Sun Life 2012 Annual Report Download - page 60

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 based on the intrinsic merits of a particular opportunity and by 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 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 and we recognize the importance of a strong enterprise-wide risk
management discipline to manage this risk. 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 brand and reputation.
Governance Structure and Accountabilities
Our enterprise risk management framework sets out lines of responsibility and authority for risk-taking, governance and control.
Board of Directors
Our Board of Directors is 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 primary oversight of risk management to its Risk Review Committee, which is a standing
committee of the Board of Directors. The primary function of the Risk Review Committee is to assist the Board of Directors with its
oversight of the enterprise risk framework in order to promote a balanced business and product model that will achieve desired risk-
adjusted returns and allocate capital accordingly. The Risk Review Committee oversees the identification of major areas of risks, the
development of strategies to manage those risks, reviews and approves risk management policies and reviews compliance with these
policies. The Risk Review Committee oversees policies, practices, procedures and controls related to the capital structure, compliance
with regulatory capital requirements and reviews and monitors the Capital plan.
The Board of Directors has delegated to the Governance, Nomination and Investment Committee responsibilities related to monitoring
of the Investment Plan, overseeing practices, procedures and controls related to the management of the general fund investment
portfolio, and developing effective corporate governance guidelines and processes.
The Board of Directors has delegated the approval of compliance policies to the Audit and Conduct Review Committee. Its primary
functions are to assist the Board of Directors with its oversight role by reviewing the integrity of financial statements and information
provided to shareholders and others, compliance with financial regulatory requirements, adequacy and effectiveness of the internal
controls implemented and maintained by management, policies and processes to sustain ethical behaviour, compliance with legal and
regulatory requirements and the identification and management of compliance risk; and the qualifications, independence and
performance of the external auditor who is accountable to the committee, the Board of Directors and our shareholders.
The Management Resources Committee is responsible for assisting the Board of Directors in ensuring we have the leadership
resources for succession of senior executive positions and programs to effectively attract, retain, develop and reward executives for
achieving our strategic objectives.
Senior Management Committees
The Executive Risk Committee is responsible for providing executive oversight of the Company’s enterprise risk management activities.
This mandate includes executive oversight of the development and articulation of the Company’s formal risk appetite and tolerance
limits, the processes in place to ensure ongoing identification of major risks facing the Company and the development of strategies and
tactics to manage those risks in accordance with the risk appetite and overall objective of optimizing the global risk and return of the
Company.
The Corporate Credit Committee is responsible for addressing credit risk holistically within the Company and makes significant credit
decisions. The committee provides a forum to discuss credit from an aggregated perspective, supporting credit risk discussions
throughout the organization, and providing a forum to challenge decisions and debate credit risk issues.
The Corporate Asset Liability Management Committee is responsible for providing executive oversight and direction for the effective
measurement, control and management of the market and liquidity risks arising from the Company’s investing, financing and insurance
underwriting activities.
The Executive Investment Committee is responsible for providing oversight on new investment initiatives and reviewing resource
capacity, overall portfolio analytics and portfolio composition, sector reviews, derivative processes and positions, impairment reviews,
quarterly financial information, the annual investment plan, new investment initiatives, investment finance systems/projects and
investment control processes.
Accountabilities
Primary accountability for risk management is delegated by the Board of Directors to our CEO, and the CEO further delegates
responsibilities throughout the Company through 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 management of risk in their
scope of business accountability is in accordance with Board-approved risk policies and the risk management framework. In particular,
business segment leaders have overall, front line accountability for managing the risks in their operations and a network of compliance
and risk officers provide independent oversight of these activities.
58 Sun Life Financial Inc. Annual Report 2012 Management’s Discussion and Analysis