Circular Letter of the Financial Services Authority Number 22/SEOJK.05/2020 Concerning Pension Fund Health Assessment

To:
Management and Acting Management of Pension Funds, At your location.

COPY
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA NUMBER 22/SEOJK.05/2020 CONCERNING PENSION FUND HEALTH ASSESSMENT

In accordance with the mandate of Article 7 paragraph (5), Article 8 paragraph (8), Article 9 paragraph (8), Article 10 paragraph (8), Article 12 paragraph (6), and Article 17 paragraph (5) of the Financial Services Authority Regulation Number 28/POJK.05/2020 concerning Health Assessment of Nonbank Financial Institutions (State Gazette of the Republic of Indonesia Year 2020 Number 120, Supplement to the State Gazette of the Republic of Indonesia Number 6504), it is necessary to further regulate the assessment of pension fund health in this Financial Services Authority Circular Letter as follows:

I. GENERAL PROVISIONS

In this Financial Services Authority Circular Letter, the following terms are defined:

Pension Fund is a legal entity that manages and implements a pension benefit promise program, including Pension Funds that implement all or part of their business using Sharia principles.
Employer Pension Fund, hereinafter abbreviated as DPPK, is a Pension Fund established by a person or entity that employs employees, as the founder, to implement a defined benefit pension program or a defined contribution pension program, for the benefit of some or all of its employees as participants, and which creates obligations for the employer.
Financial Institution Pension Fund, hereinafter abbreviated as DPLK, is a Pension Fund established by a bank or life insurance company to implement a defined contribution pension program for individuals, whether employees or self-employed workers, who are separate from the DPPK for employees of the respective bank or life insurance company.
Founder is:
a. a person or entity that establishes a DPPK; or b. a bank or life insurance company that establishes a DPLK.
Management is the management of the Pension Fund.
Acting Management is an official from the DPLK Founder assigned to carry out the operational activities of the DPLK.
Supervisory Board is the Supervisory Board of the Pension Fund.
Sharia Supervisory Board, hereinafter abbreviated as DPS, is a board responsible for providing advice and suggestions and supervising the fulfillment of Sharia principles in the implementation of pension programs based on Sharia principles.
Pension Fund Health Level is the result of assessing the condition of the Pension Fund regarding good corporate governance for the Pension Fund, risk profile, profitability, and pension fund funding.
Composite Rank is the final result of the Pension Fund Health Level assessment.
Subsidiary Company is a company owned and/or controlled by the Pension Fund directly or indirectly within the country.
Control is an action aimed at influencing the management and/or policy of a company in any way, whether directly or indirectly.

II. GENERAL PRINCIPLES OF PENSION FUND HEALTH ASSESSMENT

The general principles in conducting assessments of the Pension Fund Health Level are as follows:
a. risk-oriented; b. proportionality;
c. materiality and significance; and
d. comprehensive and structured.
The meaning of risk-oriented as referred to in number 1 letter a includes, among others:
a. the Pension Fund Health Level assessment is based on the Pension Fund's risks and the impact on the overall performance of the Pension Fund; b. the Pension Fund Health Level assessment is conducted by identifying internal and external factors that can increase risks or affect the financial performance of the Pension Fund currently and in the future; and
c. Pension Funds are expected to be able to detect the root causes of Pension Fund problems earlier and take effective and efficient preventive and corrective steps.
The meaning of proportionality as referred to in number 1 letter b includes, among others:
a. the use of parameters or indicators in each factor of the Pension Fund Health Level assessment is conducted by considering the characteristics and complexity of the Pension Fund's business; b. the parameters or indicators for assessing the Pension Fund Health Level in this Financial Services Authority Circular Letter are minimum standards that must be used to assess the Pension Fund Health Level; and
c. in addition to the parameters or indicators as referred to in letter b, Pension Funds may use additional parameters or indicators according to the characteristics and complexity of the business in assessing the Pension Fund Health Level so that it can reflect the condition of the Pension Fund better.
The meaning of materiality and significance as referred to in number 1 letter c includes, among others:
a. Pension Funds need to consider the materiality and significance of the Pension Fund Health Level assessment factors, namely good corporate governance for the Pension Fund, risk profile, profitability, and funding, as well as the significance of parameters or indicators in each factor in concluding assessment results and determining factor rankings; and b. the determination of materiality and significance is based on analysis supported by adequate data and information regarding the risks and financial performance of the Pension Fund.
The meaning of comprehensive and structured as referred to in number 1 letter d includes, among others:
a. the assessment process is conducted thoroughly and systematically and is focused on the main problems of the Pension Fund; b. the analysis is conducted in an integrated manner, namely by considering the interrelationships between risks and between factors of the Pension Fund Health Level assessment and consolidated Subsidiary Companies; and
c. the analysis must be supported by key facts and relevant ratios to show the level, trends, and levels of problems faced by the Pension Fund.

III. PROCEDURE FOR INDIVIDUAL PENSION FUND HEALTH ASSESSMENT

Pension Funds are required to conduct Pension Fund Health Level assessments using a risk-based nonbank rating approach individually.
Pension Funds that implement part of their business using Sharia principles are required to conduct health level assessments for the implementation of part of the Pension Fund's business using Sharia principles using an individual approach.
The health level assessment for the implementation of part of the Pension Fund's business using Sharia principles individually as referred to in number 2 is an inseparable part of the Pension Fund Health Level assessment of the Pension Fund that is its parent.
The individual Pension Fund Health Level assessment as referred to in number 1 for DPPK is conducted with an assessment scope covering the following factors:
a. good corporate governance for the Pension Fund; b. risk profile;
c. profitability; and
d. funding.
The individual Pension Fund Health Level assessment as referred to in number 1 for DPLK is conducted with an assessment scope covering the following factors:
a. good corporate governance for the Pension Fund; b. risk profile; and
c. profitability.
The health level assessment for the implementation of part of the Pension Fund's business using Sharia principles individually as referred to in number 3 includes assessment of the risk profile factor.

IV. ASSESSMENT OF GOOD CORPORATE GOVERNANCE FACTOR FOR PENSION FUNDS

The assessment of the good corporate governance factor for Pension Funds is an assessment of the implementation of good corporate governance principles by the Pension Fund.
Good corporate governance principles for Pension Funds refer to Financial Services Authority Regulations concerning Pension Fund governance and its implementing regulations, while still considering the characteristics and complexity of the Pension Fund's business.
The determination of the good corporate governance factor ranking for Pension Funds is based on the analysis of:
a. the implementation of good corporate governance principles for Pension Funds as referred to in number 1; b. the adequacy of governance over the structure, process, and results of the implementation of good corporate governance principles for Pension Funds in the Pension Fund; and
c. other information related to good corporate governance for Pension Funds based on relevant data and information.
Pension Funds assess the good corporate governance factor for Pension Funds using their own assessment worksheets as contained in Table I.A of Appendix I, which is an inseparable part of this Financial Services Authority Circular Letter.
Pension Funds determine the good corporate governance factor ranking for Pension Funds in 5 (five) rankings, namely:
a. rank 1; b. rank 2;
c. rank 3;
d. rank 4; and e. rank 5, with the order of the good corporate governance factor ranking for Pension Funds with a smaller rank reflecting better implementation of good corporate governance for Pension Funds.
The determination of the good corporate governance factor ranking for Pension Funds is conducted according to Table I.B of Appendix I, which is an inseparable part of this Financial Services Authority Circular Letter.

V. ASSESSMENT OF RISK PROFILE FACTOR

A. General

The risk profile factor assessment is an assessment of:
a. inherent risk; and b. the quality of risk management implementation, in the operations of the Pension Fund.
The risks assessed consist of 8 (eight) types of risks, namely:
a. strategic risk; b. operational risk;
c. credit risk;
d. market risk; e. liquidity risk; f. legal risk; g. compliance risk; and h. reputational risk.
In assessing the risk profile, Pension Funds consider the scope of risk management implementation as regulated in Financial Services Authority Regulations concerning risk management implementation for nonbank financial institutions.

B. Inherent Risk Assessment

Inherent risk assessment is an assessment of risks attached to the Pension Fund's business activities, both quantifiable and non-quantifiable, that have the potential to affect the Pension Fund's financial position.
The characteristics of the Pension Fund's inherent risk are determined by internal and external factors, including:
a. business strategy; b. business characteristics;
c. the complexity of the Pension Fund's business activities;
d. the Pension Fund's industry conditions; and e. macroeconomic conditions.
The assessment of inherent risk is conducted by considering quantitative and qualitative parameters or indicators.
The determination of the inherent risk level for each type of risk refers to the general principles of assessing the Pension Fund Health Level as referred to in Roman numeral II.
The determination of the inherent risk level for each type of risk is categorized into the following rankings:
a. rank 1 (low); b. rank 2 (low-medium);
c. rank 3 (medium);
d. rank 4 (medium-high); and e. rank 5 (high).

C. Inherent Risk Assessment for Strategic Risk

Strategic risk is the risk resulting from the Pension Fund's inaccuracy in making and/or implementing strategic decisions and failure to anticipate changes in the business environment.
Sources of strategic risk can be caused by, among others:
a. setting strategies that are not aligned with the vision and mission of the Pension Fund; b. conducting strategic environment analysis that is not comprehensive;
c. inconsistencies in strategic plans (strategic plan) among strategic levels; and
d. failure to anticipate changes in the business environment such as technological changes, changes in macroeconomic conditions, market competition, and changes in relevant authority policies.
In assessing inherent risk for strategic risk, the parameters or indicators used are at least:
a. the alignment of business strategy with business environment conditions; b. the strategic position of the Pension Fund in the Pension Fund industry for DPLK; and
c. the achievement of the Pension Fund's business realization.
Pension Funds assess inherent risk for strategic risk using risk inherent parameters or indicators as contained in Table II.A.1 of Appendix II, which is an inseparable part of this Financial Services Authority Circular Letter.
Pension Funds determine the inherent risk level for strategic risk in 5 (five) rankings, namely:
a. rank 1 (low); b. rank 2 (low-medium);
c. rank 3 (medium);
d. rank 4 (medium-high); and e. rank 5 (high), using guidelines as contained in Table II.A.2 of Appendix II, which is an inseparable part of this Financial Services Authority Circular Letter.

D. Inherent Risk Assessment for Operational Risk

Operational risk is the risk resulting from the inadequacy and/or malfunction of internal processes, human error, system failure, and/or the existence of external events that affect the operations of the Pension Fund.
Sources of operational risk can be caused by, among others:
a. human resource weaknesses; b. internal process weaknesses;
c. inadequate systems and infrastructure; and
d. external events that have a negative impact on the Pension Fund.
Operational risk in DPPK that implements defined benefit pension programs also includes risks arising from the inadequacy of liabilities caused by weaknesses in the actuarial assumption setting process and/or the inability of actuaries to set assumptions appropriate to the conditions faced by the Pension Fund.
In assessing inherent risk for operational risk, the parameters or indicators used are at least:
a. the characteristics and complexity of the Pension Fund's activities; b. human resources;
c. infrastructure and information technology systems;
d. fraud risk; e. disruptions to the Pension Fund; and f. the use of third-party services.
Pension Funds assess inherent risk for operational risk using risk inherent assessment parameters or indicators as contained in Table II.B.1 of Appendix II, which is an inseparable part of this Financial Services Authority Circular Letter.
Pension Funds determine the inherent risk level for operational risk in 5 (five) rankings, namely:
a. rank 1 (low); b. rank 2 (low-medium);
c. rank 3 (medium);
d. rank 4 (medium-high); and e. rank 5 (high), using guidelines as contained in Table II.B.2 of Appendix II, which is an inseparable part of this Financial Services Authority Circular Letter.

E. Inherent Risk Assessment for Credit Risk

Credit risk is the risk resulting from the failure of other parties to fulfill their obligations to the Pension Fund.
Credit risk due to investment failure includes, among others, investment concentration risk, counterparty credit risk, and settlement risk.
Credit risk generally exists in all Pension Fund activities whose performance depends on investment performance, counterparty performance, and/or issuer performance.
Investment concentration risk as referred to in number 2 is the risk arising from concentrated investments, among others, in specific parties, geographic regions, products, types of investments, or specific business fields, commonly known as investment concentration risk, and is calculated in the inherent risk assessment.
Counterparty credit risk as referred to in number 2 is the risk arising from the failure of counterparties to fulfill their obligations and arises from transaction types with specific characteristics, for example, transactions influenced by fair value or market value movements.
Settlement risk as referred to in number 2 is the risk arising from the failure to deliver cash and/or financial instruments on the agreed settlement date from the sale and/or purchase transactions of financial instruments.
In assessing inherent risk for credit risk, the parameters or indicators used are at least:
a. portfolio composition and investment concentration level; b. investments in affiliated parties;
c. default risk (wanprestasi); and
d. external factors.
Pension Funds assess inherent risk for credit risk using risk inherent assessment parameters or indicators as contained in Table II.C.1 of Appendix II, which is an inseparable part of this Financial Services Authority Circular Letter.
Pension Funds determine the inherent risk level for credit risk in 5 (five) rankings, namely:
a. rank 1 (low); b. rank 2 (low-medium);
c. rank 3 (medium);
d. rank 4 (medium-high); and e. rank 5 (high), using guidelines as contained in Table II.C.2 of Appendix II, which is an inseparable part of this Financial Services Authority Circular Letter.

F. Inherent Risk Assessment for Market Risk

Market risk is the risk on asset, liability, and equity positions, including derivative transactions, resulting from overall changes in market conditions.
Market risk includes interest rate risk, exchange rate risk, and equity risk.
Risk management implementation for equity risk is applied by Pension Funds that consolidate with Subsidiary Companies.
In assessing inherent risk for market risk, the parameters or indicators used are at least:
a. allocation and/or investment portfolio; b. investment objectives and strategies;
c. investment portfolio volatility;
d. investment portfolio transaction ease; and e. investment valuation.
Pension Funds assess inherent risk for market risk using risk inherent assessment parameters or indicators as contained in Table II.D.1 of Appendix II, which is an inseparable part of this Financial Services Authority Circular Letter.
Pension Funds determine the inherent risk level for market risk in 5 (five) rankings, namely:
a. rank 1 (low); b. rank 2 (low-medium);
c. rank 3 (medium);
d. rank 4 (medium-high); and e. rank 5 (high), using guidelines as contained in Table II.D.2 of Appendix II, which is an inseparable part of this Financial Services Authority Circular Letter.

G. Inherent Risk Assessment for Liquidity Risk

Liquidity risk is the risk resulting from the Pension Fund's inability to meet due liabilities from cash flow funding sources, and/or from liquid assets that can be easily converted into cash, without disrupting the Pension Fund's activities and financial conditions.
Liquidity risk can also be caused by the Pension Fund's inability to liquidate assets without incurring material discounts due to the absence of an active market or severe market disruption, called market liquidity risk.
Liquidity risk in DPPK that implements defined benefit pension programs also includes risks arising from the inability to provide assets to fund liabilities due to inadequate contribution setting.
In assessing inherent risk for liquidity risk, the parameters or indicators used are at least:
a. current asset and current liability profile; b. cash flow profile;
c. long-term asset profile;
d. long-term liability profile; e. the ratio between long-term assets and long-term liabilities; and f. the difference between expected investment performance and achieved investment performance.
Pension Funds assess inherent risk for liquidity risk using risk inherent assessment parameters or indicators as contained in Table II.E.1 of Appendix II, which is an inseparable part of this Financial Services Authority Circular Letter.
Pension Funds determine the inherent risk level for liquidity risk in 5 (five) rankings, namely:
a. rank 1 (low); b. rank 2 (low-medium);
c. rank 3 (medium);
d. rank 4 (medium-high); and e. rank 5 (high), using guidelines as contained in Table II.E.2 of Appendix II, which is an inseparable part of this Financial Services Authority Circular Letter.

H. Inherent Risk Assessment for Legal Risk

Legal risk is the risk arising from legal demands and/or weaknesses in legal aspects.
Legal risk can arise due to the absence and/or changes in legislation or weaknesses in agreements, such as the non-fulfillment of contract validity requirements and litigation processes arising from third-party lawsuits against the Pension Fund or the Pension Fund against third parties.
In assessing inherent risk for legal risk, the parameters or indicators used are at least:
a. the absence or changes in legislation; b. legal aspect weaknesses (legal issues); and
c. litigation or dispute resolution processes.
Pension Funds assess inherent risk for legal risk using risk inherent assessment parameters or indicators as contained in Table II.F.1 of Appendix II, which is an inseparable part of this Financial Services Authority Circular Letter.
Pension Funds determine the inherent risk level for legal risk in 5 (five) rankings, namely:
a. rank 1 (low); b. rank 2 (low-medium);
c. rank 3 (medium);
d. rank 4 (medium-high); and e. rank 5 (high), using guidelines as contained in Table II.F.2 of Appendix II, which is an inseparable part of this Financial Services Authority Circular Letter.

I. Inherent Risk Assessment for Compliance Risk

Compliance risk is the risk arising from the Pension Fund's failure to comply with and/or implement legislation and regulations.
Sources of compliance risk arise from legal behavior, namely the Pension Fund's behavior or activities that deviate from or violate legislation regulations, Pension Fund regulations, and organizational behavior, namely the Pension Fund's behavior or activities that deviate from or contradict generally applicable standards.
In assessing inherent risk for compliance risk, the parameters or indicators used are at least:
a. the type and significance of violations committed; b. the frequency of violations including sanctions imposed and the Pension Fund's non-compliance track record;
c. the behavior underlying the violations; and
d. follow-up on violations.
Pension Funds assess inherent risk for compliance risk using risk inherent assessment parameters or indicators as contained in Table II.G.1 of Appendix II, which is an inseparable part of this Financial Services Authority Circular Letter.
Pension Funds set the inherent risk level for compliance risk into 5 (five) ranks, namely:
a. rank 1 (low); b. rank 2 (low-medium);
c. rank 3 (medium);
d. rank 4 (medium-high); and e. rank 5 (high), using guidelines as contained in Table II.G.2 of Appendix II which is an inseparable part of this Financial Services Authority Circular.

