Risk Control

Responsibilities

The Risk Control division is responsible for monitoring and measuring the financial risks and performance associated with the borrowing, debt management and investment of liquid reserves. It also ensures risk management policies reflect prevailing market practices and address counterparty exposures and monitors compliance. The division develops and implements risk management policies and the associated infrastructure to assess and monitor new business exposures, ensuring compliance with policies as approved by the Board of Directors.

The division also forecasts the Province’s IOD for the provincial budget and quarterly fiscal updates providing forecast-to-forecast variance analyses. It has the responsibility of managing the Province’s relationship with the credit rating agencies and assessing counterparty credit risk. It also oversees the development of the OFA’s Business Continuity Plan (BCP). Finally, the division provides systems development and information technology support to the OFA and OSIFA.

Results for 2003-04

Substantial progress was made to reduce operational risk in 2003-04 through the ongoing Model Risk Review Initiative. The Model Risk Review Initiative was established to assist in the mitigation of operational risk factors through the reviews of models and enhanced process documentation. This includes ensuring that data inputs, software code, pricing models, risk measurement tools and risk exposure estimates are current and accurate.

The division increased the scope and frequency of its stress testing to supplement current Value-at-Risk (VaR) reporting and to more comprehensively assess and report the risks inherent in current positions.

The division further strengthened the OFA’s credit risk monitoring capability through a number of revisions to the OFA’s Credit and Related Legal Risks Policy. As a result, the division has started monitoring settlement risk as part of credit risk measurement. The revisions also broadened the range of acceptable issuers of securities without compromising the OFA’s high credit quality standards. This will allow the OFA to invest in a wide range of securities issued by strong credits, thereby providing the Province with new opportunities to achieve higher returns on its liquid reserve investments.