The social security institution sets out appropriate processes and structures to measure risk.

The measurement of risk consists of assessing the frequency and severity of the risks identified as well as the likely distribution of outcomes. The frequency of a risk is the probability the event will occur; the severity is the financial implication; while the distribution refers to how widely outcomes are likely to vary from the mean expected event.

The social security institution sets out appropriate processes and structures to identify risk.

The social security institution establishes a risk function that oversees the management of risk and reports to the board, if any, and/or management. This function, and the processes carried out or overseen by it, require actuarial input. The risk function coordinates with other functions to ensure effective risk management.

Although the role of social security is to respond effectively to life-cycle risks of the population covered, the management, financing, administration and delivery of benefits and services supporting this role are also subject to risk. The risks inherent in what social security institutions do are multifaceted, changing and often complex. The nature of risk depends on outside trends and factors as well as how the institution carries out and monitors tasks internally.

The social security institution communicates actuarial information in a way that is appropriate for the intended audience.

It is often difficult to communicate technical information to different stakeholders. These stakeholders include board members, parliamentarians and plan participants who will have different levels of skills, experience and expertise. The social security institution, with the assistance of actuaries, should work at preparing communications that address the needs of both technical and general audiences.

The social security institution provides stakeholders with regular, timely and comprehensive information on the actuarial status of the social security scheme. The social security institution informs stakeholders, in a timely manner, of any changes in the scheme’s provisions and their impact on the sustainability of the scheme and adequacy of benefits.

The social security organization follows a well-defined reporting process with respect to the actuarial valuation of a social security scheme.

A legislated, well-established and well-defined reporting process is a vital part of the good governance procedures for social security programmes. This guideline should be read together with Guidelines 1 and 43.

The board (if any), management of the social security institution and the actuary communicate clearly and effectively. This exchange of information improves management but doesn’t negatively impact the independence of the actuary.

A well-defined reporting process is a vital element of good governance for social security schemes. Actuarial and financial reports based on sound data, assumptions and methodology contribute to the financial sustainability of schemes. Information presented in such reports can send “early warning signals” if a scheme is experiencing difficulties; it can identify short-term and long-term trends that have a potential to make the scheme unsustainable, and, as a result, trigger public and other stakeholder consultation regarding the sustainability of the scheme.

The actuary inputs into the investment reporting process to ensure that information disclosed is accurate and presented in an appropriate way. The actuary also provides input into the decision-making process in respect of what information to disclose.