J. Inherent Risk Assessment on Reputational Risk

Reputational risk is the risk arising from a decline in stakeholder trust stemming from negative perceptions of the Pension Fund.
Reputational risk arises, among others, due to negative media coverage and/or rumors regarding the Pension Fund, as well as the Pension Fund's ineffective communication strategy.
In assessing the inherent risk of reputational risk, the parameters or indicators used are at least:
a. reputational influence from the founder and/or subsidiaries; b. violations of business ethics;
c. product complexity; and
d. frequency and materiality of complaints or reports from participants, including legal issues.
Pension Funds assess the inherent risk for reputational risk using the parameters or risk assessment indicators as contained in Table II.H.1 of Appendix II which is an inseparable part of this Financial Services Authority Circular.
Pension Funds set the inherent risk level for reputational risk into 5 (five) ranks, namely:
a. rank 1 (low); b. rank 2 (low-medium);
c. rank 3 (medium);
d. rank 4 (medium-high); and e. rank 5 (high), using guidelines as contained in Table II.H.2 of Appendix II which is an inseparable part of this Financial Services Authority Circular.

K. Assessment of Risk Management Application Quality

The assessment of risk management application quality reflects the assessment of the adequacy of the risk control system covering all pillars of risk management application as regulated in the Financial Services Authority Regulation regarding risk management application for nonbank financial service institutions.
The assessment of risk management application quality aims to evaluate the effectiveness of the Pension Fund's risk management application in accordance with principles regulated in the Financial Services Authority Regulation regarding risk management application for nonbank financial service institutions.
The application of risk management by Pension Funds varies significantly according to size, complexity, and the level of risk tolerable by the Pension Fund.
The assessment of risk management application quality is an assessment of 4 (four) interrelated aspects, namely:
a. active supervision by the Board of Directors/Acting Board of Directors, Board of Supervisors, and DPS; b. adequacy of risk management policies and procedures as well as risk limit setting;
c. adequacy of risk identification, measurement, control, and monitoring processes, as well as risk management information systems; and
d. comprehensive internal control system.
Active supervision by the Board of Directors/Acting Board of Directors, Board of Supervisors, and DPS as referred to in item 4 letter a includes evaluation of:
a. the adequacy of active supervision by the Board of Directors/Acting Board of Directors, Board of Supervisors, and DPS; and b. the adequacy of the exercise of authority and responsibilities of the Board of Directors/Acting Board of Directors, Board of Supervisors, and DPS.
The adequacy of risk management policies and procedures as well as risk limit setting as referred to in item 4 letter b includes evaluation of:
a. the formulation of the level of risk to be taken (risk appetite) and risk tolerance; b. risk management strategies aligned with the level of risk to be taken and risk tolerance;
c. the adequacy of risk management policies and procedures; and
d. the adequacy of risk limit setting.
The adequacy of risk identification, measurement, control, and monitoring processes, as well as risk management information systems as referred to in item 4 letter c includes evaluation of:
a. the adequacy of risk identification, measurement, control, and monitoring processes; b. the adequacy of risk management information systems; and
c. the adequacy of the quantity and quality of human resources in supporting the effectiveness of the risk management process.
The comprehensive internal control system as referred to in item 4 letter d includes evaluation of:
a. the adequacy of the internal control system; and b. the adequacy of review by independent parties within the Pension Fund, either by the work unit handling risk management or by the work unit handling internal audit.
Review by the work unit handling risk management as referred to in item 8 letter b includes, among others, the methods, assumptions, and variables used to measure and set risk limits.
Review by the work unit handling internal audit as referred to in item 8 letter b includes, among others, the reliability of the risk management framework and the application of risk management by business units and/or support units.
The level of risk management application quality for each type of risk is categorized into 5 (five) ranks, namely:
a. rank 1 (strong); b. rank 2 (fairly strong);
c. rank 3 (adequate);
d. rank 4 (fairly weak); and e. rank 5 (weak).
The determination of risk management application quality is done for each type of risk, namely:
a. strategic risk, using guidelines as contained in Table II.A.3 of Appendix II which is an inseparable part of this Financial Services Authority Circular; b. operational risk, using guidelines as contained in Table II.B.3 of Appendix II which is an inseparable part of this Financial Services Authority Circular;
c. credit risk, using guidelines as contained in Table II.C.3 of Appendix II which is an inseparable part of this Financial Services Authority Circular;
d. market risk, using guidelines as contained in Table II.D.3 of Appendix II which is an inseparable part of this Financial Services Authority Circular; e. liquidity risk, using guidelines as contained in Table II.E.3 of Appendix II which is an inseparable part of this Financial Services Authority Circular; f. legal risk, using guidelines as contained in Table II.F.3 of Appendix II which is an inseparable part of this Financial Services Authority Circular; g. compliance risk, using guidelines as contained in Table II.G.3 of Appendix II which is an inseparable part of this Financial Services Authority Circular; and h. reputational risk, using guidelines as contained in Table II.H.3 of Appendix II which is an inseparable part of this Financial Services Authority Circular.

L. Determination of Risk Profile Factor Rank

The determination of risk profile factor rank is carried out in the following steps:
a. determination of the risk level for each risk; b. determination of the composite inherent risk level and composite risk management application quality; and
c. determination of the risk profile factor rank.
The determination of the risk level as referred to in item 1 letter a is determined based on the assessment of the inherent risk level and risk management application quality for each type of risk as referred to in letters B through K.
After Pension Funds determine the inherent risk level and risk management application quality, Pension Funds determine the risk level for each type of risk, namely:
a. strategic risk; b. operational risk;
c. credit risk;
d. market risk; e. liquidity risk; f. legal risk; g. compliance risk; and h. reputational risk, using guidelines as contained in Table II.I of Appendix II which is an inseparable part of this Financial Services Authority Circular.
In the event that a Pension Fund has a Subsidiary, the Pension Fund calculates the impact of the Subsidiary's risk on the Pension Fund's risk profile by considering the significance and materiality of the Subsidiary and/or the significance of the Subsidiary's issues.
The determination of the composite inherent risk level and composite risk management application quality as referred to in item 1 letter b is done by considering the significance of each risk to the overall risk profile.
Pension Funds determine the risk profile factor rank as referred to in item 1 letter c based on a comprehensive and structured analysis of the results of determination as referred to in item 1 letter a and letter b, considering the significance of each risk to the overall risk profile.
The risk profile factor rank is the final conclusion on the Pension Fund's risk after considering mitigation carried out through risk management application.
The determination of the risk profile rank as referred to in items 6 and 7 uses the format as contained in Table II.J of Appendix II which is an inseparable part of this Financial Services Authority Circular.
The determination of the risk profile factor rank consists of 5 (five) ranks, namely:
a. rank 1; b. rank 2;
c. rank 3;
d. rank 4; and e. rank 5, with a smaller risk profile rank order reflecting a lower level of risk faced by the Pension Fund.
The determination of the risk profile factor rank is carried out in accordance with Table II.K of Appendix II which is an inseparable part of this Financial Services Authority Circular.

M. Risk Profile Factor Assessment for the Implementation of Part of Pension Fund Business with Sharia Principles:

Provisions regarding the assessment of risk profile factors for Pension Funds as referred to in letters A through L apply mutatis mutandis to the assessment of risk profile factors for the implementation of part of Pension Fund business with Sharia principles.
Pension Funds implementing part of their business with Sharia principles must conduct a risk profile factor assessment for the implementation of part of Pension Fund business with Sharia principles using:
a. inherent risk parameters or indicators, guidelines for setting inherent risk levels, and guidelines for setting risk management application quality with the following format:

strategic risk, using Tables II.A.1, II.A.2, and II.A.3;
operational risk, using Tables II.B.1, II.B.2, and II.B.3;
credit risk, using Tables II.C.1, II.C.2, and II.C.3;
market risk, using Tables II.D.1, II.D.2, and II.D.3;
liquidity risk, using Tables II.E.1, II.E.2, and II.E.3;
legal risk, using Tables II.F.1, II.F.2, and II.F.3;
compliance risk, using Tables II.G.1, II.G.2, and II.G.3;
reputational risk, using Tables II.H.1, II.H.2, and II.H.3;
b. guidelines for setting the risk level for each type of risk, using Table II.I;
c. format for setting the risk profile rank, using Table II.J; and
d. guidelines for setting the risk profile factor rank, using Table II.K, as contained in Appendix II which is an inseparable part of this Financial Services Authority Circular.

VI. PROFITABILITY FACTOR ASSESSMENT

The profitability factor assessment must at least include assessment of:
a. the Pension Fund's performance in generating investment income (profitability); b. sources supporting profitability;
c. the continuity of future profitability prospects; and
d. profitability management.
The assessment is conducted by considering the level, trend, structure, and stability of profitability, and comparing the Pension Fund's performance with that of an equivalent peer group through both quantitative and qualitative aspect analysis.
In determining the equivalent peer group, Pension Funds need to consider the business scale, characteristics, and/or complexity of the Pension Fund's business as well as the availability of data and information owned.
Parameters or indicators in assessing profitability include:
a. the Pension Fund's performance in generating investment income (profitability); b. sources supporting profitability;
c. future profitability prospects; and
d. profitability management.
Pension Funds assess the profitability factor using parameters or indicators as contained in Table III.A of Appendix III which is an inseparable part of this Financial Services Authority Circular.
The determination of the profitability factor rank is based on a comprehensive and structured analysis of the profitability parameters or indicators as referred to in item 5, considering the significance of each parameter or indicator and considering other issues affecting the Pension Fund's profitability.
Pension Funds set the profitability factor rank into 5 (five) ranks, namely:
a. rank 1; b. rank 2;
c. rank 3;
d. rank 4; and e. rank 5, with a smaller profitability factor rank order reflecting better profitability conditions.
The determination of the profitability factor rank is carried out in accordance with Table III.B of Appendix III which is an inseparable part of this Financial Services Authority Circular.

VII. FUNDING FACTOR ASSESSMENT

The funding factor assessment is only conducted by the DPPK.
The assessment of the funding factor must at least include assessment of:
a. funding conditions; and b. additional funding.
In conducting the assessment, the DPPK needs to consider the level, trend, structure, and stability of funding by considering the performance of an equivalent peer group as well as the adequacy of the DPPK's funding management.
The assessment is conducted using quantitative and qualitative parameters or indicators.
In determining the equivalent peer group, the DPPK needs to consider the business scale, characteristics, and/or complexity of the DPPK's business as well as the availability of data and information owned.
Parameters or indicators in assessing funding include:
a. Funding position; b. the Employer's ability to fund the pension program; and
c. contributions.
The DPPK assesses the funding factor using parameters or indicators as contained in Table IV.A of Appendix IV which is an inseparable part of this Financial Services Authority Circular.
The funding factor is determined based on a comprehensive and structured analysis of the funding parameters or indicators as referred to in item 7, considering the materiality and significance of each parameter or indicator and considering other issues affecting the DPPK's funding.
The DPPK sets the funding factor rank into 5 (five) ranks, namely:
a. rank 1; b. rank 2;
c. rank 3;
d. rank 4; and e. rank 5, with a smaller funding factor rank order reflecting better DPPK funding conditions.
The determination of the funding factor rank is carried out in accordance with Table IV.B of Appendix IV which is an inseparable part of this Financial Services Authority Circular.

VIII. COMPOSITE HEALTH LEVEL RANK ASSESSMENT

The Pension Fund Health Level is determined based on a comprehensive and structured analysis of the rank of each factor and considering the general principles of Pension Fund Health Level assessment as referred to in Roman numeral II.
In conducting comprehensive analysis, Pension Funds need to consider the ability to face significant changes in external conditions.
Pension Funds set the Composite Rank into 5 (five) composite ranks, namely:
a. Composite Rank 1 (CR-1); b. Composite Rank 2 (CR-2);
c. Composite Rank 3 (CR-3);
d. Composite Rank 4 (CR-4); and e. Composite Rank 5 (CR-5), with a smaller Composite Rank order reflecting a healthier Pension Fund.
The determination of the Composite Rank is carried out in accordance with Appendix V which is an inseparable part of this Financial Services Authority Circular.

IX. PROCEDURE FOR ASSESSING PENSION FUND HEALTH LEVEL ON A CONSOLIDATED BASIS

In the event that a Pension Fund exercises Control over a Subsidiary, in addition to conducting a health level assessment using a risk-based nonbank rating approach individually as referred to in Roman numeral III item 1, the Pension Fund is required to conduct a health level assessment using a risk-based nonbank rating approach on a consolidated basis.
The Pension Fund Health Level Assessment as referred to in item 1 is conducted with an assessment scope covering the following factors:
a. good corporate governance for the Pension Fund; b. risk profile;
c. profitability; and
d. funding for the DPPK.
In conducting consolidated assessment, the Pension Fund considers:
a. the significance or materiality of the Subsidiary's share to the Pension Fund on a consolidated basis; and/or b. Subsidiary issues regarding good corporate governance for the Pension Fund, risk profile, profitability, and funding that have a significant impact on the Pension Fund on a consolidated basis.
The determination of the significance and materiality of the Subsidiary's share to the Pension Fund on a consolidated basis as referred to in item 3 letter a can be determined through:
a. comparison of the Subsidiary's total assets to the Pension Fund's total assets on a consolidated basis; or b. the significance of specific positions in the Subsidiary that affect the Pension Fund's performance on a consolidated basis such as risk profile, profitability, and funding.
The determination of the significance of Subsidiary issues as referred to in item 3 letter b, among others, considers issues present in the Subsidiary that have a significant impact on the performance or condition of the Pension Fund on a consolidated basis, for example:
a. issues related to the Subsidiary's business that can impact the consolidated Pension Fund's reputational risk, credit risk, or liquidity risk; b. risk management governance issues; and/or
c. weaknesses in the Subsidiary's risk management application.
For Pension Funds conducting Pension Fund Health Level assessment on a consolidated basis:
a. the mechanism for determining the rank of each assessment factor and determining the Composite Rank of the Pension Fund Health Level on a consolidated basis; and b. the categorization of the rank of each assessment factor and Composite Rank on a consolidated basis, must refer to the mechanism for determining and categorizing the rank of the Pension Fund individually.
Parameters or indicators used in the individual Pension Fund Health Level assessment can be used by the Pension Fund when assessing the Pension Fund Health Level on a consolidated basis.
The use of parameters or indicators as referred to in item 7 can be supplemented with other parameters or indicators as long as they are relevant to the business scale, characteristics, and complexity of the Pension Fund on a consolidated basis.
In assessing the Pension Fund Health Level on a consolidated basis, the mechanism for determining the rank and rank category of each assessment factor and determining the composite rank of the Pension Fund Health Level on a consolidated basis refers to the procedure for assessing the Pension Fund Health Level individually as referred to in Roman numerals III through VIII.
The determination of the rank of the good corporate governance factor for the Pension Fund on a consolidated basis is conducted by considering:
a. the significance or materiality of the Subsidiary's share to the Pension Fund on a consolidated basis; and b. issues related to the implementation of good corporate governance principles in the Subsidiary that have a significant impact on the implementation of good corporate governance principles for the Pension Fund on a consolidated basis.
The funding factor for the Subsidiary used for the assessment of the application of good corporate governance principles for the Pension Fund on a consolidated basis is determined by considering the business characteristics of the Subsidiary and supported by adequate data and information.
The determination of the rank of good corporate governance for the Pension Fund on a consolidated basis is conducted by considering the impact of the Subsidiary's governance application.
The determination of the consolidated risk profile factor is conducted by considering:
a. the significance or materiality of the Subsidiary's share to the Pension Fund on a consolidated basis; and b. risk profile issues in the Subsidiary that have a significant impact on the consolidated risk profile.
The determination of the consolidated risk profile factor is conducted in the following steps:
a. the determination of the inherent risk level, risk management application quality, and the Pension Fund's risk level on a consolidated basis is done by calculating the impact caused by the Subsidiary's risk on the consolidated Pension Fund's risk profile; and b. the determination of the consolidated Pension Fund risk profile rank is done by calculating the impact of all Subsidiary risks on the consolidated Pension Fund's risk profile.
The determination of the consolidated profitability factor rank is based on a comprehensive and structured analysis of specific profitability parameters or indicators resulting from the consolidated Pension Fund financial reports and other financial information, considering:
a. the significance or materiality of the Subsidiary's share to the Pension Fund on a consolidated basis; and b. profitability issues in the Subsidiary that have a significant impact on consolidated profitability.
The assessment is conducted by referring to specific parameters or indicators applicable to the Pension Fund individually as long as they are supported by adequate data or information.
In conducting the assessment, the Pension Fund can add parameters or indicators relevant to the scale, characteristics, and complexity of the Subsidiary.
The determination of the consolidated funding factor rank is based on a comprehensive and structured analysis of specific funding parameters or indicators resulting from consolidated financial reports and other financial information, considering:
a. the significance or materiality of the Subsidiary's share to the DPPK on a consolidated basis; and b. capital issues in the Subsidiary that have a significant impact on consolidated funding.
Assessments are conducted by referring to specific parameters or indicators applicable to individual Pension Funds, provided they are supported by adequate data or information.
In conducting assessments, Pension Funds may add parameters or indicators relevant to the scale, characteristics, and complexity of Subsidiary Companies.

