Actuaries are solicited in the assessment of some or all of the operational risks faced by social security institutions due to their knowledge of various elements of the management of a system. The internal actuarial department also conducts its own risk assessment which will feed into the overall risk assessment of the organization.

The social security institution seeks actuarial input into the management of risks faced by social security schemes.

This guideline identifies some of the risks related to social security schemes, sets out the mechanisms to consider in addressing them through their identification, measurement and treatment using the risk management process set out in Guidelines 30, 31 and 32, and describes actuarial input into this process.

Once risk has been identified and measured, the social security institution makes appropriate decisions regarding the mitigation and treatment of risk.

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.