Workshop on Investment Governance and Asset and Liability Management

Context and Overview

Investment Governance is the decision-making and monitoring process that must be put in place to ensure social security assets are invested appropriately. It is not only consistent with good practice but adds value in low return times. It can be defined as ‘doing things right’ and ‘doing the right things’. Appropriate investment governance structures and mechanisms ensure effective management of social security reserve funds.

Investment Governance is important because:

• Social security must meet its benefit obligations and good investment of assets supports this.
• Risks are more complex and the external environment more challenging than ever before.
• Effective management improves the financial position of social security systems.

A key aspect of Investment Governance is taking into account liabilities appropriately. Ultimately, the aim of the investing institution is to meet its promises to members of social security schemes. The workshops will focus on liability driven investment and Asset Liability Management – how to systematically take into account scheme liabilities in the setting and carrying out of an investment strategy.

Workshop Aims

This three day virtual training workshop will cover key governance issues, relevant international examples and good practices and have interactive breakout sessions to facilitate the development of BPJS investment governance documents and processes. It is only with the foundations of Governance in place that an institution can carry out investment effectively. The workshop will also be used to help formulate the steps, processes and deliverables for the follow up investment work under the project.

A key element of the workshop will be the use of resources to support the investment governance principles set out in the ISSA Investment Guidelines. These Guidelines support social security institutions in the design, implementation and subsequent monitoring of an appropriate investment policy. The Guidelines provide guidance at all steps of the process from the setting up of appropriate structures and assigning responsibilities to the investment process itself. They are applicable to both social security institutions that carry out investment management internally as well as for those who use the services of external managers.

The aim of the workshop is therefore to improve investment governance knowledge for those involved in the investment management process as well as those overseeing the process. It will particularly focus on taking into account liabilities in the investment process.

Each individual day will have a different focus:

• Day 1: Investment Governance Principles and Structures
• Day 2: Liability driven investment, constraints and mapping exercise of current to optimal processes
• Day 3: Discussions around next steps – processes and deliverables; international practice and benchmarks

Workshop Content

The workshop will cover the following areas:

• Governance structures required for effective investment management
• Taking into account liabilities and constraints in the investment process
• Outline steps for follow on work

We will use appropriate material with the ISSA Guidelines on Investment of Social Security Funds as a key source and significant focus on international experience and case studies. There will be interactive sessions so that the BPJS can share with the ILO their current challenges and constraints so that work plans can be put in place to address these.

Key features and proposed structure of workshop

The following sets out the draft structure and content:

• Day 1: Investment Governance Principles and Structures (June 22nd, 13.00-16.30)
• Day 2: Liability driven investment and other constraints; mapping exercise of current to optimal processes (June 24th, 13.00-16.30)
• Day 3: Discussions around next steps – processes and deliverables; international practice and benchmarks (July 5th, 13.00-16.30).