X. REPORTING

Pension Funds are required to conduct self-assessments of the Pension Fund Health Status.
The self-assessment of the Pension Fund Health Status as referred to in item 1 must be conducted at least annually for the position at the end of December.
In addition to conducting self-assessments as referred to in item 1, Pension Funds are required to update the self-assessment of the Pension Fund Health Status when necessary.
Pension Funds update the self-assessment of the Pension Fund Health Status as referred to in item 3, including in cases such as:
a. the financial condition of the Pension Fund deteriorates; b. there are external and internal factors that can significantly affect the Pension Fund Health Status; or
c. other conditions where the Financial Services Authority and/or the Pension Fund deem it necessary to update the assessment of the Pension Fund Health Status.
The results of the self-assessment of the Pension Fund Health Status and the implementation of part of the Pension Fund's business using Sharia principles are submitted using the reporting format as referred to in Appendix VI, which is an integral part of this Financial Services Authority Circular Letter.
Pension Funds submit the results of the self-assessment of the Pension Fund Health Status to the Financial Services Authority as follows:
a. no later than February 15 for the assessment of the Pension Fund Health Status position at the end of December; or b. no later than 30 (thirty) working days since the date of updating the self-assessment of the Pension Fund Health Status.
If the submission deadline for the results of the self-assessment of the Pension Fund Health Status as referred to in item 6 letters a and b falls on a holiday, the results of the self-assessment of the Pension Fund Health Status are submitted on the next working day.
Pension Funds must submit the results of the self-assessment of the Pension Fund Health Status to the Financial Services Authority online through the Financial Services Authority's data communication network system.
In the event that the Financial Services Authority's data communication network system as referred to in item 8 is not yet available or experiences technical disruptions, submissions are made to the Financial Services Authority offline by:
a. direct handover; or b. sending via a courier service company.
In the event of technical disruptions as referred to in item 9, the Financial Services Authority announces this through the Financial Services Authority website.
Offline submission of reports as referred to in item 9 must be submitted in electronic data format using media such as compact discs or other electronic data storage media.
Submission of reports as referred to in item 11 must be accompanied by a printed cover letter signed by the Board of Trustees/Acting Board of Trustees.
Reports on the results of self-assessments of the Pension Fund Health Status and/or updates to self-assessments of the Pension Fund Health Status submitted offline as referred to in item 9 are submitted to:
a. for Pension Funds:
Executive Head of Supervision of Insurance Companies, Pension Funds, Financing Institutions, and Other Financial Service Institutions Financial Services Authority u.p. Director of Pension Fund and BPJS Employment Supervision Wisma Mulia Building 2, 12th Floor Jalan Jenderal Gatot Subroto Kav. 40 Jakarta 12710; b. for Pension Funds that implement all or part of their business using Sharia principles:
Executive Head of Supervision of Insurance Companies, Pension Funds, Financing Institutions, and Other Financial Service Institutions Financial Services Authority u.p. Director of Sharia IKNB Wisma Mulia Building 2, 15th Floor Jalan Jenderal Gatot Subroto Kav. 40 Jakarta 12710.
In the event of a change in the address of the Financial Services Authority's office for report submission as referred to in item 13, the Financial Services Authority will provide notification regarding the address change via letter or announcement.
Pension Funds are deemed to have submitted reports on the results of self-assessments of the Pension Fund Health Status and/or updates to self-assessments of the Pension Fund Health Status with the following provisions:
a. for online submission through the Financial Services Authority's data communication network system, evidenced by a receipt from the Financial Services Authority's data communication network system; or

Salinan ini sesuai dengan aslinya
Direktur Hukum 1
Departemen Hukum ttd
Mufli Asmawidjaja

b. for offline submission, evidenced by a receipt from the Financial Services Authority.

XI. CLOSING

At the time this Financial Services Authority Circular Letter takes effect, Financial Services Authority Circular Letter No. 2/SEOJK.05/2015 concerning Pension Fund Risk Assessment is revoked and declared invalid.
This Financial Services Authority Circular Letter takes effect on the date it is established.

Established in Jakarta on 6 November 2020

EXECUTIVE HEAD OF SUPERVISION
OF INSURANCE COMPANIES, PENSION FUNDS,
FINANCING INSTITUTIONS, AND
OTHER FINANCIAL SERVICE INSTITUTIONS
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, ttd
RISWINANDI

APPENDIX I
FINANCIAL SERVICES AUTHORITY CIRCULAR LETTER
REPUBLIC OF INDONESIA
NO. 22 /SEOJK.05/2020
CONCERNING
PENSION FUND HEALTH ASSESSMENT

ASSESSMENT OF GOOD CORPORATE GOVERNANCE FACTORS FOR PENSION FUNDS PENSION FUND HEALTH STATUS
Table I.A : Self-Assessment Worksheet
Good Corporate Governance Factors for
Pension Fund Assessment
Table I.B : Guidelines for Determining the Rating of Good Corporate Governance Factors for Pension Funds

Table I.A: Self-Assessment Worksheet Good Corporate Governance Factors for Pension Fund Assessment

Objectives

The assessment of governance structure aims to evaluate the adequacy of the structure and infrastructure of good corporate governance for Pension Funds so that the implementation process of good corporate governance principles for Pension Funds produces outcomes consistent with the expectations of Pension Fund stakeholders. Included in the good corporate governance structure for Pension Funds are the Supervisory Board, Board of Trustees/Acting Board of Trustees, Committees, and work units within the Pension Fund. Included in the good corporate governance infrastructure for Pension Funds are, among others, Pension Fund policies and procedures, management information systems, and the main duties and functions of each organizational structure.
The assessment of governance process aims to evaluate the effectiveness of the implementation process of good corporate governance principles for Pension Funds, supported by the adequacy of the structure and infrastructure of good corporate governance for Pension Funds, thereby producing outcomes consistent with the expectations of Pension Fund stakeholders.
The assessment of governance outcome aims to evaluate the quality of outcomes that meet the expectations of Pension Fund stakeholders, which are the results of the implementation process of good corporate governance principles for Pension Funds, supported by the adequacy of the structure and infrastructure of good corporate governance for Pension Funds.

Included in the implementation outcomes (outcome) cover qualitative aspects and quantitative aspects, including:
a. adequacy of report transparency; b. compliance with laws and regulations;
c. improvement of human resource quality;
d. consumer protection; e. objectivity in conducting assessments or audits; and/or f. Pension Fund performance such as profitability, efficiency, and funding.

Filling Instructions:

Pension Funds conduct self-assessments of the implementation of good corporate governance principles for Pension Funds in the "analysis" column in Appendix I.
Parameters or indicators for assessing good corporate governance factors for Pension Funds in Appendix I are minimum standards that must be used in assessing good corporate governance factors for Pension Funds.
Pension Funds may add other parameters or indicators according to the characteristics and complexity of the Pension Fund.
Assessments are conducted per position and period for the last 12 (twelve) months for parameters or indicators that are quantitative in nature.
In assessing good corporate governance factors for Pension Funds on a consolidated basis, Pension Funds may use parameters or indicators for assessing good corporate governance factors for Pension Funds individually, adjusted to the scale, characteristics, and complexity of Subsidiary Company business.
In the event of changes to regulations governing criteria or indicators, Pension Funds must adjust criteria or indicators based on applicable laws and regulations.

No. Parameter or Indicator* Analysis

Implementation of duties and responsibilities of Board of Trustees/Acting Board of Trustees

A. Governance Structure (Governance Structure)

Board of Trustees of Pension Fund (DPPK)
a. The Board of Trustees of Pension Fund (DPPK) must have at least 2 (two) Board of Trustees members. b. The Board of Trustees of Pension Fund (DPPK) may have more than 2 (two) Board of Trustees members, adjusted to the complexity of the DPPK while still considering effectiveness in decision-making.
c. all Board of Trustees members must reside within the territory of the Republic of Indonesia.
d. at least half of the number of Board of Trustees members must have knowledge or experience in the field of investment or risk management. e. the Board of Trustees of Pension Fund (DPPK) must have Board of Trustees members overseeing the compliance function. f. Board of Trustees members overseeing the compliance function are prohibited from holding concurrent positions with Board of Trustees members overseeing the funding, finance, or investment functions. g. in the event that the number of Board of Trustees members is 2 (two), the compliance function may be held concurrently by the Board of Trustees member overseeing the finance function. h. all Board of Trustees members must have knowledge relevant to their positions.
i. in follow-up to supervision results, the Financial Services Authority may request the DPPK to adjust the number of Board of Trustees members.
j. Board of Trustees members of the DPPK must meet the following criteria:
(1) meet the fit and proper test requirements according to Financial Services Authority Regulations concerning the fit and proper test for key parties of financial service institutions; (2) able to act with good faith, honesty, and professionalism; (3) able to act in the interests of the DPPK, Participants, and/or parties entitled to receive benefits; (4) prioritize the interests of the DPPK, Participants, and/or parties entitled to receive benefits over personal interests; (5) able to make decisions based on independent and objective assessments for the interests of the DPPK, Participants, and/or parties entitled to receive benefits; and (6) able to prevent the abuse of authority to obtain undue personal gains or cause losses to the DPPK. k. the majority of the Board of Trustees members of the DPPK are prohibited from having family relationships up to the second degree with other Board of Trustees members and/or the Supervisory Board within the same DPPK.
Acting Board of Trustees of Non-Participant Pension Fund (DPLK)
a. The Founder of the DPLK acts as the Board of Trustees. b. in managing the DPLK, the Founder of the DPLK must appoint an Acting Board of Trustees.
c. the Acting Board of Trustees appointed by the Founder of the DPLK must manage all aspects of the DPLK.
d. the DPLK must have at least 2 (two) Acting Board of Trustees members. e. the DPLK may have more than 2 (two) Acting Board of Trustees members, adjusted to the complexity of the DPLK while still considering effectiveness in decision-making. f. all Acting Board of Trustees members must reside within the territory of the Republic of Indonesia. g. at least half of the number of Acting Board of Trustees members must have knowledge or experience in the field of investment or risk management. h. Acting Board of Trustees members overseeing the compliance function are prohibited from holding concurrent positions with Acting Board of Trustees members overseeing the funding, finance, or investment functions.
i. in the event that the number of Acting Board of Trustees members is 2 (two), the compliance function may be held concurrently by the Acting Board of Trustees member overseeing the finance function.
j. all Acting Board of Trustees members must have knowledge relevant to their positions. k. in follow-up to supervision results, the Financial Services Authority may request the DPLK to adjust the number of Acting Board of Trustees members.
l. Acting Board of Trustees members must meet the following criteria:
(1) meet the fit and proper test requirements according to Financial Services Authority Regulations concerning the fit and proper test for key parties of financial service institutions; (2) able to act with good faith, honesty, and professionalism; (3) able to act in the interests of the DPLK, Participants, and/or parties entitled to receive benefits; (4) prioritize the interests of the DPLK, Participants, and/or parties entitled to receive benefits over personal interests; (5) able to make decisions based on independent and objective assessments for the interests of the DPLK, Participants, and/or parties entitled to receive benefits; and (6) able to prevent the abuse of authority to obtain undue personal gains or cause losses to the DPLK. m. the majority of the Acting Board of Trustees members are prohibited from having family relationships up to the second degree with other Acting Board of Trustees members and/or the Supervisory Board within the same DPLK.

B. Governance Process (Governance Process)

Board of Trustees of DPPK must:
a. be fully responsible for the management of the DPPK. b. implement good corporate governance for the DPPK.
c. carry out duties and responsibilities as regulated in the Pension Fund Regulations and laws and regulations in the field of Pension Funds.
d. follow up on audit findings and recommendations from work units performing the internal audit function of the DPPK, external audit function of the DPPK, and/or supervision results of the Financial Services Authority. e. ensure that the functions and duties of each work unit within the DPPK are clear so that each can perform its functions and duties well. f. be accountable for the implementation of their duties to the Founder. g. ensure that the DPPK considers the interests of all parties, particularly Participants and/or parties entitled to benefits. h. ensure that information regarding the DPPK has been provided to the Supervisory Board and DPS accurately and completely.
i. hold Board of Trustees meetings regularly at least 1 (one) time in 1 (one) month.
Acting Board of Trustees of DPLK must:
a. be fully responsible for the management of the DPLK. b. implement good corporate governance for the DPLK.
c. carry out duties and responsibilities as regulated in the Pension Fund Regulations and laws and regulations in the field of Pension Funds.
d. follow up on audit findings and recommendations from work units performing the internal audit function of the DPLK, external audit function of the DPLK, and/or supervision results of the Financial Services Authority. e. ensure that the functions and duties of each work unit within the DPLK are clear so that each can perform its functions and duties well. f. be accountable for the implementation of their duties to the Founder. g. ensure that the DPLK considers the interests of all parties, particularly Participants and/or parties entitled to benefits. h. ensure that information regarding the DPLK has been provided to the Supervisory Board and DPS accurately and completely.
i. ensure that Participants are given choices regarding investment packages or types of investments that are suitable and receive information regarding the possibility of loss risks arising from the choice of investment packages or types of investments made by Participants through the DPLK.
j. ensure that the performance of investment packages or types of investments is monitored well. k. ensure that costs charged to Participants are disclosed in detail and Participants are offered assistance in choosing investment packages or types of investments.
l. hold Acting Board of Trustees meetings regularly at least 1 (one) time in 1 (one) month.

C. Implementation Results of Governance (Governance Outcome)

Board of Trustees of DPPK
a. has been accountable for the management of the DPPK. b. guarantees effective, precise, and rapid decision-making and can act independently without interests that can interfere with their ability to perform duties independently, objectively, and critically.
c. has been accountable for the implementation of their duties to the Founder.
d. does not conduct transactions with conflicts of interest with DPPK activities where the respective Board of Trustees members serve. e. does not utilize the DPPK for personal, family, and/or other parties' interests that can harm the DPPK. f. does not take and/or receive personal profits from the DPPK where the respective Board of Trustees members serve, other than remuneration and facilities established. g. has held Board of Trustees meetings regularly. h. records Board of Trustees meeting results in meeting minutes and documents them well, including clear disclosure of differences of opinion occurring in the Board of Trustees meetings along with the reasons for such differences of opinion.
i. All strategic policies and decisions of the Board of Trustees have been decided in Board of Trustees meetings, considering supervision according to the duties and responsibilities of the Supervisory Board.
Acting Board of Trustees of DPLK
a. has been accountable for the management of the DPLK. b. guarantees effective, precise, and rapid decision-making and can act independently without interests that can interfere with their ability to perform duties independently, objectively, and critically.
c. has been accountable for the implementation of their duties to the Founder.
d. does not conduct transactions with conflicts of interest with DPLK activities where the respective Acting Board of Trustees members serve. e. does not utilize the DPLK for personal, family, and/or other parties' interests that can harm the DPLK. f. does not take and/or receive personal profits from the DPLK where the respective Acting Board of Trustees members serve, other than remuneration and facilities established. g. has held Acting Board of Trustees meetings regularly. h. records Acting Board of Trustees meeting results in meeting minutes and documents them well, including clear disclosure of differences of opinion occurring in the Acting Board of Trustees meetings along with the reasons for such differences of opinion.
i. All strategic policies and decisions of the Acting Board of Trustees have been decided in Acting Board of Trustees meetings, considering supervision according to the duties and responsibilities of the Supervisory Board.

Implementation of duties and responsibilities of the Supervisory Board

A. Governance Structure (Governance Structure)

Supervisory Board of DPPK
a. The Supervisory Board of DPPK must have at least 2 (two) Supervisory Board members consisting of representatives of Employers and representatives of Participants with equal numbers. b. Supervisory Board members of the DPPK from Participant representatives must be appointed by the Founder based on proposals from Participants.
c. Supervisory Board members of the DPPK from Participant representatives must come from active Participants in the DPPK.
d. in the event that the Supervisory Board of DPPK representing Participants has more than 1 (one) person and the number of pensioners is more than 50 (fifty) people, at least 1 (one) person representing Participants must be a pensioner who still receives periodic pension benefits. e. the mechanism for submitting proposals from Participants and the Founder's appointment of the Supervisory Board of DPPK from Participant representatives is established in the good corporate governance guidelines for Pension Funds. f. Supervisory Board members of the DPPK from Participant representatives must be able to act representing the interests of Participants. g. the DPPK must communicate the appointment of the Supervisory Board of DPPK from Participant representatives to all Participants. h. at least half of the number of the Supervisory Board of DPPK must reside within the territory of the Republic of Indonesia.
i. all Supervisory Board members of the DPPK must have knowledge relevant to their positions.
j. Supervisory Board members of the DPPK must meet the following criteria:
(1) meet the fit and proper test requirements according to Financial Services Authority Regulations concerning the fit and proper test for key parties of financial service institutions; (2) able to act with good faith, honesty, and professionalism; (3) able to act in the interests of the DPPK, Participants, and/or parties entitled to receive benefits; (4) prioritize the interests of the DPPK, Participants, and/or parties entitled to receive benefits over personal interests; (5) able to make decisions based on independent and objective assessments for the interests of the DPPK, Participants, and/or parties entitled to receive benefits; and (6) able to prevent the abuse of authority to obtain undue personal gains or cause losses to the DPPK. k. the majority of the Supervisory Board members of the DPPK are prohibited from having family relationships up to the second degree with other Supervisory Board members and/or Board of Trustees within the same DPPK.
l. Supervisory Board members of the DPPK are prohibited from holding concurrent positions as:
(1) Board of Trustees or DPS within the same DPPK; or (2) Supervisory Board, Board of Trustees, or DPS within another DPPK.
The prohibition of concurrent positions does not apply in the event that the Founder of the DPPK where the Supervisory Board serves is part of the same group or financial conglomerate.
Supervisory Board of DPLK
The Board of Commissioners or equivalent, from the Founder of the DPLK, acts as the Supervisory Board of the DPLK according to laws and regulations regarding Pension Funds.

B. Governance Process (Governance Process)

Supervisory Board of DPPK
a. The Supervisory Board is fully responsible for the supervision of the DPPK. b. The Supervisory Board monitors the effectiveness of the implementation of good corporate governance for Pension Funds.
c. The Supervisory Board ensures that internal controls of the DPPK have been implemented well.
d. The Supervisory Board carries out the duties and responsibilities of the Supervisory Board as regulated in the Pension Fund Regulations and laws and regulations in the field of Pension Funds independently. e. The Supervisory Board ensures that the Board of Trustees of the DPPK has followed up on audit findings and recommendations from work units performing the internal audit function of the DPPK, external audit function, and/or supervision results of the Financial Services Authority. f. The Supervisory Board ensures that the implementation of internal audits and external audits has been carried out in accordance with applicable audit standards. g. The Supervisory Board follows up on audit findings and recommendations from work units performing the internal audit function of the DPPK, external audit function, and/or supervision results of the Financial Services Authority. h. The Supervisory Board supervises the Board of Trustees of the DPPK in maintaining the balance of interests of all parties, particularly the interests of Participants and/or parties entitled to receive benefits.
i. The Supervisory Board ensures that the DPPK has a code of ethics as a guide for ethical behavior for the Supervisory Board, DPS, Board of Trustees, and all employees.

j. The Supervisory Board holds Supervisory Board meetings periodically at least once every 3 (three) months.

k. The Supervisory Board holds Supervisory Board meetings by inviting the Management of the Pension Fund Administration Company (DPPK) at least once every 3 (three) months.

