Sun Life 2010 Annual Report Download - page 63

Our executive compensation philosophy recognizes the importance and contribution of a highly effective and motivated leadership
team in pursuing sustainable growth in shareholder value. We remain committed to ensuring that the design and governance of overall
compensation practices are aligned with our risk philosophy, principles and policies.
Capability Alignment
Our risk appetite is aligned with our inherent risk management capabilities. Our ability to perform robust risk assessments, the quality of
our risk governance and control environment and the depth and quality of our innovative risk response and pricing strategies are
particularly important capabilities in this regard. We proactively seek out profitable risk-taking opportunities in those areas where we
have established risk management skills and capabilities. Conversely, we endeavour to avoid risks that are beyond our risk-taking
capability.
Risk Budgeting
We seek to allocate our risk-taking capacity in a manner that optimizes the overall level of risk-adjusted returns and stakeholder value
creation. Budgeting of risk-taking capacity is managed through the application of prescribed risk tolerance limits and the embedding of
strong risk management discipline into a wide range of key management decision-making processes.
Portfolio Perspective
Risk/return trade-offs are assessed and managed not only based on the intrinsic merits of a particular opportunity, but also relative to
their marginal contribution to our overall risk profile and business portfolio. This perspective is extended to the development of risk
mitigation and pricing strategies, recognizing that often the most cost-effective way of managing risk involves utilizing available
diversification relationships already inherent in our business model and risk portfolio.
Risk to Reputation
A financial institution’s reputation is one of its most important assets. We recognize the increasingly important and high profile role that
a strong enterprise-wide risk management discipline can play in this regard. A key objective of our enterprise risk management
framework is to help ensure that it continues to operate under standards that support its ability to maintain and build upon a sound
corporate reputation and brand.
Accountability
Our enterprise-wide risk management framework sets out lines of responsibility and authority for risk-taking, governance and control.
The Company’s Board of Directors is ultimately responsible for ensuring that risk management policies and practices are in place.
Through approval of our risk appetite and ongoing oversight, the Board of Directors ensures that our principal risks are appropriately
identified and managed. The Board of Directors has delegated this function to its Risk Review Committee, which is a standing
committee of the Board of Directors. That Committee is comprised of independent directors, whose primary functions are to assist the
Board of Directors with its oversight role with respect to the review and approval of risk management policies, ensuring the
identification of major areas of risk facing the Company and the development of strategies to manage those risks, and to review
compliance with risk management policies implemented by the Company.
The Board of Directors has delegated the approval of investment risk management policies to its Investment Oversight Committee.
This committee, also composed of independent directors, is responsible for the oversight of investment policies, practices, procedures
and controls related to the management of the general fund investment portfolio, the approval and monitoring of the annual Investment
Plan and monitoring the investment performance of enterprise pension and savings plans.
The Board of Directors has delegated the approval of compliance risk management policies to its Governance and Conduct Review
Committee. This committee is also composed of independent directors. Its primary functions are to assist the Board of Directors with its
oversight role by developing effective corporate governance guidelines and processes; reviewing policies and processes to sustain
ethical behaviour; reviewing reports related to compliance with legal and regulatory matters; assessing the effectiveness of the Board
of Directors and its Committees as well as the contributions of individual Directors; and identifying and recommending for election as
Directors those individuals with Board-determined competencies, skills and qualities who are best suited to complement the current
Board composition.
Primary accountability for risk management is delegated by the Board of Directors to the Company’s CEO, and the CEO further
delegates responsibilities throughout the Company through a framework of management authorities and responsibilities. The CEO
delegates line accountability for the various classes of risk management to our executive officers, who are accountable for ensuring the
day-to-day management of enterprise risk in their scope of business accountability in accordance with Board approved risk policies and
this framework. In particular, business segment leaders have overall, front line accountability for managing the risks in their operations
and are supported by a network of business segment compliance and risk officers.
Our governance model for risk management also includes oversight from the various functional heads in the Corporate Office. There
are functional heads for all key business oversight functions such as the Chief Compliance Officer, the Chief Privacy Officer and the
Chief Internal Auditor. The Internal Audit function supports our risk management activities through ongoing assessments of the
effectiveness of, and adherence to, internal controls. All of the functional heads support the Chief Risk Officer (the “CRO”) in the
development and communication of the Company’s enterprise risk management function. The responsibilities of the CRO role include
developing and implementing enterprise-wide risk management strategies aimed at optimizing our global risk/return profile and
providing independent functional oversight of our enterprise-wide risk management programs by ensuring that effective risk
management processes are in place for risk identification, risk measurement and assessment, risk response development, risk
monitoring and control, and reporting and communication of risks inherent in our activities.
Management’s Discussion and Analysis Sun Life Financial Inc. Annual Report 2010 59