Risk management plays a key role in Etera's investment activities. The goal is to meet the long-term targeted level of investment returns and to ensure the stability of Etera's solvency.
Investment risks result from fluctuations in the value and return on investments and are caused by changes occurring in different market variables. Key variables consist of share prices, interest rates, exchange rates, credit spreads and real estate prices.
Investment risks are managed by altering the amount and allocation of risk in the investment portfolio so that the amount and allocation of the risks are always correctly proportioned in terms of Etera's solvency and optimal in terms of the situation in the financial markets.
Investment portfolio risks are also managed through broad diversification. Etera's investment portfolio is widely diversified according to asset class, currency area, geographic area and investment style.
The Board of Directors defines the risk limits
Etera's Board of Directors has, in its investment policy, defined risk limits, i.e. how much risk can be taken in the different forms and in terms of the entire portfolio. Tactical allocation decisions can be made within these risk limits.
A key goal is to ensure that swift, and even preventive, action is taken in case solvency is threatened by market events. Tactical decisions can be made to minimise the impact of negative market events on the investment portfolio.
Investment risks are monitored separately from investment activities
Risk management related to investments has been organised separately from the Investment function. The Board of Directors monitors compliance with limits and authorisations of the investment plan based on regular reporting. In addition to monitoring risk limits, the risks of the investment portfolio are assessed using various complimentary analyses such as statistical models and simulations, sensitivity analyses as well as scenario analyses and stress tests.
The volume of Etera's investment operations and dynamism of its operating environment require smoothly functioning processes and IT systems. This ensures that the return and risk situations of the investments can be reported comprehensively, in real time and from a number of perspectives on a daily basis.