Supervisory Board of the Pension Fund Implementation Agency (DPLK)

a. The Supervisory Board is fully responsible for the supervision of the DPLK.

b. The Supervisory Board monitors the effectiveness of the implementation of good corporate governance for the Pension Fund.

c. The Supervisory Board ensures that the Pension Fund's internal control structure has been implemented well.

d. The Supervisory Board carries out its duties and responsibilities as regulated in the Pension Fund Regulation and other legislation in the field of Pension Funds independently.

e. The Supervisory Board ensures that both internal and external audits have been carried out in accordance with applicable audit standards.

f. The Supervisory Board ensures that follow-up on audit findings is implemented by management.

g. The Supervisory Board supervises the Acting Manager in maintaining the balance of interests of Participants and/or parties entitled to receive benefits.

h. The Supervisory Board ensures that the DPLK has a code of ethics as a guide for ethical behavior for the Supervisory Board, DPS, Acting Manager, and all employees.

i. The Supervisory Board formulates and applies supervision mechanisms for the DPLK.

j. The Supervisory Board forms committees that function to assist the Supervisory Board of the DPLK in carrying out its duties.

C. Governance Outcome

Supervisory Board of the Pension Fund Administration Company (DPPK)

a. The Supervisory Board has accounted for the supervision of the DPPK.

b. The Supervisory Board guarantees effective, timely, and rapid decision-making and can act independently, having no interests that could interfere with its ability to carry out its duties independently, objectively, and critically.

c. The Supervisory Board has prepared a report on the results of the Supervisory Board's supervision over the implementation of good corporate governance for the Pension Fund, which is part of the report on the implementation of good corporate governance for the Pension Fund.

d. The Supervisory Board does not conduct transactions that have a conflict of interest with the activities of the Pension Fund where the Supervisory Board member serves.

e. The Supervisory Board does not utilize the DPPK for personal, family, and/or third-party interests that could harm the DPPK.

f. The Supervisory Board does not take and/or receive personal profits from the DPPK where the Supervisory Board member serves, other than remuneration and facilities established.

g. The Supervisory Board does not interfere in the operational activities of the DPPK that are the responsibility of the DPPK Management.

h. The Supervisory Board has held Supervisory Board meetings periodically.

i. The Supervisory Board has held Supervisory Board meetings by inviting the DPPK Management.

j. The results of the Supervisory Board meetings have been recorded in the meeting minutes of the Supervisory Board and documented well, including clear disclosure of differences of opinion that occurred in the meeting accompanied by the reasons for such differences of opinion.

k. The DPPK has a code of ethics as a guide for ethical behavior for the Supervisory Board, DPS, Management, and all employees.

Supervisory Board of the Pension Fund Implementation Agency (DPLK)

a. The Supervisory Board has accounted for the supervision of the DPLK.

b. The Supervisory Board has supervised the Acting Manager in maintaining the balance of interests of Participants and/or parties entitled to receive benefits.

c. The Supervisory Board has formulated and applied supervision mechanisms for the DPLK.

d. The Supervisory Board has prepared a report on the results of the Supervisory Board's supervision over the implementation of good corporate governance for the Pension Fund, which is part of the report on the implementation of good corporate governance for the Pension Fund.

e. The Supervisory Board has formed committees that function to assist the Supervisory Board of the DPLK in carrying out its duties.

f. The DPLK has a code of ethics as a guide for ethical behavior for the Supervisory Board, DPS, Acting Manager, and all employees.

Implementation of Duties and Responsibilities of the Sharia Supervisory Board (DPS) for Pension Funds that conduct all or part of their business using Sharia principles

A. Governance Structure

The number of DPS members consists of 1 (one) person or more.
DPS members are Sharia experts appointed by the Founder based on recommendations from the National Sharia Board of the Indonesian Ulema Council.
DPS members are clearly appointed in the Founder's decision letter.
Half of the number of DPS members must reside within the territory of the Republic of Indonesia.
DPS members must meet the following criteria:

a. meet the assessment requirements for competence and propriety according to Financial Services Authority Regulations regarding the assessment of competence and propriety for key parties of financial service institutions;

b. be able to act with good faith, honesty, and professionalism;

c. be able to act in the interest of the Pension Fund, Participants, and/or parties entitled to receive benefits;

d. prioritize the interests of the Pension Fund, Participants, and/or parties entitled to receive benefits over personal interests;

e. be able to make decisions based on independent and objective assessments for the interest of the Pension Fund, Participants, and/or parties entitled to receive benefits; and

f. be able to avoid abuse of authority to obtain undue personal profit or cause losses to the Pension Fund.

DPS members are prohibited from holding concurrent positions as Management of the DPPK, Acting Manager, or Supervisory Board member at the same Pension Fund.
DPS members are prohibited from holding concurrent positions as DPS members at more than 4 (four) other Sharia financial service institutions.

B. Governance Process

DPS carries out its duties and responsibilities as regulated in the PDP and other legislation in the field of Pension Funds.
DPS carries out supervision duties and provides advice and suggestions to the DPPK Management and Acting Manager so that business activities comply with Sharia principles.
DPS follows up on audit findings and recommendations from units performing the Pension Fund's internal audit function, external audit function, and/or results of Financial Services Authority supervision.
DPS holds DPS meetings periodically at least once every 3 (three) months.

C. Governance Outcome

DPS has submitted findings of violations related to the implementation of Sharia principles in the Pension Fund being supervised to the DPPK Management and/or Acting Manager.
DPS does not conduct transactions that have a conflict of interest with the activities of the Pension Fund where the DPS member serves.
DPS does not utilize the Pension Fund for personal, family, and/or third-party interests that could harm the Pension Fund.
DPS does not take and/or receive personal profits from the Pension Fund where the DPS member serves, other than remuneration and facilities established.
DPS meeting results are recorded in the DPS meeting minutes and documented well, including clear disclosure of differences of opinion that occurred in the meeting accompanied by the reasons for such differences of opinion.

Implementation of Duties and Responsibilities of the Founder and Co-Founder

A. Governance Structure

The Founder and Co-Founder have adequate integrity and financial feasibility.
The Founder is fully responsible for the organization of the Pension Fund.

B. Governance Process

The Founder and Co-Founder must support the implementation of good corporate governance for the Pension Fund.
The Founder and Co-Founder must carry out their respective duties and responsibilities as regulated in the PDP and other legislation in the field of Pension Funds.
The Founder and Co-Founder must follow up on audit findings and recommendations from units performing the Pension Fund's internal audit function, external audit function, and/or results of Financial Services Authority supervision.
The Founder and Co-Founder have a commitment to undertake necessary efforts if the Pension Fund faces financial difficulties.
The Founder and Co-Founder have a commitment to the development of Pension Fund operations.
The Founder and Co-Founder ensure that the Pension Fund is run based on sound business practices.

C. Governance Outcome

The Founder and Co-Founder do not interfere in the operational activities of the Pension Fund that are the responsibility of the Management/Acting Manager in accordance with legislation.
The Founder and Co-Founder do not influence or order the Management/Acting Manager, Supervisory Board, officials, and/or employees of the Pension Fund to provide unfair benefits.
The Founder and Co-Founder do not influence or order the Management/Acting Manager, Supervisory Board, officials, and/or employees of the Pension Fund to perform acts that violate prudential principles in the financial services sector and/or good Pension Fund management principles.
The Founder and Co-Founder do not influence or order the Management/Acting Manager, Supervisory Board, officials, and/or employees of the Pension Fund to perform acts that violate Sharia principles in the Sharia financial services sector.
The Founder and Co-Founder do not intervene in the implementation of duties of the Management/Acting Manager and Supervisory Board that causes the Pension Fund to experience difficulties, endanger the continuity of the Pension Fund's business, and/or the financial services industry.
The Founder and Co-Founder show seriousness and/or take necessary steps to support the Pension Fund's business plan, among others reflected in ownership commitment and efforts to strengthen Pension Fund funding.

Implementation of Duties and Responsibilities of the Audit Committee (if any)

A. Governance Structure

The number of audit committee members consists of at least 1 (one) Supervisory Board member representing Participants and at least 1 (one) party other than the Pension Fund.
Parties other than the Pension Fund serving on the audit committee do not have financial, managerial, and/or family relationships with the Supervisory Board, DPPK Management, Acting Manager, and/or Founder, or other relationships that could affect their ability to act independently.

B. Governance Process

The audit committee acts as a facilitator for the Supervisory Board to ensure that:

a. the Pension Fund's internal control structure has been implemented well;

b. both internal and external audits have been carried out in accordance with applicable audit standards; and

c. follow-up on audit findings is implemented by management.

The audit committee holds meetings according to the needs of the Pension Fund.

C. Governance Outcome

The audit committee accounts for the implementation of its duties.
Audit committee meeting results are recorded in the meeting minutes and documented well, including clear disclosure of differences of opinion that occurred in the meeting accompanied by the reasons for such differences of opinion.

Implementation of Duties and Responsibilities of the Risk Monitoring Committee

A. Governance Structure

The Risk Monitoring Committee consists of at least 2 (two) committee members.
Members of the Risk Monitoring Committee must have experience in risk monitoring.
Members of the Risk Monitoring Committee at the DPPK consist of at least one Supervisory Board member representing Participants and another party.

B. Governance Process

The Risk Monitoring Committee assists the Supervisory Board in monitoring the implementation of risk management arranged by the DPPK Management or Acting Manager and assessing the risk tolerance that can be taken by the Pension Fund.
The Risk Monitoring Committee holds meetings according to the needs of the Pension Fund.

C. Governance Outcome

The Risk Monitoring Committee accounts for the implementation of its duties.
Committee meeting results are recorded in the meeting minutes and documented well, including clear disclosure of differences of opinion that occurred in the meeting accompanied by the reasons for such differences of opinion.

Implementation of Duties and Responsibilities of the Nomination and Remuneration Committee (if any)

A. Governance Structure

The Nomination and Remuneration Committee consists of one Supervisory Board member and another party.

B. Governance Process

The Nomination and Remuneration Committee acts as a facilitator for the Supervisory Board in assisting the Founder to set criteria and select candidates for the Supervisory Board and DPPK Management or Acting Manager.
The Nomination and Remuneration Committee acts as a facilitator for the Supervisory Board in assisting the Founder to establish a remuneration system.
The Nomination and Remuneration Committee holds meetings according to the needs of the Pension Fund.

C. Governance Outcome

The Nomination and Remuneration Committee accounts for the implementation of its duties.
Committee meeting results are recorded in the meeting minutes and documented well, including clear disclosure of differences of opinion that occurred in the meeting accompanied by the reasons for such differences of opinion.

Implementation of Internal Audit Function

A. Governance Structure

The organizational structure of the unit handling the Pension Fund's internal audit function complies with the Pension Fund's internal regulations.
The unit handling internal audit is independent from operational units.
The Pension Fund provides qualified human resources to the unit handling internal audit to complete tasks effectively.

B. Governance Process

The Management or Acting Manager is responsible for:

a. creating an internal control structure, and ensuring the functioning of the Pension Fund's internal audit function at every level of management; and

b. follow-up on Pension Fund internal audit findings in accordance with policies and directives of the Supervisory Board.

The internal audit function is tasked with detailing the operational planning, execution, and monitoring of audit results.
The Pension Fund implements the internal audit function effectively across all aspects and elements of activities that are directly estimated to affect the interests of the Pension Fund and the public.
The examination plan of the unit handling the Pension Fund's internal audit, the adequacy of the examination scope, and the depth of the examination have been sufficient.
There are no deviations in the realization of the examination plan of the unit handling the Pension Fund's internal audit.
The Pension Fund plans and realizes periodic and continuous improvements in the skills of human resources.
The unit handling internal audit has performed independent supervision functions with adequate task coverage in accordance with planning, execution, and monitoring of audit results.
The unit handling internal audit has carried out duties at least covering the assessment of:

a) the adequacy of the Pension Fund's internal control system;

b) the effectiveness of the Pension Fund's internal control system; and

c) performance quality.

The unit handling internal audit has reported all examination findings in accordance with regulations.
The unit handling internal audit has monitored, analyzed, and reported on the progress of corrective actions taken by the auditee.
The unit handling internal audit has regularly formulated and updated work guidelines and systems and procedures for internal auditors to carry out their duties in accordance with regulations and legislation.

C. Governance Outcome

The Management or Acting Manager is responsible for providing a report on the implementation of the Pension Fund's internal audit function to the Supervisory Board.
Findings from the unit handling internal audit have been followed up, and no recurring findings have occurred.
The unit handling internal audit acts objectively in conducting audits.
The internal audit function has been implemented adequately, considering among others:

a) the audit program covers all work units, with implementation considering the risk level of each work unit;

b) the audit program and scope are adequate in accordance with generally accepted internal audit principles, including the fulfillment of independence, objectivity, and no restrictions on the scope and coverage of internal audit; and

c) the number and quality of internal auditors are fulfilled.

Implementation of External Audit and Actuarial Functions

A. Governance Structure

Assignment of audit to public accountants must at least meet the aspects of:

a) capacity of the appointed public accountant;

b) legality of the employment agreement;

c) scope of audit;

d) professional standards of public accountants; and

e) communication between the Financial Services Authority and the aforementioned public accountant.

Assignment of actuaries must include a statement of willingness signed by the actuary to use actuarial practice standards applicable in Indonesia and willingness to provide information related to valuation results to the Financial Services Authority.

B. Governance Process

In the implementation of the Pension Fund's financial report audit, the Pension Fund appoints a public accountant registered with the Financial Services Authority and not currently subject to administrative sanctions by competent authorities.
Appointment of the same public accountant by the Pension Fund must comply with regulations and legislation.
Public accountants must be appointed by the Supervisory Board from external auditor candidates proposed by the audit committee or the Supervisory Board exercising the audit committee function.
Appointed public accountants must be able to work independently, meet public accountant professional standards, and adhere to employment agreements and established audit scopes.
Public accountants have communicated with the Financial Services Authority regarding the condition of the audited Pension Fund in preparation for and implementation of the audit.
The Pension Fund must provide all accounting records and supporting data required by external auditors in conducting the Pension Fund's financial report audit.
Public accountants have conducted audits independently and professionally.
Appointment of actuaries whose services will be used to fulfill legislation in the field of Pension Funds must be appointed by the Supervisory Board from actuary candidates proposed by the DPPK Management or Acting Manager.
The Pension Fund must provide all supporting data required by actuaries in conducting actuarial valuations.

C. Governance Outcome

Audit results and management letters have described significant issues of the Pension Fund.
Audit result coverage is at least in accordance with the audit scope as regulated in the provisions.
Auditors act objectively in conducting audits.
Actuarial valuation results are based on actuarial practice standards applicable in Indonesia.

Handling Conflicts of Interest

A. Governance Structure

The Pension Fund has policies, systems, and procedures for resolution regarding:

Conflicts of interest binding every Management/Acting Manager, Supervisory Board member, and employee of the Pension Fund;
Administration, documentation, and disclosure of said conflicts of interest in meeting minutes.

B. Governance Process

In the event of a conflict of interest, the Management/Acting Manager and Supervisory Board do not take actions that could harm or reduce the benefits of the Pension Fund.

C. Governance Outcome

Conflicts of interest that could harm the Pension Fund or reduce its benefits have been disclosed in every decision and documented well.
Operational activities of the Pension Fund are free from intervention by the Founder or related parties or other parties that could cause conflicts of interest that could harm the Pension Fund or reduce its benefits.
The Pension Fund successfully resolves conflicts of interest that occur.

Implementation of Compliance Function

A. Governance Structure

The unit handling the compliance function is independent from operational units.
Units or employees performing the compliance function report to the Management/Acting Manager who oversees the compliance function.
The Pension Fund has provided qualified human resources to the compliance unit to complete tasks effectively.

B. Governance Process

The Management/Acting Manager overseeing the compliance function is tasked and responsible for, among others:

a) ensuring the Pension Fund's compliance with legislative provisions, by:

(1) establishing necessary steps considering prudential principles;

(2) monitoring and ensuring that the Pension Fund's business activities do not deviate from regulations;

(3) monitoring and ensuring the Pension Fund's compliance with all agreements and commitments made by the Pension Fund to the Financial Services Authority and competent authorities;

b) submitting periodic reports on the implementation of duties and responsibilities to the Management/Acting Manager, with copies to the Supervisory Board or competent parties according to the Pension Fund's organizational structure;

c) formulating strategies to encourage the creation of a Pension Fund compliance culture;

d) proposing compliance policies or compliance principles to be established by the Management/Acting Manager;

e) establishing compliance systems and procedures to be used to formulate internal regulations and guidelines of the Pension Fund;

f) ensuring that all policies, regulations, systems, procedures, and business activities conducted by the Pension Fund comply with legislation;

g) minimizing the Pension Fund's compliance risks;

h) taking preventive actions so that policies and/or decisions to be taken do not deviate from Financial Services Authority regulations and legislation;

i) performing other tasks related to the compliance function.

