Managing Risk

Managing Risk

There are inherent risks whenever we invest, divest, or hold our assets, and wherever we operate.

Our portfolio of mostly equities means a higher year to year volatility of annual returns, including a higher risk of negative returns in any one year. The higher risk of negative returns in some years comes with an expectation of higher returns over the long term.

As an owner investor, we maintain full flexibility to deploy capital across listed and unlisted assets, and to adopt a long investment horizon. We do not have limits or targets for asset class, country, sector, theme or single name concentration. We manage our leverage and liquidity conservatively for resilience and flexibility, even in times of extreme stress.

We track and manage risks proactively and throughout market cycles.

Organisational Risk Management Framework

Our Organisational Risk Management Framework includes Risk Return Appetite Statements (RRAS) which set out various levels of risks tolerance, from reputational risk, to liquidity risk and sustained loss of overall portfolio value over prolonged periods.

RRAS 1 We have no tolerance for risks that could damage Temasek's reputation and credibility
We focus on performance over the long term
We have flexibility to take concentrated positions
We maintain a resilient balance sheet
We evaluate the potential for sustained loss of overall portfolio value over prolonged periods and use different scenarios to test our resilience

We promote a culture of risk awareness and balanced risk taking. Our risk sharing compensation philosophy fosters the spirit of ownership of risk outcomes over longer term market and economic cycles.

Day to day risk decisions are taken by management, while major risk decisions, including major investments and divestments, are Board level decisions.

For more information, please see How We Manage Risk in the Temasek Review.


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