In order to achieve the established operational goals, AP2 must take financial risk in its management. Financial risk is the single most important resource available to the Fund. This risk-taking is designed as effectively as possible in line with the definition of what constitutes exemplary management. The financial risks taken are carefully managed, controlled, followed up and evaluated. The Fund must have a good risk diversification and must take the risk that the Fund wants.

Risk management, risk analysis and risk control are therefore a central part of AP2’s operations and an integral part of the Fund’s governance. The Board of Directors is ultimately responsible for the risks associated with the Fund’s operations and for ensuring that there are appropriate processes for internal governance and control.

AP2’s main risks can be divided into financial, operational and impact risks.

The financial risks for AP2 are:
• Market risk
• Credit risk
• liquidity risk;

Operational risk refers to the risk of losses due to ineffective or failed internal processes, human error, faulty systems or external events. Follow-up of operational risks takes place at least annually through various tools such as self-assessment, workshops, process analysis or incident reporting.

Sustainability risks surround all types of risk and can be of different types and affect the Fund in different ways. They can be either financial risks or operational risks. An example of a sustainability risk that affects financial risk is fossil reserves. The risk means that the assets may become stranded as a result of the transition to fossil-free and thus risk losing value, which in turn causes the companies that hold them to decrease in value. This can be seen as a sustainability risk, but it is effectuated in the form of a financial risk. The most common sustainability risk factor during operational risks is reputational risk. The risk that investment activities will cause a loss of confidence in the business or the pension system.

In addition to the division into financial and operational risks, there is also the risk that an investment may harm people or the environment, without necessarily having an impact on financial or operational risk. These risks can be categorised under impact risks. High impact risks then mean that the Fund has difficulty achieving the goal of exemplary management. The risk that the Fund, through its investments, contributes to human rights violations is an example of such a risk.