Full report - SGI Canada

Employee future benefits
The Corporation’s benefit expense for its defined benefit pension plan and defined benefit service
recognition plans is calculated by the Corporation’s external benefits actuary utilizing management’s
best estimate of critical assumptions. These critical assumptions consist of: expected plan investment
performance, salary escalation, age at retirement, mortality of members and future pension indexing.
Management reviews and adjusts these assumptions as required on an annual basis. The financial impact
of changing these assumptions, along with actual experience being different from the assumptions, is
reflected in income on the Consolidated Statement of Operations.
The end of period discount rate is determined at each year-end using market rates of high-quality debt
instruments with cash flows that match the timing and amount of expected benefit payments.
Further details of the Corporation’s defined benefit plans are contained in note 16 to the consolidated
financial statements.
Risk Management
Risk Management is a process for recognizing and addressing risks that could affect the achievement
of corporate objectives. On an annual basis, management reviews the key risks faced by SGI CANADA
by identifying specific risk events and their potential impact on the Corporation’s operations, finances
and reputation. Each risk event is rated based on the likelihood of the event occurring and severity of the
consequences if it did occur, both before and after the application of potential mitigations.
The above process results in a risk profile for the Corporation, which is reviewed by the Risk Committee of
the Board of Directors. SGI’s Audit Services department also uses the risk profile in developing its annual
work plan, which provides an assurance component to SGI’s risk management process.
The following risks represent the most serious threat to SGI CANADA. Failure to manage any of these risks
could lead to significant operational, financial or reputational damage. The nature of these risks, along with
efforts to mitigate them, is summarized below.
Significant privacy breach
Risk: Personal information held by SGI CANADA for a large number of customers is lost, accessed or
disclosed to an unauthorized party, resulting in adverse legal, regulatory and financial
consequences, as well as a loss in confidence by customers and the shareholder.
Mitigation: Specific guidelines on how to handle personal information have been developed and, to
improve employees’ awareness of corporate privacy obligations, online privacy training and
the annual sign-off of the Code of Ethics and Conduct, and the Confidentiality and Non-
Disclosure Agreement is required for all staff. SGI CANADA has also implemented payment card
standards that do not allow the retention of electronic customer credit card information
and minimizes the exposure for paper-based sources. In 2009, the Corporation began
conducting privacy audits in areas that handle customer information, and continues to work
on the development of administrative, physical and technical safeguards to reduce the likelihood
and magnitude of a privacy breach.
Competition
Risk: Changes to the competitive landscape lead to reduced margins and/or loss of market share. These
changes include use of data and technology to target customers and the acquisition of business
through the Internet.
Mitigation: SGI CANADA’s response to increased competition has been through providing superior
service to its broker network including broker training on new products and technology. Outside
Saskatchewan, SGI CANADA has improved brokers’ contingent profit commission and appointed
brokers that utilize the Internet to attract customers. To become more market-focused,
SGI CANADA is reorganizing its underwriting function using a product management approach, and
is developing a marketing strategy to increase the focus on customer requirements.
Catastrophic claims loss
Risk: An event loss in excess of reinsurance limits, an aggregation of large losses within the corporate net
retention or the failure of a reinsurer could result in major financial losses for SGI CANADA.
Mitigation: SGI CANADA’s reinsurance limits were determined based on independent catastrophe
modeling, using a 1-in-250-year event assumption to calculate probable maximum loss. To mitigate
the risk of reinsurer failure, SGI CANADA and its reinsurance brokers monitor the reinsurer rating
provided by AM Best, and Standard and Poors.
Transfer and acquisition of expertise
Risk: SGI CANADA is unable to build and maintain the knowledge, skill and experience within the
organization’s workforce needed to thrive now and in the future, resulting in lower productivity,
higher operating costs and higher health and safety concerns from overworked employees.
Challenges include retirements, recruitment of qualified personnel in a tight labour market and the
need to support an analytical culture.
Mitigation: SGI CANADA has implemented a number of programs in this area, including competencybased
recruitment, mentoring programs and the monitoring of workplace engagement and
strategic clarity through employee surveys. A corporate learning strategy was created in 2008 to
grow people talent in support of a high-performing organization, and SGI CANADA has devoted
additional resources to training and development. SGI’s succession planning process focuses on
ensuring current senior management positions have backups and identifying high performing staff
who have potential for more senior roles.
Systems security
Risk: The security of SGI CANADA’s systems is compromised by a virus attack, system breach, or
unauthorized access to confidential or sensitive information by internal or external parties, resulting
in significant financial and reputational damage.
Mitigation: SGI CANADA created an Information Technology Security Policy in 2009, which includes
corporate standards for user access (including remote and external vendor access), passwords,
physical security and wireless networks. Antivirus, email filtering, firewalls and intrusion monitoring
are used, and the Corporation has a formal disposal process for all systems hardware. SGI has also
developed incident response procedures to decrease the severity of a breach, should one occur.
Customer focus
Risk: SGI CANADA is unable to identify or anticipate the needs of its policyholders and brokers, meet
those needs due to lack of internal collaboration or utilize the Internet to market products due to its
commitment to the broker distribution channel, leading to a loss of customers and market share.
Mitigation: SGI CANADA identifies the needs of its customers through claims customer surveys, broker
surveys and councils, as well as feedback from regional representatives, and works with the broker
community to address gaps in products or service. Annual product reviews are conducted internally to
identify pricing and coverage changes. As noted above, SGI CANADA is also developing a
marketing strategy to increase the focus on customer requirements, which will include promoting
the benefits of working with a broker and encouraging brokers to initiate selling over the Internet.
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