Appointment of the Management/Acting Manager overseeing the compliance function must comply with regulations.
The Management/Acting Manager has:

a) approved the Pension Fund's compliance policy in the form of a formal document on the effective compliance function;

b) been responsible for communicating all policies, guidelines, systems, and...

procedures throughout the entire organizational hierarchy; c) responsible for creating an effective and permanent compliance function as part of the Pension Fund's overall compliance policy.
4) The operational unit overseeing the compliance function is tasked and responsible for, among others:
a) taking steps to support the creation of a compliance culture in all Pension Fund business activities at every organizational level; b) identifying, measuring, monitoring, and controlling compliance risks; c) assessing and evaluating the effectiveness, adequacy, and alignment of the Pension Fund's policies, regulations, systems, and procedures with applicable laws and regulations; d) conducting reviews and/or recommending updates and improvements to the Pension Fund's policies, regulations, systems, and procedures to ensure alignment with applicable laws and regulations; e) taking measures to ensure that the Pension Fund's policies, regulations, systems, procedures, and business activities comply with applicable laws and regulations;

f) performing other tasks related to the compliance function.
C. Governance Outcome

The scope of the report on the implementation of duties by the Board of Trustees/Acting Board of Trustees overseeing the compliance function must align with the Pension Fund's internal regulations.
The Pension Fund has successfully reduced the level of violations against regulations.
The Pension Fund has successfully built a compliance culture in decision-making and in the Pension Fund's operational activities.

Implementation of Risk Management including Internal Control Systems
A. Governance Structure

The Pension Fund has an adequate organizational structure to support the implementation of good risk management and internal control, including operational units overseeing internal audit, operational units overseeing risk management, and a compliance unit.
The Pension Fund has adequate policies and procedures for risk management and the establishment of risk limits.
B. Governance Process
The Board of Trustees/Acting Board of Trustees has clear duties and responsibilities, including:
a) formulating risk management policies, including strategies and risk management frameworks in writing and comprehensively, including the establishment of overall risk limits and per risk type, considering the level of risk taken and risk tolerance regarding funding adequacy. After receiving approval from the Board of Supervisors, the Board of Trustees/Acting Board of Trustees establishes the aforementioned policies, strategies, and risk management frameworks; b) formulating, establishing, and updating procedures and tools to identify, measure, monitor, and control risks; c) formulating and establishing approval mechanisms for transactions, including those exceeding limits and authority at every job level; d) evaluating and/or updating risk management policies, strategies, and frameworks at least once (1) within one (1) year or at more frequent intervals in the event of significant changes in factors affecting the Pension Fund's business activities, risk exposure, and/or risk profile; e) establishing an organizational structure, including clear authorities and responsibilities at every job level related to the implementation of risk management; f) being responsible for the implementation of risk management policies, strategies, and frameworks approved by the Board of Supervisors, and evaluating and providing guidance based on reports submitted by the operational unit overseeing risk management, including reports on risk profiles; g) ensuring that all material risks and the impacts thereof have been followed up on and that reports of accountability have been submitted to the Board of Supervisors periodically. The aforementioned reports include reports on the progress and issues related to material risks, along with improvement steps that have been, are being, and will be taken; h) ensuring the implementation of effective improvement steps for issues or deviations in the Pension Fund's business activities found by the operational unit overseeing internal audit; i) developing a risk management culture, including risk awareness at all organizational levels, including adequate communication to all organizational levels regarding the importance of effective internal control; j) ensuring adequate financial and infrastructure support to manage and control risks;

k) ensuring that the risk management function has been implemented independently, reflected, among others, by the separation of functions between the operational unit overseeing risk management, which identifies, measures, monitors, and controls risks, and the operational unit that executes and settles transactions.
2) The Board of Supervisors has clear duties and responsibilities, including:
a) approving risk management policies, including strategies and risk management frameworks established in accordance with the level of risk taken (risk appetite) and risk tolerance (risk tolerance); b) evaluating risk management policies and risk management strategies at least once (1) within one (1) year or at more frequent intervals in the event of significant changes in factors affecting the Pension Fund's business activities; and c) evaluating the accountability of the Board of Trustees/Acting Board of Trustees and providing improvement guidance regarding the implementation of risk management policies periodically. The evaluation is conducted to ensure that the Board of Trustees/Acting Board of Trustees manages the Pension Fund's activities and risks effectively.

The Pension Fund has implemented a comprehensive and reliable internal control system.
C. Governance Outcome
The Pension Fund implements risk management effectively, adjusted to the objectives, policies, size, and complexity of the business, as well as the Pension Fund's capabilities.
The Board of Trustees/Acting Board of Trustees and the Board of Supervisors are able to conduct active supervision of the implementation of risk management policies and strategies.
The Pension Fund does not conduct business activities exceeding the funding capacity to absorb loss risks.

Transparency of Financial and Non-Financial Conditions, Implementation Reports of Good Corporate Governance for Pension Funds, and Internal Reporting
A. Governance Structure

The Pension Fund has policies and procedures, including regarding the implementation of governance principles, such as the transparency of financial and non-financial conditions.
The Pension Fund prepares reports on the implementation of good corporate governance for Pension Funds at the end of each fiscal year, with a scope in accordance with regulations.
The availability of complete, accurate, and timely internal reporting supported by adequate management information systems.
B. Governance Process
The Pension Fund has transparently disclosed financial and non-financial conditions to stakeholders, including announcing public financial reports and reporting to the Financial Services Authority or stakeholders in accordance with regulations.
The Pension Fund discloses information about the pension programs administered in accordance with applicable laws and regulations, including:
a) written information regarding the administered pension programs meeting minimum requirements as determined; b) Pension Fund staff have explained the information about the administered pension programs to Participants; c) information about the administered pension programs is presented in accordance with actual conditions; d) The Pension Fund has informed participants if there are changes to the information about the administered pension programs; e) information about the administered pension programs is clear and understandable; f) The Pension Fund has a pension program information service that can be easily obtained by Participants; g) The Pension Fund has explained the purpose and consequences of disseminating personal data to Participants; h) Participants whose personal data is disseminated have provided consent for the provision of their personal data.
The Pension Fund discloses information regarding participant complaint procedures and dispute resolution to participants in accordance with regulations governing participant complaints and Pension Fund mediation.
The Pension Fund prepares and presents reports in accordance with procedures, types, and scopes as regulated in the regulations.
The Pension Fund has prepared reports on the implementation of good corporate governance for Pension Funds with content and scope at least in accordance with regulations.
In the event that the report on the implementation of good corporate governance for Pension Funds does not reflect the actual conditions of the Pension Fund, the Pension Fund must promptly submit a complete revision to the Financial Services Authority.
C. Governance Outcome
Annual financial reports have been submitted by the Pension Fund completely and on time to the Financial Services Authority.
Reports on the implementation of good corporate governance for Pension Funds have reflected the actual conditions of the Pension Fund or in accordance with the results of the Pension Fund's self-assessment, attached with the results of the self-assessment with a scope in accordance with applicable laws and regulations.
Reports on the implementation of good corporate governance for Pension Funds have been submitted completely and on time to the Financial Services Authority.
Mediation for the resolution of Pension Fund participant complaints has been conducted effectively.
The Pension Fund applies transparency of information regarding administered pension programs and the use of participant personal data.

Investment Governance and Information Technology Governance
A. Governance Structure

The Board of Trustees of the Pension Fund Management Company (DPPK) or Acting Board of Trustees formulates and implements Pension Fund Investment Guidelines containing at least:
a) the authority, authorization, and responsibilities of the DPPK Board of Trustees, Acting Board of Trustees, and Pension Fund employees; b) the analysis process for the placement and divestment of investments; c) adequate evaluation of investment management; and

d) investment risk management.
2) The Pension Fund formulates information technology governance containing at least:
a) information system organizational structure; b) information system usage guidelines accompanied by instructions or work orders for each function (standard operating procedure); and c) data security management guidelines and incident management guidelines (disaster recovery plan).
3) There is a reliable information system supported by competent human resources and adequate information system security (security system) technology.
B. Governance Process

Investment management by the Pension Fund is conducted based on the application of prudence principles, prioritizing the interests of Participants and/or beneficiaries.
The Pension Fund implements effective information technology governance.
C. Governance Outcome
The results of the Pension Fund's investment management are reported in accordance with procedures, types, and scopes as regulated in the regulations.
Information system usage guidelines accompanied by instructions or work orders for each function (standard operating procedure) and data security management guidelines and incident management guidelines (disaster recovery plan) have been understood and implemented by the Board of Trustees/Acting Board of Trustees, Board of Supervisors, and Pension Fund employees.

Pension Fund Business Plan
A. Governance Structure

The Pension Fund's strategic plan has been formulated in the form of a business plan in accordance with the Pension Fund's vision and mission.
The Pension Fund's business plan is fully supported by the founders, reflected in the founders' commitment and efforts to strengthen Pension Fund funding.
B. Governance Process
The Pension Fund has formulated a realistic, comprehensive, measurable (achievable) Pension Fund business plan, considering prudence principles and responsiveness to internal and external changes.
The Pension Fund's business plan is approved by the Board of Supervisors.
The Board of Trustees/Acting Board of Trustees has communicated the Pension Fund's business plan to:
a) Founders; and b) all organizational levels within the Pension Fund.
The Board of Trustees/Acting Board of Trustees has effectively implemented the Pension Fund's business plan.
In the formulation and submission of the Pension Fund's business plan, the following have been considered:

a) external and internal factors that can affect the continuity of the Pension Fund's business; b) prudence principles; c) the implementation of risk management; and d) the principles of a healthy Pension Fund.
6) The Board of Supervisors has conducted supervision over the implementation of the Pension Fund's business plan.
C. Governance Outcome

The Pension Fund's business plan is formulated by the Board of Trustees/Acting Board of Trustees and approved by the Board of Supervisors.
The Pension Fund's business plan and its realization have been communicated by the Board of Trustees/Acting Board of Trustees to the founders and all organizational levels within the Pension Fund.
The Pension Fund's business plan describes the Pension Fund's sustainable growth.
The Pension Fund's business plan is formulated based on comprehensive studies considering business opportunities and the strengths possessed by the Pension Fund, as well as identifying weaknesses and threats (strength, weakness, opportunity, threat/SWOT Analysis).
The Pension Fund's business plan must be supported by adequate infrastructure preparation, including human resources, information technology, office networks, as well as policies and procedures.

Conclusion:
Based on the analysis of all the above assessment criteria or indicators, it is concluded that:
A. Governance Structure

Strengths of the Pension Fund's governance structure aspect are.....
Weaknesses of the Pension Fund's governance structure aspect are.....
B. Governance Process
Strengths of the Pension Fund's governance process aspect are.....
Weaknesses of the Pension Fund's governance process aspect are.....
C. Governance Outcome
Strengths of the Pension Fund's governance outcome aspect are.....
Weaknesses of the Pension Fund's governance outcome aspect are.....

Table I.B: Guidelines for Determining the Rating of Good Pension Fund Governance Factors
Rating Definition
1 Reflects that the Pension Fund management has implemented good corporate governance for Pension Funds which is generally very good. This is reflected in the very adequate fulfillment of good corporate governance principles for Pension Funds. In the event of weaknesses in the implementation of good corporate governance principles for Pension Funds, these weaknesses are generally not significant and can be promptly improved by the Pension Fund management. 2 Reflects that the Pension Fund management has implemented good corporate governance for Pension Funds which is generally good. This is reflected in the adequate fulfillment of good corporate governance principles for Pension Funds. In the event of weaknesses in the implementation of good corporate governance principles for Pension Funds, these weaknesses are generally less significant and can be resolved with normal actions by the Pension Fund management. 3 Reflects that the Pension Fund management has implemented good corporate governance for Pension Funds which is generally quite good. This is reflected in the quite adequate fulfillment of good corporate governance principles for Pension Funds. In the event of weaknesses in the implementation of good corporate governance principles for Pension Funds, these weaknesses are generally quite significant and require considerable attention from the Pension Fund management. 4 Reflects that the Pension Fund management has implemented good corporate governance for Pension Funds which is generally less good. This is reflected in the less adequate fulfillment of good corporate governance principles for Pension Funds. There are weaknesses

This copy is consistent with the original
Legal Director 1
Legal Department signed
Mufli Asmawidjaja
Rating Definition in the implementation of good corporate governance principles for Pension Funds, these weaknesses are generally significant and require comprehensive improvement by the Pension Fund management. 5 Reflects that the Pension Fund management has implemented good corporate governance for Pension Funds which is generally not good. This is reflected in the inadequate fulfillment of good corporate governance principles for Pension Funds. There are weaknesses in the implementation of good corporate governance principles for Pension Funds, these weaknesses are generally very significant and difficult to improve by the Pension Fund management. Established in Jakarta on November 6, 2020 EXECUTIVE HEAD OF SUPERVISOR INSURANCE, PENSION FUNDS, FINANCING INSTITUTIONS, AND OTHER FINANCIAL SERVICE INSTITUTIONS FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA, signed RISWINANDI

APPENDIX II
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA NUMBER 22 /SEOJK.05/2020 REGARDING ASSESSMENT OF PENSION FUND HEALTH LEVELS

ASSESSMENT OF RISK PROFILE FACTORS FOR PENSION FUND HEALTH LEVELS Strategic Risk Assessment
Table II.A.1: Parameters or Indicators for Assessing Inherent Risk
for Strategic Risk
Table II.A.2: Guidelines for Determining the Level of Inherent Risk for
Strategic Risk
Table II.A.3: Guidelines for Determining the Quality of Risk Management Implementation for Strategic Risk
Operational Risk Assessment
Table II.B.1: Parameters or Indicators for Assessing Inherent Risk
for Operational Risk
Table II.B.2: Guidelines for Determining the Level of Inherent Risk for
Operational Risk
Table II.B.3: Guidelines for Determining the Quality of Risk Management Implementation for Operational Risk
Credit Risk Assessment
Table II.C.1: Parameters or Indicators for Assessing Inherent Risk
for Credit Risk
Table II.C.2: Guidelines for Determining the Level of Inherent Risk for
Credit Risk
Table II.C.3: Guidelines for Determining the Quality of Risk Management Implementation for Credit Risk
Market Risk Assessment
Table II.D.1: Parameters or Indicators for Assessing Inherent Risk
for Market Risk
Table II.D.2: Guidelines for Determining the Level of Inherent Risk for
Market Risk
Table II.D.3: Guidelines for Determining the Quality of Risk Management Implementation for Market Risk
Liquidity Risk Assessment
Table II.E.1: Parameters or Indicators for Assessing Inherent Risk
for Liquidity Risk
Table II.E.2: Guidelines for Determining the Level of Inherent Risk for
Liquidity Risk

Table II.E.3: Guidelines for Determining the Quality of Risk Management Implementation for Liquidity Risk
Legal Risk Assessment
Table II.F.1: Parameters or Indicators for Assessing Inherent Risk
for Legal Risk
Table II.F.2: Guidelines for Determining the Level of Inherent Risk for
Legal Risk
Table II.F.3: Guidelines for Determining the Quality of Risk Management Implementation for Legal Risk
Compliance Risk Assessment
Table II.G.1: Parameters or Indicators for Assessing Inherent Risk
for Compliance Risk
Table II.G.2: Guidelines for Determining the Level of Inherent Risk for
Compliance Risk
Table II.G.3: Guidelines for Determining the Quality of Risk Management Implementation for Compliance Risk
Reputational Risk Assessment
Table II.H.1: Parameters or Indicators for Assessing Inherent Risk
for Reputational Risk
Table II.H.2: Guidelines for Determining the Level of Inherent Risk for
Reputational Risk
Table II.H.3: Guidelines for Determining the Quality of Risk Management Implementation for Reputational Risk
Table II.I: Guidelines for Determining the Level of Risk for Each Type of Risk
Table II.J: Format for Determining Risk Profile Rating 152
Table II.K: Guidelines for Determining the Rating of Risk Profile Factors 153

Filling Instructions:

Pension Funds assess the Pension Fund Health Level and the administration of part of the Pension Fund's business with Sharia principles using a risk-based nonbank rating approach individually, with the scope of assessment covering risk profile factors according to Appendix II.
The parameters or indicators for assessing risk profile factors in Appendix II are minimum standards that must be used in assessing risk profile factors.
Pension Funds may add other parameters or indicators in accordance with the characteristics and complexity of the Pension Fund's business.
Assessments are conducted per position and period for the last 12 (twelve) months for parameters or indicators that are quantitative.
For certain parameters or indicators, assessments can be conducted by considering trends for at least 3 (three) years.
In assessing Pension Fund risk profile factors in consolidation, Pension Funds can use parameters or indicators for assessing Pension Fund risk profile factors individually, adjusted to the scale, characteristics, and complexity of the Subsidiary Company's business.
Parameters apply to all Pension Funds and the administration of part of the Pension Fund's business with Sharia principles, unless stated otherwise.

Table II.A.1: Parameters or Indicators for Assessing Inherent Risk for Strategic Risk
Parameter or Indicator Description

Alignment of
business strategy with business environment conditions a. Stages or mechanisms for formulating strategic plans by the Board of Trustees/ Acting Board of Trustees Assessment of parameters includes the availability of formulation procedures. b. Understanding of the Board of Trustees/Acting Board of Trustees regarding the entire Pension Fund strategic plan. Clearly stated.
c. The Pension Fund's process in formulating business strategies and changes in business strategies made.
Clearly stated. d. Alternative strategies (contingent/emergent strategy) in the event of changes in the business environment that have been anticipated.
Clearly stated. e. The establishment of strategic objectives needs to consider internal and external factors of the Pension Fund's business:
Internal factors, including:

vision, mission, and business direction the Pension Fund aims to achieve;
Assessment of parameters includes measuring whether the establishment of strategic targets by the Board of Trustees/Acting Board of Trustees is supported by internal and external conditions of the Pension Fund's business environment.

Parameter or Indicator Description
2) organizational culture, especially regarding the establishment of strategic objectives requiring organizational structure changes and business process adjustments;
3) organizational capability factors including human resources, infrastructure, office networks, and management information systems;
4) risk tolerance level, i.e., the Pension Fund's financial capacity to absorb risks;
5) selection of Pension Programs;
6) the magnitude and complexity of Pension Benefits for DPPK - Pension Fund Benefit Programs (PPMP); and
7) Pension Fund co-funding for DPPK.

Parameter or Indicator	Description

Projection of active participant composition compared to passive participants (freezing membership) | External factors, including:
macroeconomic conditions;
technological development; and
level of business competition, for the Pension Fund Operator (DPLK).

