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This study focuses on the effectiveness of managing financial risks in social security institutions using a case of Local Authorities Pensions Fund (LAPF). The objectives of the study were to identify the financial risks available in LAPF operations, identify measures taken by LAPF to combat financial risks and examine the effectiveness of the existing measures being taken by LAPF in managing the financial risks. Structured interviews, questionnaires and observation were used to obtain the primary data and various documents were reviewed to gather secondary data. The data gathered were analysed by using SPSS computer program. Study findings show that, there are different financial risks facing LAPF including liquidity credit, operational, compliance, litigation, information technology security, political, market risks, and others. Furthermore, the study revealed that, the presence of these financial risks at LAPF means that the fund is vulnerable to encounter more problems like liquidity problems, loss of investment return, political influence, fraud and liability problems. The findings further show that, LAPF has established risk management framework in 2008 but it is not fully implemented.
It was concluded that, the availability of these financial risks in social security institutions impede their operations and sustainability. In order to get rid of these financial risks and ensure sustainability of the social security institution, it is recommended that, a fully fledged independent risk management unit should be established, in addition, LAPF should establish risk management policy, training staff on key risk indicators, control market risk by diversification, effective audit, use of derivatives for hedging purposes, and carrying out frequent performance analysis. In the same vein, the government should regulate social security institutions in the country to make sure that, their operations are safe and sustainable. |
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