Risk management is the process of identifying, analysing, accepting, mitigating or transferring uncertainty in investment decisions. Fund managers apply risk management by analysing and attempting to quantify the potential loss of an investment and then acting accordingly.
In November 2018, the Central Bank of Paraguay approved the Regulations for Risk Management of the Retirement and Pension Fund for Employees of Banks and Related Institutions (Caja de Jubilaciones y Pensiones de Empleados de Bancos y Afines) (Bank Fund, hereinafter), which is made up of three sections: Financial Risks, Credit Risks and Operational Risks.
Within this framework, risk management rules were established to set guidelines and define strategies to comply with the provisions of the Regulations for Risk Management. In September 2020, the Institutional Strategic Plan (Plan Estratégico Institucional) was approved, establishing the guidelines and directives for risk management.
Risk can be defined as the level of uncertainty or potential loss a person is exposed to when making an investment decision. When making decisions and investments, we are exposed to risk.