Strategic Position of Pension Funds in the Pension Fund Industry for DPLK
a. Market where the Pension Fund conducts business activities | Clear enough. b. Adequacy of analysis regarding competitive advantages possessed by the Pension Fund compared to competitors. | The assessment evaluates the adequacy of analysis and the competitive advantage of the Pension Fund.
c. Efficiency in conducting business activities | Clear enough.
d. Readiness of the Pension Fund to face macroeconomic changes and their impact on the Pension Fund's condition, including interest rates, inflation, and exchange rates. | Clear enough.

Parameter or Indicator | Description
--- | --- e. The Pension Fund's strategy to maintain or increase its strategic position in the market, which will be carried out by the Pension Fund, including business activities, operational coverage area, or others. | Clear enough. f. Formulation/strategy for setting investment packages for participants according to their risk profile and risk appetite (e.g., default option according to life cycle fund) | Clear enough.

Achievement of Business Realization for Pension Funds
a. Level of deviation between strategic targets and the Pension Fund's achievement results. | The purpose of the assessment is to measure the extent of the deviation of business plan realization compared to the targets in the business plan. b. Trend of increasing deviation between strategic targets and the Pension Fund's achievement results in recent years | Clear enough.
c. Documentation of the causes of business plan deviations. | Clear enough.

Table II.A.2: Guidelines for Determining the Level of Inherent Risk for Strategic Risk

Rating	Definition of Rating
Rating 1 (Low)	Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by strategic risk is classified as low during a certain period in the future.<br><br>Example characteristics of Pension Funds included in Rating 1 (low) include the following:<br>a. Pension Fund strategy is classified as conservative or low risk;<br>b. Pension Fund activities are classified as stable, not complex, and diversified;<br>c. Specified pension benefits are not large and not complex;<br>d. No indications of risk regarding the funding of partner Pension Funds; and<br>e. Achievement of the Pension Fund's business plan is very adequate.
Rating 2 (Low-Medium)	Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by strategic risk is classified as low-medium during a certain period in the future.<br><br>Example characteristics of Pension Funds included in Rating 2 (low-medium) include the following:<br>a. Pension Fund strategy is classified as low-medium risk;<br>b. Pension Fund activities are classified as not complex and diversified;<br>c. Specified pension benefits are somewhat large and somewhat complex;<br>d. There are indications of risk regarding the funding of Pension Funds with some founding partners but do not significantly impact the pension fund; and<br>e. Achievement of the Pension Fund's business plan is adequate.
Rating 3 (Medium)	Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by strategic risk is classified as medium during a certain period in the future.<br><br>Example characteristics of Pension Funds included in Rating 3 (medium) include the following:<br>a. Pension Fund strategy is classified as medium risk;<br>b. Pension Fund activities are quite complex and generally quite diversified;<br>c. Specified pension benefits are quite large and quite complex, so there is a possibility of endangering the funding of the Pension Fund;<br>d. There are indications of risk regarding the funding of Pension Funds with some founding partners and have a quite significant impact on the pension fund; and<br>e. Achievement of the Pension Fund's business plan is quite adequate.
Rating 4 (Medium-High)	Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by strategic risk is classified as medium-high during a certain period in the future.<br><br>Example characteristics of Pension Funds included in Rating 4 (medium-high) include the following:<br>a. Pension Fund strategy is classified as medium-high risk;<br>b. Pension Fund activities are classified as complex and concentrated;<br>c. Specified pension benefits are large and complex, so there is a possibility of endangering the funding of the Pension Fund;<br>d. There are indications of risk regarding the funding of Pension Funds with some founding partners and have a significant impact on the Pension Fund; and<br>e. Achievement of the Pension Fund's business plan is less adequate.
Rating 5 (High)	Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by strategic risk is classified as high during a certain period in the future.<br><br>Example characteristics of Pension Funds included in Rating 5 (high) include the following:<br>a. Pension Fund strategy is classified as high risk;<br>b. Pension Fund activities are classified as very complex and very concentrated;<br>c. Specified pension benefits are very large and very complex, thereby endangering the funding of the Pension Fund;<br>d. There are indications of risk regarding the funding of Pension Funds with most founding partners and have a very significant impact on the pension fund; and<br>e. Achievement of the Pension Fund's business plan is inadequate.

Table II.A.3: Guidelines for Determining the Quality of Risk Management Implementation for Strategic Risk

Rating	Definition of Rating
Rating 1 (Strong)	The quality of risk management implementation for strategic risk is very adequate, with minor weaknesses that are not significant.<br><br>Example characteristics of Pension Funds included in Rating 1 (strong) include the following:<br>a. Formulation of the level of risk to be taken (risk appetite) and risk tolerance is very adequate and has aligned with strategic targets and overall business strategy;<br>b. Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS have very good awareness and understanding of risk management for strategic risk, sources of strategic risk, and the level of strategic risk in the Pension Fund;<br>c. Risk management culture for strategic risk is very strong and has been internalized very well at all organizational levels;<br>d. Execution of duties by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS overall is very adequate;<br>e. Risk management function for strategic risk is independent, has clear duties and responsibilities, and has operated very well;<br>f. Delegation of authority is controlled and monitored periodically, and has operated very well;<br>g. Risk management strategy for strategic risk is very aligned with the level of risk to be taken and strategic risk tolerance;<br>h. Policies, procedures, and setting of limits for strategic risk are very adequate and available for all areas of risk management for strategic risk, aligned with implementation, and understood well by employees;<br>i. Risk management process for strategic risk is very adequate in identifying, measuring, monitoring, and controlling strategic risk;<br>j. Risk management information system for strategic risk is very good, thereby generating comprehensive strategic risk reports to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS;<br>k. Human resources are very adequate in terms of quantity and quality in the risk management function for strategic risk;<br>l. Internal control system is very effective in supporting the implementation of risk management for strategic risk;<br>m. Execution of independent review by internal audit work units and functions conducting independent review is very adequate in terms of methodology, frequency, and reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS;<br>n. Generally, there are no significant weaknesses based on the results of independent review;<br>o. Follow-up on independent review has been implemented very adequately;<br>p. The compliance function for strategic risk has very clear duties and responsibilities and has operated very well; and<br>q. Policies, regulations, systems, and procedures, as well as business activities conducted by the Pension Fund, are very consistent with statutory regulations.
Rating 2 (Fairly Strong)	The quality of risk management implementation for strategic risk is adequate, although there are several minor weaknesses that can be resolved in normal business activities.<br><br>Example characteristics of Pension Funds included in Rating 2 (fairly strong) include the following:<br>a. Formulation of the level of risk to be taken (risk appetite) and risk tolerance is adequate and has aligned with strategic targets and overall business strategy;<br>b. Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS have good awareness and understanding of risk management for strategic risk, sources of strategic risk, and the level of strategic risk in the Pension Fund;<br>c. Risk management culture for strategic risk is strong and has been internalized well at all organizational levels;<br>d. Execution of duties by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS is generally adequate, with some weaknesses but not significant and can be repaired immediately;<br>e. Risk management function for strategic risk has clear duties and responsibilities and has operated well, with minor weaknesses that can be resolved in normal business activities;<br>f. Delegation of authority is controlled and monitored periodically and has operated well;<br>g. Risk management strategy for strategic risk is aligned with the level of risk to be taken and strategic risk tolerance;<br>h. Policies, procedures, and setting of limits for strategic risk are adequate and available for all areas of risk management for strategic risk, aligned with implementation, and understood well by employees, although there are minor weaknesses;<br>i. Risk management process for strategic risk is adequate in identifying, measuring, monitoring, and controlling strategic risk;<br>j. Risk management information system for strategic risk is good, including reporting strategic risk to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS, but there are minor weaknesses that can be easily repaired;<br>k. Human resources are adequate in terms of quantity and competence in the risk management function for strategic risk;<br>l. Internal control system is effective in supporting the implementation of risk management for strategic risk;<br>m. Execution of independent review by internal audit work units and functions conducting independent review is adequate in terms of methodology, frequency, and reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS;<br>n. There are weaknesses but not significant based on the results of independent review;<br>o. Follow-up on independent review has been implemented adequately;<br>p. The compliance function for strategic risk has clear duties and responsibilities and has operated well; and<br>q. Policies, regulations, systems, and procedures, as well as business activities conducted by the Pension Fund, are consistent with
statutory regulations.
Rating 3 (Sufficient)	The quality of risk management implementation for strategic risk is sufficiently adequate. Although minimum requirements are met, there are several weaknesses that require management attention.<br><br>Example characteristics of Pension Funds included in Rating 3 (sufficient) include the following:<br>a. Formulation of the level of risk to be taken (risk appetite) and risk tolerance is sufficiently adequate but not always aligned with strategic targets and overall business strategy;<br>b. Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS have sufficiently good awareness and understanding of risk management for strategic risk, sources of strategic risk, and the level of strategic risk in the Pension Fund;<br>c. Risk management culture for strategic risk is sufficiently strong and has been internalized sufficiently well but not always implemented consistently;<br>d. Execution of duties by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS is generally sufficiently adequate, with weaknesses in some assessment aspects that need management attention;<br>e. Risk management function for strategic risk is quite good, but there are several weaknesses including reporting to the Board of Directors, Board of Supervisors, and/or Sharia Supervisory Board that require management attention;<br>f. Delegation of authority is quite good, but control and monitoring are not always implemented well;<br>g. Risk management strategy for strategic risk is quite aligned with the level of risk to be taken and strategic risk tolerance;<br>h. Policies, procedures, and setting of limits for strategic risk are sufficiently adequate but not always consistent with implementation;<br>i. Risk management process for strategic risk is sufficiently adequate in identifying, measuring, monitoring, and controlling strategic risk;<br>j. Risk management information system for strategic risk meets minimum expectations but there are several weaknesses including reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS that require management attention;<br>k. Human resources are sufficiently adequate in terms of quantity and quality in the risk management function for strategic risk;<br>l. Internal control system supports the implementation of risk management for strategic risk;<br>m. Execution of independent review by internal audit work units and functions conducting independent review is sufficiently adequate, with some weaknesses in methodology, frequency, and/or reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS that require management attention;<br>n. There are weaknesses that are quite significant based on the results of independent review that require management attention; and<br>o. Follow-up on independent review has been implemented sufficiently adequately;<br>p. The compliance function for strategic risk has
sufficiently clear duties and responsibilities and has operated sufficiently well; and<br>q. Policies, regulations, systems, and procedures, as well as business activities conducted by the Pension Fund, are sufficiently consistent with statutory regulations.
Rating 4 (Fairly Weak)	The quality of risk management implementation for strategic risk is less adequate, with significant weaknesses in various aspects of risk management for strategic risk that require immediate corrective action.<br><br>Example characteristics of Pension Funds included in Rating 4 (fairly weak) include the following:<br>a. Formulation of the level of risk to be taken (risk appetite) and risk tolerance is less adequate and not aligned with strategic targets and overall business strategy;<br>b. There are significant weaknesses in the awareness and understanding of the Board of Directors/Acting Board of Directors regarding risk for strategic risk, sources of strategic risk, and the level of strategic risk in the Pension Fund;<br>c. Risk management culture for strategic risk is not strong and has not been internalized well at every organizational level;<br>d. Execution of duties by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS is generally less adequate, with weaknesses in various assessment aspects that require immediate improvement;<br>e. There are significant weaknesses in the risk management function for strategic risk that require immediate improvement;<br>f. Delegation of authority is poor, not controlled and not monitored well;<br>g. Risk management strategy for strategic risk is not aligned with the level of risk to be taken and strategic risk tolerance;<br>h. There are significant weaknesses in policies, procedures, and setting of limits for strategic risk;<br>i. Risk management process for strategic risk is less adequate in identifying, measuring, monitoring, and controlling strategic risk;<br>j. There are significant weaknesses in the risk management information system for strategic risk, including reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS that require immediate improvement;<br>k. Human resources are less adequate in terms of quantity and quality in the risk management function for strategic risk;<br>l. Internal control system is less effective in supporting the implementation of risk management;<br>m. Execution of independent review by internal audit work units and functions conducting independent review is less adequate, with weaknesses in methodology, frequency, and/or reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS that require immediate improvement;<br>n. There are significant weaknesses based on the results of independent review that require immediate improvement action;<br>o. Follow-up on independent review is less adequate;<br>p. The compliance function for strategic risk has unclear duties and responsibilities and has operated poorly; and<br>q. Policies, regulations, systems, and procedures, as well as business activities conducted by the Pension Fund, are less consistent with statutory regulations.
Rating 5 (Weak)	The quality of risk management implementation for strategic risk is inadequate, with significant weaknesses in various aspects of risk management for strategic risk, the resolution of which is beyond management's capability.<br><br>Example characteristics of Pension Funds included in Rating 5 (weak) include the following:<br>a. Formulation of the level of risk to be taken (risk appetite) and risk tolerance is inadequate and there is no connection with strategic targets and overall business strategy;<br>b. Awareness and understanding of the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS is very weak regarding risk management for strategic risk, sources of strategic risk, and the level of strategic risk in the Pension Fund;<br>c. Risk management culture for strategic risk is not strong or does not exist at all;<br>d. Execution of duties by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS is inadequate, with significant weaknesses in almost all assessment aspects, and resolution actions are beyond the Pension Fund's capability;<br>e. There are significant weaknesses in the risk management function for strategic risk that require fundamental improvement;<br>f. Delegation of authority is very weak or non-existent;<br>g. Risk management strategy for strategic risk is not aligned with the level of risk to be taken and strategic risk tolerance;<br>h. There are very significant weaknesses in policies, procedures, and setting of limits for strategic risk;<br>i. Risk management process for strategic risk is inadequate in identifying, measuring, monitoring, and controlling strategic risk;<br>j. There are fundamental weaknesses in the risk management information system for strategic risk;<br>k. Human resources are inadequate in terms of quantity and quality in the risk management function for strategic risk;<br>l. Internal control system is ineffective in supporting the implementation of risk management for strategic risk;<br>m. Execution of independent review by internal audit work units and functions conducting independent review is inadequate, with weaknesses in methodology, frequency, and/or reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS that require fundamental improvement;<br>n. There are very significant weaknesses based on the results of independent review, the improvement of which is beyond management's capability;<br>o. Follow-up on independent review is inadequate or non-existent;<br>p. The compliance function for strategic risk has unclear duties and responsibilities and has operated poorly; and<br>q. Policies, regulations, systems, and procedures, as well as business activities conducted by the Pension Fund, are inconsistent with statutory regulations.

Table II.B.1: Parameters or Indicators for Assessing Inherent Risk for Operational Risk

Parameter or Indicator	Description
1. Characteristics and Complexity of Pension Fund Activities
a. Business scale and organizational structure.	Clear enough.
b. Size and complexity of Pension Fund activities.	High business complexity of the Pension Fund will cause complexity and variation in work processes, both manual and automated, thereby potentially causing operational disruptions or losses.
c. Complexity of business processes and diversity of products/services, for DPLK.	Clear enough.
d. Corporate actions and new business development, for DPLK.	Clear enough.
e. Business Expense Ratio (quantitative)	(Operating Expenses + Investment Expenses) / Investment Income<br><br>Note:<br>1) Operating expenses are as presented in the statement of changes in net assets.<br>2) Investment expenses are as presented in the statement of changes in net assets.<br>3) Investment income includes realized and unrealized investment income as presented in the statement of changes in net assets.
f. Growth of investment assets (quantitative)	(Total Investments tn – Total Investments tn-1) / Total Investments tn-1<br><br>Note:<br>1) Total Investments tn-1 is the total investments in the period before the current year period as presented in the net asset statement of the previous period.<br>2) Total Investments tn is the total investments in the current period in the net asset statement.
g. History of transaction process failures or management processes.	Clear enough.
2. Human Resources
a. Implementation of human resource management.
b. Failures due to human factors (human error).	Ineffective human resource management can result in the potential for operational disruptions or losses for the Pension Fund.<br>Assessment can be conducted based on:<br>1) percentage of human resource fulfillment in the organizational structure;<br>2) employee turnover rate; and

Budgeting and realization of education and training costs against human resource budgets.

Infrastructure and information technology systems
a. Complexity of information technology systems. Inadequate information technology and/or ineffective and inefficient management can cause losses to the Pension Fund. Assessment can be conducted based on, among other things, the number of system disruptions (internal and external) occurring within 1 year. b. Changes in information technology systems. Sufficiently clear.
c. Maturity of information technology systems.
Sufficiently clear. d. Reliability of information systems, including supporting infrastructure, against information technology threats and attacks.
Sufficiently clear. e. Suitability of information technology systems with Pension Fund activities.
Information technology systems used by the Pension Fund must be suitable for the Pension Fund's activities, for example, accounting recording systems integrated with investment payment and pension benefit payment recording systems, and the use of technology that facilitates DPLK (Pension Fund Execution Agency) membership services. f. Materiality of information technology system disruptions/failures. Sufficiently clear.
Fraud risk
a. History and frequency of internal fraud. b. History and frequency of external fraud.
c. Materiality of Fraud.
Fraud assessment is conducted based on the frequency or materiality of fraud that has occurred in previous assessment periods, including potential fraud that may arise from weaknesses in business aspects, human resources, information technology, and external events.
Disruptions to the Pension Fund
a. Disruption history b. Frequency and materiality of external events.
External events include, for example, terrorism, crime, pandemics, and natural disasters, location, and the geographical conditions of the Pension Fund.
Use of third-party services
a. Third-Party Reputation b. Third-party selection process
c. Level of interaction and the Pension Fund's dependence on third parties regarding business processes and financial performance.
d. Evaluation of third-party usage
Delegating part of the work execution to another party does not remove the responsibility of the Board of Trustees/Acting Board of Trustees in carrying out their duties.

