Document ID: chunk:federal_register_of_legislation:F2022L01492:body:0:p6
Version: federal_register_of_legislation:F2022L01492
Segment Type: other
Provision Reference: 
Character Range: 15063–18415

testing based on scenarios determined in paragraph 31 to confirm that each investment strategy, including the  targets and ranges set under paragraph 20(c) and paragraph 21(a) remain appropriate on at least an annual basis; and

       (c)          investment stress testing based on scenarios determined in paragraph 31, and other parameters deemed appropriate by the RSE licensee, to assess the performance of each investment option based on the actual asset allocation on at least an annual basis.

    33.         The comprehensive investment stress testing program must, at a minimum include:

       (a)          clearly articulated stress testing objectives, methodology, assumptions, frequency (at least annually), and risk factors, including the rationale for the severity of the adverse stress scenarios as required in paragraph 31;

       (b)          the roles and responsibilities of persons (both internal and external) involved in the design, implementation, review, reporting and oversight of investment stress testing, including the role of the Board, relevant Board committees and senior management;

       (c)          investment stress testing output or metrics that demonstrate the performance of each investment option under the stress scenarios required in paragraph 31;

       (d)          processes for the regular review of stress testing methodology and assumptions;

       (e)          circumstances that might lead to ad hoc investment stress testing, including triggers to indicate when ad hoc investment stress testing would be undertaken; and

       (f)           processes for ensuring that relevant and reliable data are used in investment stress testing.

    34.         An RSE licensee must ensure that the results of the comprehensive investment stress testing program are:

       (a)          reviewed periodically by the Board, relevant Board committees, and senior management; and

       (b)          reflected in the RSE licensee's investment governance framework.

    35.         The Board must document the methodology for stress scenario selection and how the results of the comprehensive stress testing program have been used in decision-making.

Liquidity and cash flow management

    36.         An RSE licensee must, at a minimum, have a liquidity management plan, approved by the Board, for each RSE within its business operations that:

       (a)          covers each investment option in the RSE;

       (b)          outlines the procedures determined by the RSE licensee for measuring and managing liquidity on an ongoing basis;

       (c)          includes consideration of how the liquidity of investment options in an RSE can be managed in a range of stress scenarios;

       (d)          identifies the circumstances the RSE licensee considers to be a significantly adverse liquidity outcome that requires action (liquidity event);

       (e)          outlines what action the RSE licensee will take when a liquidity event occurs;

       (f)           outlines the roles and responsibilities of persons involved in the management and oversight of liquidity risk, including the role of the Board, relevant Board committees and senior management; and

       (g)          outlines information, including key metrics, that must be reported to the Board, relevant