CalPERS rates reputational risk above investments

Risk to reputation is more important than risk to investments according to a survey of internal staff at CalPERS completed as part of its governance/risk management initiative.

Governance and operational risk was the most important risk (with 34 per cent) according to the survey followed by reputational risk (17 per cent) which rated above investment risk (14 per cent).

The survey also found staff believe the board and chief executive are the most responsible for setting risk parameters, while senior management are most responsible for managing risk.

The risk inventory survey forms part of the third phase of the fund’s enterprise-wide risk initiative, which aims to develop a risk profile of the fund and was designed to elicit “top of mind” risks from executives and staff.

The survey does not consider the risk mitigation measures and processes designed to identify, assess and manage these risk, they will be addressed in seven targeted focus groups.

The next phase of the project will be evaluating the governance/risk management structure and strategies to identify gaps that increase risk above the fund’s risk tolerance, with the project culminating in recommendations for ongoing enterprise risk management in January 2011.

The governance risk management initiative project team is led by Allen Goldstein of The Results Group, and reports to the ad hoc risk management committee established for this purpose.