Risk types

 
The Group is exposed to the following main risks:
 
Risk category (primary)
Risk type (secondary) and description
Potential significant impact
Operational Operational risk is the risk that there is a loss as a result of inadequate or failed internal processes, people or systems and external events. Operational risk includes: All Group businesses
Information and technology risk: the risk of obsolescence of infrastructure, deficiency in integration, failures/inadequacies in systems/networks and the loss of accuracy, confidentiality, availability and integrity of data.
Going concern/business continuity risk: the risk that inadequate processes, people, financial controls and resources exist to continue business in the foreseeable future.
Legal risk: the risk that the Group will be exposed to contractual obligations which have not been provided for.
Compliance risk: the risk of not complying with laws and regulations, as well as investment management mandates.
Human resources risk: the risk that the Group does not have access to appropriate skills and staff complement to operate and effectively manage other operational risk.
Fraud risk: the risk of financial crime and unlawful conduct occurring within the Group.
Taxation risk: the risk of financial loss owing to changes in tax legislation that result in the actual tax on shareholders' fund earnings being higher than expected, with a corresponding reduction in return on GEV; or the actual policyholder tax being higher than that assumed in the determination of premium rates and guaranteed policy benefits.
Regulatory risk: the risk that new acts or regulations will result in the need to change business practices that may lead to financial loss.
Process risk: the risk of loss as a result of failed or inadequate internal processes.
Project risk: the risks inherent in major projects.
Reputational Reputational risk is the risk that the actions of a business (e.g. the treatment of clients, employment equity and social responsibility) harm its reputation and brand. All Group businesses
Strategic Strategic risk is the risk that the Group's strategy is inappropriate that the Group is unable to implement its strategy. All Group businesses
Market Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in the market. Market risk includes: Life insurance Retail credit Capital markets Short-term insurance
Equity risk: the risk that the value of a financial instrument will fluctuate as a result of changes in equity prices.
Interest rate risk: the risk that the value of a financial instrument will fluctuate as a result of changes in interest rates and the risk that a mismatch loss will be incurred in respect of a matched asset/liability position following changes in interest rates.
Currency risk: the risk that the rand value of a financial instrument or liability will fluctuate owing to changes in foreign exchange rates.
Property risk: the risk that the value of investment properties will fluctuate as a result of changes in the environment.
Asset liability mismatching risk: the risk that losses will be incurred as a result of a deviation between asset and liability cash flows, prices or carrying amounts.
Concentration risk: the risk of losses associated with inadequately diversified asset portfolios. This may arise either from a lack of diversification in the asset portfolio, or from large exposure to default risk by a single issuer of securities or a group of related issuers (market risk concentrations).
Market Liquidity Risk (also known as trading liquidity risk or asset liquidity risk): risk stemming from the lack of marketability of a financial instrument that cannot be bought or sold quickly enough to prevent or minimise a loss (or realise the required profit).
Credit Credit risk is the risk of default and change in the credit quality of issuers of securities, counterparties and intermediaries to whom the company has exposure. Credit risk includes: Life insurance Retail credit Capital markets Short-term insurance Corporate
Default risk: credit risk arising from the inability or unwillingness of a counterparty to a financial instrument to discharge its contractual obligations.
Downgrade or Migration risk: risk that changes in the possibility of a future default by an obligator will adversely affect the present value of the contract with the obligator.
Settlement risk: risk arising from the lag between the transaction and settlement dates of securities transactions.
Reinsurance counterparty risk: concentration risk with individual reinsurers, owing to the nature of the reinsurance market and the restricted range of reinsurers that have acceptable credit ratings.
Credit spread risk: the sensitivity of financial instruments to changes in the level or volatility of credit spreads over the risk-free interest rate term structure.
Liquidity Liquidity risk is the risk relating to the difficulty/inability to accessing/raising funds to meet commitments associated with financial instruments or policy contracts. Life insurance Retail credit Capital markets Short-term insurance Corporate
Insurance risk (life business) Insurance risk (life business): risk arising from the underwriting of life insurance contracts, in relation to the perils covered and the processes used in the conduct of business. It includes: Life insurance
Underwriting risk: the risk that the actual experience relating to mortality, disability and medical risks will deviate negatively from the expected experience used in the pricing of solutions and valuation of policy liabilities.
Persistency risk: the risk of financial loss owing to negative lapse, surrender and paid-up experience.
Expense risk: the risk of loss owing to actual expense experience being worse than that assumed in premium rates and the valuation of policy liabilities.
Concentration risk: the risk of financial loss owing to having written large proportions of business with policyholders of the same/similar risk profile.
Insurance risk (short-term insurance business) Insurance risk (short-term insurance business): risk arising from the underwriting of non-life insurance contracts, in relation to the perils covered and the processes used in the conduct of business. It includes: Short-term insurance
Claims risk: refers to a change in value caused by the ultimate costs for full contractual obligations varying from those assumed when these obligations were estimated.
Catastrophe risk: the risk of loss, or of adverse change in the value of insurance liabilities, resulting from significant uncertainty relating to the pricing and provisioning assumptions for extreme or exceptional events.