United Pensions (UP) has developed an efficient broad risk management cycle that comprises four steps: identify, quantify, manage and monitor. Along with investment risks, it has identified four main risk areas that the cycle focuses on:

• Operational risks. UP considers outsourcing and business continuity key risks to the smooth running of its operations;

• Compliance risks. As a cross-border pension fund, UP manages local pension arrangements of different types in various European countries, increasing the probability of potential risk exposures linked to political developments and legislative updates;

• Investment risks. The importance of defining a risk appetite that supports an acceptable level of exposure remains key to evaluating portfolio allocations as investment markets evolve;

• Actuarial and financial risks. UP undertakes short and long-term stress scenarios based on 360° screenings to obtain further insight into indexation results, the sustainability of technical provisions, dependency on future contributions, reduction of benefits and recovery capacity.

To overcome limitations of traditional risk management methodologies Dobrowolny Fundusz Emerytalny PZU (Dobrowolny) has developed an advanced, in-house risk management system that redefines the entire fund management process.

Dobrowolny’s model not only delivers superior risk management but also sets a new industry benchmark in portfolio management in Poland. The risk management model is rooted in the belief that every investment decision must be based on accurate data and thorough analysis.

By leveraging advanced techniques, the model assesses how each portfolio component contributes to overall risk, enabling Dobrowolny to eliminate cross-dependencies between instruments. This is particularly crucial to efficiently manage counterintuitive impacts. For example, two nominally identical positions might appear equivalent at first glance, yet one may be generating significant risk, while the other is reducing risk. This insight elevates the fund’s portfolio management process, allowing detection of risks that are not immediately visible and often defy common sense.