Management framework | Norges Bank Investment Management

Issued 16 August 2016
Last updated 12 June 2024

Policy

The management framework describes how the business is managed,, and how strategy, planning and enterprise risk management are integrated. It further outlines the relationship between the organisational assets used, allocation of roles and responsibilities and how we manage daily activities in the organisation.

Overall framework

NBIM shall maintain an overall management framework, keep track and control of relevant organisational assets, and treat this as structural capital.
Organisational assets include the organisational structure, regulations and business rules, processes and activities, information assets, systems, services and technology, and the providers of these assets.
NBIM shall seek continuous improvement for all activities to support organisational effectiveness and cost efficiency in the management of the Government Pension Fund Global (the “Fund”).

Strategy and strategy implementation

NBIM's strategy sets the long-term direction of the organisation. The strategy shall be updated through a planning process in regular cycles and approved by the Executive Board.
NBIM shall evaluate both risks and opportunities related to the strategic objectives. The strategy shall support NBIM’s mission to safeguard and build financial wealth for the future generations.
Strategic objectives shall be decomposed into an actionable level as initiatives and projects (action plan).. Progress and status on the strategy shall be reported to the Executive Board at regular intervals.
There shall be a clear link between the strategy, its implementation through activities and corresponding budget and costs.

Enterprise risk management

NBIM shall apply an effective framework for enterprise risk management where enterprise risk is defined as all risks affecting NBIM’s organisation and business. Enterprise risk management includes the culture, capabilities and practices, integrated with strategy-setting and its execution, that the organisation relies on to manage risk in creating, preserving and realising value.
Enterprise risk management shall be integrated in strategy, strategy implementation and day-to-day operations.
The framework for enterprise risk management shall include strategic risk, investment risk and operational risk as the main risk classes.
Strategic risk is defined as the risk of not achieving strategic objectives as set out in the strategy plan.
Strategic risks shall be identified and the implications of the strategy for the overall risk profile shall be considered. Strategic risks shall be assessed and updated through the ongoing monitoring of the strategy plan.
Investment risk is defined as the risk of events affecting the return of our investments. Investment risk includes market risk, credit risk and counterparty risk.
Assessment of Environmental, Social and Corporate Governance (ESG) risks shall be integrated into the investment management process and managed in accordance with the Principles for responsible investment management in NBIM.
Operational risk is defined as the risk of an unwanted operational event with financial or reputational impact. The unwanted event may arise from breakdown of internal processes, human error, system failure or other events caused by third parties or other external factors.
Operational risk management shall be structured, systematic and integrated in the decision-making processes in NBIM with the aim to create value and support continuous improvement of NBIM's processes.
NBIM shall establish an effective internal control environment to provide reasonable assurance that objectives will be achieved.
Reputational impact shall be considered as a consequence applied across identified strategic, investment and operational risks.

Budgeting and cost-control

The annual budget proposal for the management of the Fund shall be submitted to the Executive Board in accordance with the requirements set out in the Supervisory Council's budget rules (Budsjettreglement).
The budget proposal shall show the relationship between the strategy, activities and resource use and provide sufficient information to manage and control the use of resources in the management of the fund.
The budget shall include an outline of the activities and capital expenditure planned for the applicable budget year, with comments on cost development in light of the strategy, objectives and available external benchmarks, analysis of key cost drivers, cost/benefit analysis for new investments or initiatives, risk factors and benefit realisation from previous initiatives where applicable.
The organisation and use of resources should be cost-effective and ensure that NBIM's operations and management of assets are carried out in a proper manner.
All activities incurring costs for the Fund shall be approved according to given authorisation limits and aligned with the budget before they are initiated.
Cost comparisons and tender processes shall be carried out for all major purchases of goods and services to ensure competition and cost efficiency.
Cost analysis shall be conducted on a regular basis for relevant areas.

Reporting

Reporting to the Executive Board shall include information of all significant matters relating to assets under management including status of investment management activities, status of the strategy implementation, status of costs compared to the approved budget and forecasts for the year, investment performance, operational risk and internal control in line with requirements set by the Executive Board.
The financial reporting for the Fund shall be prepared in accordance with the Regulation on the financial reporting of Norges Bank, laid down by the Ministry of Finance.
The financial reporting for the Fund shall encompass all assets and liabilities in the investment portfolio and include subsidiaries of Norges Bank that are exclusively established as part of the management of the Fund.
A separate annual report for the Fund, including annual financial reporting, shall be published no later than three months after the end of the year in accordance with the Management mandate. A half year report for the Fund, including interim financial reporting, shall be prepared with closing date 30 June.
The half year and annual financial reporting shall be submitted to the Executive Board as part of the half year and annual report for the Fund, in accordance with the NBIM CEO job description issued by the Executive Board.
Any significant changes in accounting policies and disclosures, or any information about items in the financial reporting that involve considerable risk or a high degree of discretionary judgement shall be reported to the Audit Committee and the Executive Board.
The annual financial reporting for the Fund shall be formally approved by the Executive Board as part of Norges Bank's annual financial statements.