Risk management

Sun Life has a Risk Management Framework (RMF) that spans all areas and geographies of our organization. The RMF is a comprehensive set of protocols and programs for conducting our business activities. It helps us ensure we apply a consistent approach to managing risk exposures across Sun Life. Exposures include but aren’t limited to environmental and social risks.

Our Risk Appetite Policy is integral to our approach. It outlines specific constraints that define the total level of risk that Sun Life is willing to accept.

Our risk culture is more than the requirements we set as an organization. It’s also about the way we behave and respond to risks. We need to consider risk in everything we do.

We have a Risk Culture Statement supported by six principles designed to embed a strong, unified culture throughout Sun Life. These principles are:

• tone from the top
• transparency
• effective challenge
• communication 
• incentives
• accountability 

We encourage discussions on risk decisions and urge employees to speak up about potential concerns.

Everyone at Sun Life is responsible for recognizing and managing risks when making business decisions. Our mandatory training program helps employees spot, minimize and report risks that could affect our business. This training covers topics such as: 

• Code of Conduct 
• Safety and Emergency Preparedness   
• Business Continuity
• Financial Crime Awareness
• Data Privacy and Information Protection
• Workplace Awareness and Respect

Our three lines of defence model outlines specific duties related to risks, oversight and reporting.

One of the ways we assess risk and the effectiveness of our internal controls is through stress testing. Stress testing is a risk management technique that includes integrated scenario testing, reverse scenario testing, and key assumption sensitivity testing. These exercises help us analyze Sun Life’s resilience under extreme circumstances. Those include a severe economic shock, health pandemic, cyber breach, extreme weather event and more. Our business continuity plans consider various situations under which a disruption may occur. Every year, we update our business continuity plans to integrate evolving risks and our scenario analysis findings. 

Climate change is one of the most serious and complex risks facing society today. It is one of Sun Life’s risks, which we manage within our overall RMF. 

We continue working to better understand potential climate-related risks and to improve our resilience against them. There are two major categories of climate-related risks: 

• Physical risk: risks related to physical impacts of climate change, including event-driven acute physical risks, for example more severe weather events; and chronic physical risks from longer-term shifts in climate patterns.
• Transition risk: risks related to the transition to a lower-carbon economy. This includes policy, legal, technology and market changes to address the need to reduce and adapt to climate change, and related reputation risk. 

Our definition of climate risk includes impacts in both of these categories. These impacts can include, but are not limited to, damage to owned and operated real assets including real estate and infrastructure, a reduction in the values of investments in public and private fixed income and non-fixed income assets tied to fossil fuels and carbon intensive industries, litigation risk to a company or sector in which we invest, health impacts to affected populations, and socio-economic, geopolitical and regulatory changes.

Our approach to addressing climate change risk also involves strengthening our ability to evaluate and report on potential impacts. We provide climate disclosures guided by the recommendations of the Task Force on Climate-related Financial Disclosures. These disclosures help investors and other stakeholders assess how Sun Life is tackling potential climate-related impacts on our business.

Climate change is one of many environmental and social risks we’re monitoring and responding to across our business. Others include cyber threats, issues of inequality and public health issues.

We also consider material ESG risk factors in mergers and acquisitions transactions. Our approach, informed by best practice, supports Sun Life in its consideration of ESG factors during the investment process.

Learn more:

• Climate and Environmental Action
• 2022 Task Force on Climate-related Financial Disclosures reporting