Table II.B.2: Guidelines for Determining Inherent Risk Levels for Operational Risk

Rating Level	Rating Definition
Rating 1 (Low)	Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by operational risk is classified as low for a certain period in the future.<br><br>Example characteristics of Pension Funds included in Rating 1 (low) are as follows:<br>a. Pension Fund activities have very simple characteristics such as: business scale and organizational structure are not complex, history of transaction process or management process failures is low;<br>b. Human resources are very adequate, both in terms of quantity and quality of human resources, and historical data on losses due to human error are not significant;<br>c. Use of third-party services with very good reputation, efficiency in work and cost in using third-party services, third-party selection process is in accordance with standard operating procedures (SOP) and applicable regulations, periodic evaluation of third-party usage is very comprehensive;<br>d. Information technology is very mature (mature) and there are no significant changes in information technology systems, vulnerability of information technology to disruptions or attacks is very low, supporting infrastructure is very reliable in supporting Pension Fund business;<br>e. frequency of internal and external fraud has never occurred in the last three-year period;<br>f. materiality of internal and external fraud is low and accumulated losses caused are not significant compared to the total investment of the Pension Fund; and<br>external is very low.
Rating 2 (Low-Medium)	Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by operational risk is classified as low-medium for a certain period in the future.<br><br>Example characteristics of Pension Funds included in Rating 2 (low-medium) are as follows:<br>a. Pension Fund activities have simple characteristics such as: business scale and organizational structure are not very complex, history of transaction process or management process failures is low-medium;<br>b. Human resources are adequate, both in terms of quantity and quality of human resources, and historical data on losses due to human error are less significant;<br>c. Use of third-party services with good reputation, efficiency in work and cost in using third-party services, third-party selection process is in accordance with standard operating procedures (SOP) and applicable regulations, periodic evaluation of third-party usage is comprehensive;<br>d. Information technology is relatively mature (mature) and there are no significant changes in information technology systems. Vulnerability of information technology to disruptions or attacks is low. Supporting infrastructure is reliable in supporting Pension Fund business;<br>e. frequency of internal and external fraud has occurred in the last three-year period;<br>f. materiality of internal and external fraud is low-medium and accumulated losses caused are generally not significant compared to the total investment of the Pension Fund; and<br>external is low-medium.
Rating 3 (Medium)	Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by operational risk is classified as medium for a certain period in the future.<br><br>Example characteristics of Pension Funds included in Rating 3 (medium) are as follows:<br>a. Pension Fund activities have moderately complex characteristics such as: business scale and organizational structure are moderately complex, history of transaction process or management process failures is medium;<br>b. Human resources are moderately adequate, both in terms of quantity and quality of human resources, and historical data on losses due to human error are moderately significant;<br>c. Use of third-party services with moderately good reputation, efficiency in work but cost in using third-party services is quite large, third-party selection process is moderately in accordance with standard operating procedures (SOP) and applicable regulations, no evaluation of third-party usage;<br>d. Information technology is moving towards maturity and significant changes may occur in information technology systems. Information technology is moderately vulnerable to disruptions or attacks. Supporting infrastructure is moderately reliable in supporting Pension Fund business;<br>e. frequency of internal and external fraud occurs quite often in the last three-year period;<br>f. materiality of internal and external fraud is medium and accumulated losses caused are moderately significant compared to the total investment of the Pension Fund; and<br>external is medium.
Rating 4 (Medium-High)	Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by operational risk is classified as medium-high for a certain period in the future.<br><br>Example characteristics of Pension Funds included in Rating 4 (medium-high) are as follows:<br>a. Pension Fund activities have complex characteristics such as: business scale and organizational structure are complex, history of transaction process or management process failures is medium-high;<br>b. Human resources are less adequate, both in terms of quantity and quality of human resources, and historical data on losses due to human error are significant;<br>c. Use of third-party services with less good reputation, no efficiency in work and there is large cost usage in using third-party services, third-party selection process is less in accordance with standard operating procedures (SOP) and applicable regulations, no evaluation of third-party usage;<br>d. Information technology is not mature and significant changes occur in information technology systems, information technology is vulnerable to disruptions or attacks. Supporting infrastructure is less reliable in supporting Pension Fund business;<br>e. frequency of internal and external fraud occurs often in the last three-year period.<br>f. materiality of internal and external fraud is medium-high and accumulated losses caused are significant compared to the total investment of the Pension Fund; and<br>external is medium-high.
Rating 5 (High)	Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by operational risk is classified as high for a certain period in the future.<br><br>Example characteristics of Pension Funds included in Rating 5 (high) are as follows:<br>a. Pension Fund activities have very complex characteristics such as: business scale and organizational structure are very complex, history of transaction process or management process failures is high;<br>b. Human resources are inadequate, both in terms of quantity and quality of human resources, and historical data on losses due to human error are very significant;<br>c. Use of third-party services with bad reputation, no efficiency in work and there is large cost usage in using third-party services, third-party selection process is not in accordance with standard operating procedures (SOP) or applicable regulations, no evaluation of third-party usage;<br>d. Information technology is not mature and significant changes occur in information technology systems, information technology is very vulnerable to disruptions or attacks, supporting infrastructure is not reliable in supporting Pension Fund business;<br>e. frequency of internal and external fraud occurs very often in the last three-year period.<br>f. materiality of internal and external fraud is high and accumulated losses caused are very significant compared to the total investment of the Pension Fund; and<br>external is high.

Table II.B.3: Guidelines for Determining the Quality of Operational Risk Management Implementation for Operational Risk

Rating Level	Rating Definition
Rating 1 (Strong)	The quality of operational risk management implementation for operational risk is very adequate, with minor weaknesses that are not significant and can be ignored.<br><br>Example characteristics of Pension Funds included in Rating 1 (strong) are as follows:<br>a. formulation of risk appetite and risk tolerance is very adequate and has aligned with overall strategic objectives and business strategy;<br>b. Board of Trustees/Acting Board of Trustees, Supervisory Board, and/or DPS have very good awareness and understanding of operational risk management for operational risk, sources of operational risk, and the level of operational risk in the Pension Fund;<br>c. operational risk management culture for operational risk is very strong and has been internalized very well at all organizational levels;<br>d. Board of Trustees/Acting Board of Trustees, Supervisory Board, and/or DPS are very responsible in developing an organizational culture aware of operational risk and fostering commitment to managing operational risk in accordance with the Pension Fund's business strategy;<br>e. Board of Trustees/Acting Board of Trustees are very good at creating a culture of objective disclosure of operational risk at all organizational elements so that operational risk can be identified quickly and mitigated accurately;<br>f. Board of Trustees/Acting Board of Trustees establish very effective reward policies including remuneration and punishment integrated into the performance evaluation system in order to support optimal risk management implementation;<br>g. Board of Trustees/Acting Board of Trustees can ensure very well that the execution of authority and responsibilities delegated to service providers has been carried out well and responsibly;<br>h. execution of duties by Board of Trustees/Acting Board of Trustees, Supervisory Board, and/or DPS overall is very adequate;<br>i. operational risk management function for operational risk is independent, has clear tasks and responsibilities, and has operated very well;<br>j. delegation of authority is controlled and monitored periodically, and has operated very well;<br>k. operational risk management strategy is very aligned with the level of risk to be taken and operational risk tolerance;<br>l. policies, procedures, and limits for operational risk are very adequate and available for all operational risk management areas, aligned with implementation, and well understood by employees;<br>m. operational risk management process for operational risk is very adequate in identifying, measuring, monitoring, and controlling operational risk;<br>n. data security management guidelines and incident management guidelines (disaster recovery plan) are very reliable and very tested;<br>o. operational risk management information system is very good so as to produce comprehensive and integrated operational risk reports to the Board of Trustees/Acting Board of Trustees, Supervisory Board, and/or DPS;<br>p.
human resources are very adequate in terms of quantity and quality in the operational risk management function for operational risk;<br>q. internal control system is very effective in supporting the implementation of operational risk management;<br>r. independent review implementation by internal audit work units and functions conducting independent review is very adequate in terms of methodology, frequency, and reporting to the Board of Trustees/Acting Board of Trustees, Supervisory Board, and/or DPS;<br>s. generally, there are no significant weaknesses based on independent review results;<br>t. follow-up on independent review has been implemented very adequately;<br>u. operational risk compliance function has very clear tasks and responsibilities and has operated very well; and<br>v. policies, regulations, systems, procedures, and business activities conducted by the Pension Fund are very in accordance with statutory regulations.
Rating 2 (Fairly Strong)	The quality of operational risk management implementation for operational risk is adequate, with several minor weaknesses that can be resolved in normal business activities.<br><br>Example characteristics of Pension Funds included in Rating 2 (fairly strong) are as follows:<br>a. formulation of risk appetite and risk tolerance is adequate and has aligned with overall strategic objectives and business strategy;<br>b. Board of Trustees/Acting Board of Trustees, Supervisory Board, and/or DPS have good awareness and understanding of operational risk management for operational risk, sources of operational risk, and the level of operational risk in the Pension Fund;<br>c. operational risk management culture for operational risk is strong and has been internalized well at all organizational levels;<br>d. Board of Trustees/Acting Board of Trustees, Supervisory Board, and/or DPS are responsible in developing an organizational culture aware of operational risk and fostering commitment to managing operational risk in accordance with the Pension Fund's business strategy;<br>e. Board of Trustees/Acting Board of Trustees are good at creating a culture of objective disclosure of operational risk at all organizational elements so that operational risk can be identified quickly and mitigated accurately;<br>f. Board of Trustees/Acting Board of Trustees establish effective reward policies including remuneration and punishment integrated into the performance evaluation system in order to support optimal risk management implementation;<br>g. Board of Trustees/Acting Board of Trustees can ensure well that the execution of authority and responsibilities delegated to service providers has been carried out well and responsibly;<br>h. execution of duties by Board of Trustees/Acting Board of Trustees, Supervisory Board, and/or DPS is generally adequate, with several weaknesses but not significant and can be repaired immediately;<br>i. operational risk management function for operational risk is independent, has clear tasks and responsibilities, and has operated well, with minor weaknesses, but can be resolved in normal business activities;<br>j. delegation of authority is controlled and monitored periodically, and has operated well;<br>k. operational risk management strategy is aligned with the level of risk to be taken and operational risk tolerance;<br>l. policies, procedures, and limits for operational risk are adequate and available for all operational risk management areas, aligned with implementation, and well understood by employees although there are minor weaknesses;<br>m. operational risk management process for operational risk is adequate in identifying, measuring, monitoring, and controlling operational risk;<br>n. data security management guidelines and incident management guidelines (disaster recovery plan) are reliable and tested;<br>o. operational risk management information system is good including operational risk
reporting to the Board of Trustees/Acting Board of Trustees, Supervisory Board, and/or DPS, with minor weaknesses that can be easily repaired;<br>p. human resources are adequate, both in terms of quantity and quality in the operational risk management function for operational risk;<br>q. internal control system is effective in supporting the implementation of operational risk management;<br>r. independent review implementation by internal audit work units and functions conducting independent review is adequate in terms of methodology, frequency, and reporting to the Board of Trustees/Acting Board of Trustees, Supervisory Board, and/or DPS;<br>s. there are weaknesses that are not significant based on independent review results;<br>t. follow-up on independent review has been implemented adequately;<br>u. operational risk compliance function has clear tasks and responsibilities and has operated well; and<br>v. policies, regulations, systems, procedures, and business activities conducted by the Pension Fund are in accordance with statutory regulations.
Rating 3 (Adequate)	The quality of operational risk management implementation for operational risk is moderately adequate. Although minimum requirements are met, there are several weaknesses that require management attention.<br><br>Example characteristics of Pension Funds included in Rating 3 (adequate) are as follows:<br>a. formulation of risk appetite and risk tolerance is moderately adequate but not always aligned with overall strategic objectives and business strategy;<br>b. Board of Trustees/Acting Board of Trustees, Supervisory Board, and/or DPS have moderately good awareness and understanding of operational risk management for operational risk, sources of operational risk, and the level of operational risk in the Pension Fund;<br>c. operational risk management culture for operational risk is moderately strong and has been internalized moderately well but not always implemented consistently;<br>d. Board of Trustees/Acting Board of Trustees, Supervisory Board, and/or DPS are moderately responsible in developing an organizational culture aware of operational risk and fostering commitment to managing operational risk in accordance with the Pension Fund's business strategy;<br>e. Board of Trustees/Acting Board of Trustees are moderately good at creating a culture of objective disclosure of operational risk at all organizational elements so that operational risk can be identified quickly and mitigated accurately;<br>f. Board of Trustees/Acting Board of Trustees establish moderately effective reward policies including remuneration and punishment integrated into the performance evaluation system in order to support optimal risk management implementation;<br>g. Board of Trustees/Acting Board of Trustees can ensure moderately well that the execution of authority and responsibilities delegated to service providers has been carried out well and responsibly;<br>h. execution of duties by Board of Trustees/Acting Board of Trustees, Supervisory Board, and/or DPS is generally moderately adequate, but there are weaknesses in some assessment aspects that need management attention;<br>i. operational risk management function for operational risk is moderately good, but there are several weaknesses including reporting to the Board of Trustees/Acting Board of Trustees, Supervisory Board, and/or DPS that require management attention;<br>j. delegation of authority is moderately good, but control and monitoring are not always implemented well;<br>k. operational risk management strategy is moderately aligned with the level of risk to be taken and operational risk tolerance;<br>l. policies, procedures, and limits for operational risk are moderately adequate but not always consistent with implementation;<br>m. operational risk management process for operational risk is moderately adequate in identifying, measuring, monitoring, and controlling operational risk;<br>n. data security management guidelines and incident management guidelines (disaster recovery
plan) are moderately reliable;<br>o. operational risk management information system meets minimum expectations but there are several weaknesses including reporting to the Board of Trustees/Acting Board of Trustees, Supervisory Board, and/or DPS that require management attention;<br>p. human resources are moderately adequate in terms of quantity and quality in the operational risk management function for operational risk;

Rating Definition Rating

q. internal control system is sufficiently effective in supporting the implementation of risk management for operational risk;

r. the implementation of independent review by the internal audit unit and functions performing independent review is sufficiently adequate, with several weaknesses in methodology, frequency, and/or reporting to the Board of Trustees/Acting Board of Trustees, Board of Supervisors, and/or DPS that require management attention;

s. there are sufficiently significant weaknesses based on the results of independent review that require management attention;

t. follow-up on independent review has been implemented sufficiently adequately;

u. the compliance function for operational risk has sufficiently clear tasks and responsibilities and has operated sufficiently well; and

v. the policies, regulations, systems, procedures, and business activities conducted by the Pension Fund are sufficiently in accordance with statutory regulations.

Rating 4
(Somewhat Weak)
The quality of risk management implementation for operational risk is less than adequate, with significant weaknesses in various aspects of operational risk management requiring immediate corrective action.

Examples of characteristics of Pension Funds included in Rating 4 (somewhat weak) include the following:

a. the formulation of the level of risk to be taken (risk appetite) and risk tolerance is less than adequate and not aligned with strategic objectives and overall business strategy;

b. significant weaknesses in the awareness and understanding of the Board of Trustees/Acting Board of Trustees, Board of Supervisors, and/or DPS regarding risk management for operational risk, sources of operational risk, and the level of operational risk in the Pension Fund;

Rating Definition Rating

c. the culture of risk management for operational risk is less strong and has not been well internalized at every level of the organization;

d. the Board of Trustees/Acting Board of Trustees, Board of Supervisors, and/or DPS are less responsible in developing an organizational culture aware of operational risk and fostering commitment to managing operational risk in accordance with the Pension Fund's business strategy;

e. the Board of Trustees/Acting Board of Trustees is less able to create a culture of objective disclosure of operational risk across all organizational elements so that operational risk can be identified quickly and mitigated appropriately;

f. the Board of Trustees/Acting Board of Trustees establishes reward policies including remuneration and punishment that are less effective and not integrated into the performance assessment system to support optimal risk management implementation;

g. the Board of Trustees/Acting Board of Trustees is weak in ensuring that the implementation of delegated authority and responsibilities to service providers has been carried out well and responsibly;

h. the implementation of duties by the Board of Trustees/Acting Board of Trustees, Board of Supervisors, and/or DPS is generally less than adequate, with weaknesses in various aspects of assessment requiring immediate improvement;

i. there are significant weaknesses in the risk management function for operational risk requiring immediate improvement;

j. delegation of authority is weak, not controlled, and not monitored well;

k. management strategy for operational risk is less aligned with the level of risk to be taken and operational risk tolerance;

Rating Definition Rating

l. there are significant weaknesses in policies, procedures, and the establishment of limits for operational risk;

m. the risk management process for operational risk is less than adequate in identifying, measuring, monitoring, and controlling operational risk;

n. data security management guidelines and incident management guidelines (disaster recovery plan) are less reliable;

o. there are significant weaknesses in the operational risk management information system, including reporting to the Board of Trustees/Acting Board of Trustees, Board of Supervisors, and/or DPS, requiring immediate improvement;

p. human resources are less than adequate in terms of quantity and quality in the risk management function for operational risk;

q. the internal control system is less effective in supporting the implementation of risk management for operational risk.

r. the implementation of independent review by the internal audit unit and functions performing independent review is less than adequate, with weaknesses in methodology, frequency, and/or reporting to the Board of Trustees/Acting Board of Trustees, Board of Supervisors, and/or DPS requiring immediate improvement;

s. there are significant weaknesses based on the results of independent review requiring immediate improvement;

t. follow-up on independent review is less than adequate;

u. the compliance function for operational risk has unclear tasks and responsibilities and has operated poorly; and

v. the policies, regulations, systems, procedures, and business activities conducted by the Pension Fund are less in accordance with statutory regulations.

Rating 5
(Weak)
The quality of risk management implementation for operational risk is inadequate, with significant weaknesses in various aspects of operational risk management whose resolution is beyond the management's capability.

