Effective risk management is crucial to our investment activities and an integral part of our portfolio management and business processes. Over the years, we have developed rigorous processes, strong and sustained governance, and effective measurement tools. Today, CDPQ can rely on a solid risk management culture, stemming from the daily practices of each one of our employees.
Our risk management approach
- Business unit risk managers dedicated to different asset classes, bridging the investment groups and the Risk Management group
- Sophisticated risk analysis tools, adapted to our management style based on assets rooted in the real economy
- A robust governance framework structured around decision-making and strategic committees and critical reference documents
- Rigorous analyses of risks associated with our investments
- An agile process for analyzing common risk themes in portfolios, that encourages the sharing of ideas and that drives strategic decision-making
- Integrated management of financial, operational and business risks, structured around a disciplined enterprise risk management (ERM) mechanism
Three lines of defense
Effective risk management relies on three lines of defense. Each encompasses specific functions; together they form a robust framework.
Our risk management team
Our risk management team works daily with our investment and general services teams. It plays a central role in evaluating and measuring risks, and maintains ongoing communication with our portfolio managers to support them in their activities.
Ensure a balance in managing the risk-return relationship, procure sophisticated risk management tools, provide risk management support to managers and promote a risk culture.
The Risk group is organized into four pillars
Business unit risk managers
Are integrated into each of the investment groups
Review the specific risks involved in investments
Analyze the risks of specialized portfolios
Transactional analysis and
Proposes risk governance and oversight
Manages counterparty and credit
Analyzes transactions and new products in collaboration with business unit risk managers
Supports enterprise risk management (ERM), including operational and reputational risks
Evaluates geopolitical risk
Analyzes cross-sectoral risk
Risk Measurement and Quantitative Analysis
Develops risk (credit, counterparty, liquidity, market and concentration) measurement models for the total portfolio and specialized portfolios
Supports portfolio construction and investment strategies
Carries out stress and sensitivity tests
High governance standards
Risk management governance ensures transparency in CDPQ’s investment activities and sound management of our clients’ assets. This governance entails several components:
Based on its mandate, which is approved by the appropriate body, each of the different committees plays a key role in managing investment and operational risks. Committees receive a rendering of accounts regarding various subjects and are solicited for their opinions. In addition, these committees recommend or approve investments, strategies, processes, policies or directives.
These committees are supported by various parties, who provide analyses and progress reports, to ensure an efficient and consistent integrated risk management process.
The Integrated Risk Management Policy (IRMP) applies to all of our activities and addresses all financial, business and operational risks.
The IRMP recommends risk limits and authorization levels for CDPQ overall and limits applicable to the cross-sector activities.
Financial risks are monitored in CDPQ’s total portfolio and in each of the specialized portfolios.
The investment policy of each specialized portfolio includes its management philosophy, eligible securities, performance targets, the benchmark and risk limits.
Business and operational risk oversight is carried out across CDPQ as well as by each of the business units. A strategic plan and policies and directives are adopted accordingly to address all of these risks.
Strategic investment planning (SIP)
The annual SIP process requires each investment group to adopt a four-year investment strategy that is in-line with CDPQ’s directions and expectations. Although execution of the strategies is decentralized, SIP ensures that our vision is centralized and that our portfolios are aligned. It therefore reinforces the decision-making process by targeting the best risk-return ratio in the choice of investments.