Pensions and Employee Benefits Law Blog 

In recent years, we have seen a noticeable increase in the regulatory focus on risk management to address evolving and growing risks facing pension plan administrators (including cyber security, climate change and investment risks, to name a few):

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CAPSA Draft Risk Management Guideline

In May 2023, the Canadian Association of Pension Supervisory Authorities (CAPSA) released a final draft of its Risk Management Guideline for pension plans (Draft Risk Guideline).

Once finalized, CAPSA’s Draft Risk Guideline will provide guidance on establishing a risk framework that is intended to be adapted by pension plan administrators to suit their unique circumstances. The purpose of the Draft Risk Guideline is to provide a framework that can be used by administrators to evaluate and prioritize risks facing the plan while still allowing flexibility to implement in a way that reflects the plan’s circumstances.

The Draft Risk Guideline sets out the following framework for identifying and evaluating the risks facing a pension plan:

1. Identify plan objectives
2. Identify the specific types of risks facing the plan
3. Evaluate and prioritize risks according to overall threat posed to plan
4. Manage risks by putting appropriate controls in place
5. Monitor risks and repeat review at regular intervals

CAPSA also flags certain special risk categories for consideration by plans, including: outsourcing, cyber security, ESG, leverage, and investment risk. Administrators are encouraged to consider these specific risks as they have been specifically and expressly identified by CAPSA.

The Draft Risk Guideline is intended for all plan administrators of defined benefit, defined contribution, pooled registered, target benefit, and hybrid plans. While it does not have the force of law, CAPSA guidance is considered to be industry best practice and we expect that pension regulators may encourage or require administrators to adhere to CAPSA’s Risk Guideline. Therefore, plan administrators are encouraged to review and consider how to respond to the guidance from CAPSA.

For those wishing to submit comments on the draft Risk Guideline, the deadline to do so is September 30, 2023. Plan administrators are encouraged to familiarize themselves with the contents of the CAPSA Guideline in preparation for its release.

If you have any questions about the CAPSA Risk Guideline and its application to your pension plan, please contact a member of our Pensions and Employee Benefits Group for more information.

_{[1] While the management of risk in the context of pension plan administration is not new, the past two years has seen noticeably increased regulatory activity in this domain, with pension regulators addressing their approaches to risk management in various guidelines, papers, consultations, reports, etc. These include, but are not limited to:}

• _{BC FSA Natural Catastrophes and Climate-Related Risk Discussion Paper (July 2023)}
• _{OSFI Report on Artificial Intelligence (April 2023)}
• _{OSFI Climate Risk Management Guideline (March 2023)}
• _{ON FSRA Consultation on IT Risk Management (January 2023)}
• _{OSFI Guideline on Technology & Cyber Risk (July 2022)}
• _{OSFI Annual Risk Outlook (April 2022)}
• _{OSFI Pension Investment Risk Management Consultation Paper (March 2022)}
• _{ON FSRA Report re Alternative Assets and Risk Management (November 2021)}
• _{BC FSA Outsourcing Guideline (October 2021)}
• _{BC FSA Information Security Guideline (October 2021)}
• _{BC FSA Risk-Based Regulatory Framework for Pension Plans in BC (May 2014)}