risk

The risk of a loss in the investment portfolio arising from adverse movements in market variables such as bonds, equity prices, interest rates, exchange rates, real estate prices, commodities, credit spreads and increased volatility of market variables. Market risk is managed in accordance with the purpose and strategic fit of each investment. Portfolio decisions are made based on reasonable and adequate basis based on detailed research and due diligence. The Authority strives to diversify its portfolio across asset classes, industries, within asset classes and within industries as guided by its Investment Policy Statement. Early warning indicators are also closely monitored to ensure appropriate action is taken to mitigate losses before the losses degenerate.

Operational risk

This is the risk of loss arising from failed or inadequate internal processes and systems, human error and fraud, non-adherence to procedures and unauthorized transactions. The Authority maintains a zero appetite for operational risk through robust policies and operational procedures backed by risk indicators that enable risk to be identified, monitored and mitigated.

The Authority manages operational risk through security access programs, strict and robust approval and authorization procedures, tip-offs anonymous programme, code of conduct and ethical guidelines and robust internal control mechanisms. Risk Control and Self-Assessment are an integral part of the operational risk management. The Authority uses risk registers and maintains risk event databases as part of managing operational risk.

If you are aware of any fraud, theft, corruption, abuse and any other unethical and inappropriate behaviour by anyone at NSSA and any of its subsidiaries or any company or individual who is doing anything that is unethical that may impact on NSSA business, please report to Deloitte Tip-offs Anonymous.

Project risks

The Authority is a significant player in infrastructure development and hence at any particular moment has significant and high value projects running. Project risks refer to potential loss arising from failed projects and project management systems. Project risks are managed and mitigated through a robust project risk management framework supported by strong board oversight.

Reputation risks

The Authority recognises that its brand name is a valuable assets that should be cherished and protected. Reputational risk is the risk of potential damage to the Authority’s brand image which may result in negative stakeholder perception on NSSA and its accompanying challenges. The Authority has adopted a transparent way to doing business including enhanced disclosure in a bid to promote open dialogue with its stakeholders. Stakeholders are encouraged to approach the Authority with any of their concerns for attention.