Agenda item

This report presents the revised Risk Strategy and updated Risk Register for the Brent Pension Fund Pensions Administration Service.

Sawan Shah (Head of Finance, Brent Council) introduced a report, presenting the revised Risk Strategy and updated Risk Register for the Brent Pension Fund Administration Service.  In considering the report, members noted the changes made following a review of the Risk Strategy (attached as Appendix 2 to the report) which had been designed to reflect changes in the Local Government Pension Scheme and the broader environment, with the main changes including:

• An update section 7 of the strategy to develop key principles of risk management; and
• An update of the risk analysis (Section 10) to adjust the scoring of impact and likelihood to a five-point scale and ensure the descriptions matched those within the Council’s risk strategy.

Members were advised that the changes within the revised risk strategy had been designed to assess and score impact across financial impact, service impact and reputational impact with all three elements of each risk being combined and weighed to arrive at a composite score for impact based on the criteria set out within section 3.2.5 of the report.

Following an update of the Strategy, members were advised that key changes had been made to the Risk Register (attached as Appendix 1 to the report). These changes included:

·       All risks having been re-scored in line with the updating scoring descriptions in the risk strategy.

·       The risk register having been refreshed with similar risks being consolidated to avoid unnecessary duplication.

·       The inclusion of a new risk, Item 3.5, to cover the transfer of Brent's pensions payroll to LPPA.

In thanking Sawan Shah for the overview, the Chair welcomed comments from Board members. Contributions, questions, and responses were as follows:

• Further updates were sought on the risks that had been RAG rated as red within the refreshed Risk Register relating to cyber security and the geographic and economic risks impacting investments.  In terms of cyber risk, the Board was advised that whilst Brent had an established cyber strategy in place and LPPA had also implemented several controls in relation to cyber security, the high risk identified had been designed to reflect the increased threat posed given recent attacks on other public sector organisations and Councils targeting backup systems and third-party suppliers.  Whilst mitigations and controls were subject to regular and ongoing review and felt to provide a high level of protection, the risk was still considered to be high given the need to safeguard the integrity, confidentiality and availability of the pension scheme member data stored across both organisations.  In response to a further query regarding the Council’s ability to withstand and recover from a cyber-attack, the Board was advised that an update would need to be sought from the Council’s Shared Technology Service (STS) regarding the specific measures and controls in place although the significant investment made to protect against risk was noted and recognised.

On the topic of geographic and economic risk, whilst recognising the more uncertain nature and volatility created as a result of current geopolitical events and the impact on economic markets, assurance was provided of the work being undertaken by officers in conjunction with the Fund Investment Advisors and actuary to actively monitor these impacts and adjust the Fund investment strategy as required.  Members were also reminded that the Fund held a well-diversified investment portfolio, which included a mixture of growth, income, and protection assets, limiting exposure to any specific market based on professional advice. The quarterly investment monitoring updates provided for the Pension Fund Sub Committee and Pension Board also provided the opportunity for regularly monitoring.

• [JK1] Responding to a query on the risk to investments created by climate change and global warming, the Board were advised that that this had been recognised as an issue with the Pension Fund Sub Committee having already begun to evolve the Fund’s Investment Strategy to take account of both the risks and opportunities identified as a result of climate risk.  Referring to the update included on the Board agenda, which had been considered by the last Pension Fund Sub Committee regarding the progress being made on the Fund’s Net Zero Rad Map, the Board were advised, as an example, of the work being undertaken with the London CIV to develop an infrastructure fund with a significant renewable component along with the development of Environmental, Social and Governance (ESG) guidelines in the management of assets held through them and the introduction of an allocation by the Fund into BlackRock’s Low Carbon equity fund as an initial step towards more responsible investment focussed more actively around reducing the carbon intensity of the fund.  In addition, the Board were advised of work being undertaken to review the passive global equities portfolio held by the Fund, given the impact that reducing emissions in that area would have in supporting the Fund moving towards it net zero ambitions and on which a further update was due to be provided for the Pension Fund Sub Committee at their next meeting.

[JK2] 

• In response to further clarification regarding the RAG rating scale, the Board was advised that a key would be included in future reports. The basic scale involved green representing risk levels assessed as 1 or 2, yellow as 3 or 4, orange as 4 to 8, dark orange as 9 to 14 and red as 15 or above.

The Board welcomed the report, and as no further issues were raised, it was RESOLVED to note the overall report, including the key changes to the Risk Register (as detailed in Appendix 1 and set out in section 3.2.8 of the report), and to agree on the updated Risk Strategy (as detailed in Appendix 1 of the report[JK3] ).