Examples of characteristics of Pension Funds included in Rating 5 (weak) include the following:

a. the formulation of the level of risk to be taken (risk appetite) and risk tolerance is inadequate and there is no connection with the strategic objectives and overall business strategy of the Pension Fund;

b. the awareness and understanding of the Board of Trustees/Acting Board of Trustees, Board of Supervisors, and/or DPS regarding risk management for operational risk, sources of operational risk, and the level of operational risk in the Pension Fund is very weak;

c. the culture of risk management for operational risk is not strong or does not exist at all;

d. the Board of Trustees/Acting Board of Trustees, Board of Supervisors, and/or DPS do not develop an organizational culture aware of operational risk and do not foster commitment to managing operational risk in accordance with the Pension Fund's business strategy;

e. the Board of Trustees/Acting Board of Trustees is unable to create a culture of objective disclosure of operational risk across all organizational elements so that operational risk can be identified quickly and mitigated appropriately;

f. the Board of Trustees/Acting Board of Trustees establishes reward policies including remuneration and punishment that are ineffective and not integrated into the performance assessment system to support optimal risk management implementation;

g. the Board of Trustees/Acting Board of Trustees is very weak in ensuring that the implementation of delegated authority and responsibilities to service providers has been carried out well and responsibly;

Rating Definition Rating

h. the implementation of duties by the Board of Trustees/Acting Board of Trustees, Board of Supervisors, and/or DPS is inadequate, with significant weaknesses in almost all aspects of assessment and the resolution is beyond the Pension Fund's capability;

i. there are significant weaknesses in the risk management function for operational risk requiring fundamental improvement;

j. delegation of authority is very weak or non-existent;

k. management strategy for operational risk is not aligned with the level of risk to be taken and operational risk tolerance;

l. there are very significant weaknesses in policies, procedures, and the establishment of limits for operational risk;

m. the risk management process for operational risk is inadequate in identifying, measuring, monitoring, and controlling operational risk;

n. data security management guidelines and incident management guidelines (disaster recovery plan) are unreliable;

o. there are fundamental weaknesses in the operational risk management information system;

p. human resources are inadequate in terms of quantity and quality in the risk management function for operational risk;

q. the internal control system is ineffective in supporting the implementation of risk management for operational risk;

r. the implementation of independent review by the internal audit unit and functions performing independent review is inadequate, with weaknesses in methodology, frequency, and/or reporting to the Board of Trustees/Acting Board of Trustees, Board of Supervisors, and/or DPS requiring fundamental improvement;

Rating Definition Rating

s. there are very significant weaknesses based on the results of independent review whose corrective actions are beyond the management's capability;

t. follow-up on independent review is inadequate or non-existent; and

u. the compliance function for operational risk has unclear tasks and responsibilities and has operated poorly; and

v. the policies, regulations, systems, and procedures, as well as business activities, [are not in accordance with] statutory regulations.

Table II.C.1: Parameters or Indicators for Assessing Inherent Risk for Credit Risk

Parameter or Indicator Description

Portfolio composition and level of investment concentration

a. Proportion of investment placement per type.
(Balance per type of Investment) / (Total Pension Fund Investments) Description:
a. Balance per type of investment and Total Investments are as stated in the Net Asset Report and Pension Fund Financial Report. b. Limits per type of investment as regulated in the Financial Services Authority Regulation regarding Pension Fund Investments.

b. Proportion of investment placement per party.
(Investment balance with one party) / (Total Pension Fund Investments) Description:
a. Investment balance with one party and Total Investments are as stated in the Net Asset Report and details, as well as the Pension Fund Financial Report. b. Limits per party for investment as regulated in the Financial Services Authority Regulation regarding Pension Fund Investments.

Investment in affiliated parties

a. Fairness of investment transactions with affiliated parties.
Definition of affiliation is as regulated in the Financial Services Authority Regulation regarding Pension Fund Investments.

b. Proportion of investment in affiliated parties.
(Investment balance with affiliated parties) / (Total Pension Fund Investments) Description:
a. Investment balance with affiliated parties and Total Investments are as stated in the Pension Fund Financial Report. b. Definition of affiliation is as regulated in the Financial Services Authority Regulation regarding Pension Fund Investments. Pension Funds must also pay attention to the interconnection between investment instruments owned by affiliated parties.

Default risk (breach of contract)

a. Counterparty credibility. a. Counterparty credibility can be seen from the investment grade rating issued by a securities rating company that has obtained a business license from OJK and/or a rating agency recognized internationally.

Rating Definition Rating

b. Counterparty credibility can also be seen from the financial soundness of the company as reflected in audited financial reports.

b. Proportion of investment placement with 'problematic' parties.
(Investment balance with identified problematic parties) / (Total Pension Fund Investments) Description:
Investment identified as problematic can be obtained from the investment balance with identified problematic parties from the Pension Fund Financial Report. Information on investees experiencing problems (default risk) can be obtained from, among others, investee financial reports, disclosures in mass media, and/or from rating agencies. Examples of conditions or parties identified as problematic include:
a. Shares whose trading is suspended by the Stock Exchange; b. Mutual funds whose prices drop significantly in a short time;
c. Bond issuers or deposit-issuing banks that record losses;
d. downgrade of bond instrument ratings below investment grade; e. delay in coupon payment for bonds or interest on deposits; f. bond issuers or deposit issuers involved in legal cases or suspected of fraud; and g. restructured bonds.

c. Potential loss compared to total investments.
(Total investments with potential loss) / (Total Pension Fund Investments) Description:
Total investments with potential loss are the investment balance with one party or several parties, where the Pension Fund has the potential to lose all or part of the value of the investment. Information on potential loss can be obtained from, among others, statements from the Pension Fund, statements from investees, statements from regulators, independent appraiser reports, court decisions, and/or results of independent auditor assessments.

d. Investment Receivables and Investment Return Receivables of the Pension Fund compared to Total Pension Fund Investments.
(Investment Receivables + Investment Return Receivables) / (Total Pension Fund Investments) Description:
a) Investment Claims are Investment Receivables and Investment Return Receivables as presented in the Pension Fund Financial Report. b) Total Investments are as presented in the Pension Fund Financial Report.

External factors.
Changes in economic conditions, technology changes, or regulations that affect interest rates, exchange rates, counterparty business cycles, and other external factors, which impact the counterparty's ability to repay its obligations. Fairly clear.

Table II.C.2: Guidelines for Determining the Level of Inherent Risk for Credit Risk

Rating Definition Rating

Rating 1
(Low)
Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by credit risk is considered low during a certain period in the future.

Examples of characteristics of Pension Funds included in Rating 1 (low) include the following:

a. investment placement per type of investment is very suitable with the asset allocation strategy considering the risk level statement established by the Pension Fund and the Founder;

b. proportion of investment placement with one party is low (below 5%);

c. there are no transactions or investment instruments with affiliated parties;

d. there are no investments with 'problematic' parties;

e. the credibility level of investment counterparties is very high.
Example: bond ratings are investment grade above single A, the health level of deposit-issuing banks is very healthy or there are no violations of regulations by the counterparty;

f. potential loss compared to total investment is low;

g. there is no delay in payment of investment returns from the counterparty;

h. investment exposure is very well diversified;

i. investment strategy or business model is considered very stable; and

j. investment portfolio is relatively unaffected by changes in external factors.

Rating 2
(Medium Low)
Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by credit risk is considered medium low during a certain period in the future.

Examples of characteristics of Pension Funds included in Rating 2 (medium low) include the following:

a. investment placement per type of investment is generally suitable with the asset allocation strategy considering the risk level statement established by the Pension Fund and the Founder;

b. proportion of investment placement with one party is medium low (below 10%);

c. there are transactions or investment instruments with affiliated parties but with a medium low proportion of total investment (below 5%);

d. there are investments with 'problematic' parties with a medium low proportion (below 1%);

e. the credibility level of investment counterparties is high.
Example: bond ratings are investment grade above BBB, the health level of deposit-issuing banks is healthy or generally there are no violations of regulations by the counterparty;

f. potential loss compared to total investment is medium low;

g. delay in payment of investment returns from the counterparty is medium low, can be resolved in a short time (<1 year);

h. investment exposure is well diversified;

i. investment strategy or business model is considered stable; and

j. investment portfolio is less affected by changes in external factors.

Rating 3
(Medium)
Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by credit risk is considered medium during a certain period in the future.

Rating Definition Rating

Examples of characteristics of Pension Funds included in Rating 3 (medium) include the following:

a. investment placement per type of investment is sufficiently suitable with the asset allocation strategy considering the risk level statement established by the Pension Fund and the Founder;

b. proportion of investment placement with one party is medium (10%-20%);

c. there are transactions or investment instruments with affiliated parties but with a medium proportion of total investment (5%-10%);

d. there are investments with 'problematic' parties with a medium proportion (1%-5%);

e. the credibility level of investment counterparties is sufficiently high.
Example: bond ratings are investment grade less than BBB+, the health level of deposit-issuing banks is sufficiently healthy or there are violations of regulations by the counterparty but not significant;

f. potential loss compared to total investment is medium;

g. delay in payment of investment returns from the counterparty is considered medium, can be resolved in a short time (<1 year);

h. investment exposure is sufficiently diversified, but there is investment concentration that is not significant;

i. investment strategy or business model is generally sufficiently stable; and

j. investment portfolio is sufficiently affected by changes in external factors.

Rating 4
(Medium High)
Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by credit risk is considered medium high during a certain period in the future.

Rating Definition Rating

Examples of characteristics of Pension Funds included in Rating 4 (medium high) include the following:

a. investment placement per type of investment is less suitable with the asset allocation strategy considering the risk level statement established by the Pension Fund and the Founder;

b. proportion of investment placement with one party is medium high (above 20%), excluding the calculation of investment placement in SBN instrument types;

c. there are transactions or investment instruments with affiliated parties with a medium high proportion of total investment (above 10%);

d. there are investments with 'problematic' parties with a medium high proportion (5%-10%);

e. the credibility level of investment counterparties is low.
Example: bond ratings are non-investment grade, the health level of deposit-issuing banks is less healthy or there are violations of regulations by the counterparty that are quite significant;

f. potential loss compared to total investment is medium high;

g. delay in payment of investment returns from the counterparty is considered medium high, cannot be resolved in a short time (>1 year);

h. investment exposure is less well diversified, there is investment concentration that is quite significant;

i. there are significant changes in investment strategy or business model; and

j. investment portfolio is affected by changes in external factors.

Rating 5
(High)
Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by credit risk is considered high during a certain period in the future.

Rating Definition Rating

Examples of characteristics of Pension Funds included in Rating 5 (high) include the following:

a. investment placement per type of investment is not suitable with the asset allocation strategy considering the risk level statement established by the Pension Fund and the Founder;

b. proportion of investment placement with one party is high (above 20%), excluding the calculation of investment placement in SBN instrument types;

c. there are transactions or investment instruments with affiliated parties with a high proportion of total investment (above 10%);

d. there are investments with 'problematic' parties with a high proportion (above 10%);

e. the credibility level of investment counterparties is very low.
Example: bond ratings are non-investment and default, the health level of deposit-issuing banks is unhealthy or there are significant violations of regulations by the counterparty;

f. potential loss compared to total investment is high;

g. delay in payment of investment returns from the counterparty is considered high, has not been resolved in a short time (>1 year) or Suspension of Debt Payment Obligations (PKPU) until bankruptcy;

h. investment exposure is not well diversified, there is significant investment concentration;

i. there are very significant changes in investment strategy or business model; and

j. investment portfolio is very affected by changes in external factors.

Table II.C.3: Guidelines for Determining the Quality of Credit Risk Management Implementation for Credit Risk

Rating	Definition	Rating
Rating 1 (Strong)	The quality of credit risk management implementation is very adequate; there are minor weaknesses, but they are not significant and can be ignored.

Examples of Pension Fund characteristics included in Rating 1 (Strong) are as follows:
a. formulation of the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance) is very adequate and has aligned with overall strategic objectives and business strategy; b. Management/Acting Management, Supervisory Board, and/or DPS have very good awareness and understanding of credit risk management, credit risk sources, and the level of credit risk in the Pension Fund;
c. credit risk management culture is very strong and has been internalized very well at all organizational levels;
d. the execution of duties by Management/Acting Management, Supervisory Board, and/or DPS is overall very adequate; e. the credit risk management function is independent, has clear duties and responsibilities, and has operated very well; f. authority delegation is controlled and monitored periodically, and has operated very well; g. investment strategy is very good and highly aligned with the level of risk to be taken and credit risk tolerance; h. policies, procedures, and credit risk limit setting are very adequate and available for all credit risk management areas, aligned with implementation, and well understood by employees;
i. the credit risk management process is very adequate in identifying, measuring, monitoring, and controlling credit risk;
j. analysis or investment instrument feasibility (due diligence) is very good, applied very consistently, and well understood by employees. There is a credit risk monitoring function that operates very well; k. credit risk grading and application systems (credit risk grading) are very good;
l. there is an independent investment review (investment review) function that operates very well;
m. the management information system for credit risk is very good, thereby producing comprehensive and integrated credit risk reports to Management/Acting Management, Supervisory Board, and/or DPS; n. human resources are very adequate in terms of both quantity and quality in the credit risk management function; o. the internal control system is very effective in supporting the implementation of credit risk management; p. the implementation of independent review by the internal audit unit and functions performing independent review is very adequate in terms of methodology, frequency, and reporting to Management/Acting Management, Supervisory Board, and/or DPS; q. generally, there are no significant weaknesses based on the results of independent review; r. follow-up on independent review has been implemented very adequately; s. responsibilities are very clear and have operated very well; and t. policies, regulations, systems, and procedures, as well as business activities conducted by the Pension Fund, are highly consistent with statutory regulations.

Rating	Definition	Rating
Rating 2 (Fairly Strong)	The quality of Credit Risk Management implementation for Credit Risk is adequate. Although there are some minor weaknesses, these weaknesses can be resolved in normal business activities.

Examples of Pension Fund characteristics included in Rating 2 (Fairly Strong) are as follows:
a. formulation of the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance) is adequate and has aligned with overall strategic objectives and business strategy; b. Management/Acting Management, Supervisory Board, and/or DPS have good awareness and understanding of credit risk management, credit risk sources, and the level of credit risk in the Pension Fund;
c. credit risk management culture is strong and has been internalized well at all organizational levels;
d. the execution of duties by Management/Acting Management, Supervisory Board, and/or DPS is generally adequate; there are some insignificant weaknesses that can be repaired immediately; e. the credit risk management function has clear duties and responsibilities and has operated well; there are minor weaknesses that can be resolved in normal business activities; f. authority delegation is controlled and monitored periodically, and has operated well; g. investment strategy is good and aligned with the level of risk to be taken (risk appetite) and credit risk tolerance (risk tolerance); h. policies, procedures, and credit risk limit setting are adequate and available for all credit risk management areas, aligned with implementation, and well understood by employees, although there are minor weaknesses;
i. the credit risk management process is adequate in identifying, measuring, monitoring, and controlling credit risk;
j. analysis or investment instrument feasibility (due diligence) is good, applied consistently, and well understood by employees. There is a credit risk monitoring function that operates well; k. credit risk grading and application systems (credit risk grading) are good;
l. there is an independent investment review (investment review) function, but there are minor weaknesses that do not disrupt the overall process, so it operates well;
m. the management information system for credit risk is good, including credit risk reporting to Management/Acting Management, Supervisory Board, and/or DPS; there are minor weaknesses that can be easily repaired; n. human resources are adequate, both in terms of quantity and quality in the credit risk management function; o. the internal control system is effective in supporting the implementation of credit risk management; p. the implementation of independent review by the internal audit unit and functions performing independent review is adequate, in terms of methodology, frequency, and reporting to Management/Acting Management, Supervisory Board, and/or DPS; q. there are insignificant weaknesses based on the results of independent review; r. follow-up on independent review has been implemented adequately; s. responsibilities are clear and have operated well; and t. policies, regulations, systems, and procedures, as well as business activities conducted by the Pension Fund, are consistent with statutory regulations.

Rating	Definition	Rating
Rating 3 (Sufficient)	The quality of credit risk management implementation for credit risk is sufficiently adequate. Although minimum requirements are met, there are some weaknesses that require management attention.

Examples of Pension Fund characteristics included in Rating 3 (Sufficient) are as follows:
a. formulation of the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance) is sufficiently adequate but not always aligned with overall strategic objectives and business strategy; b. Management/Acting Management, Supervisory Board, and/or DPS have sufficiently good awareness and understanding of credit risk management, credit risk sources, and the level of credit risk in the Pension Fund;
c. credit risk management culture is sufficiently strong and has been internalized sufficiently well but is not always implemented consistently;
d. the execution of duties by Management/Acting Management, Supervisory Board, and/or DPS is generally sufficiently adequate; there are weaknesses in some assessment aspects that need management attention; e. the credit risk management function is sufficiently good; there are some weaknesses, including reporting to Management/Acting Management, Supervisory Board, and/or DPS that require management attention; f. authority delegation is sufficiently good, but control and monitoring are not always implemented well; g. investment strategy is sufficiently aligned with the level of risk to be taken (risk appetite) and credit risk tolerance (risk tolerance); h. policies, procedures, and credit risk limit setting are sufficiently adequate but not always consistent with implementation;
i. the credit risk management process is sufficiently adequate in identifying, measuring, monitoring, and controlling credit risk;
j. analysis or investment instrument feasibility (due diligence) is sufficiently good, applied sufficiently consistently, and well understood by employees. There is a credit risk monitoring function that operates sufficiently well; k. credit risk grading and application systems (credit risk grading) are sufficiently good;
l. the investment review (investment review) function is sufficiently good, but there are some weaknesses that need management attention;
m. the management information system for credit risk meets minimum expectations but there are some weaknesses, including credit risk reporting to Management/Acting Management, Supervisory Board, and/or DPS that require management attention; n. human resources are sufficiently adequate in terms of both quantity and quality in the credit risk management function; o. the internal control system is sufficiently effective in supporting the implementation of credit risk management; p. the implementation of independent review by the internal audit unit and functions performing independent review is sufficiently adequate; there are some weaknesses in methodology, frequency, and/or reporting to Management/Acting Management, Supervisory Board, and/or DPS that require management attention; q. there are sufficiently significant weaknesses based on the results of independent review that require management attention; r. follow-up on independent review has been implemented sufficiently adequately; s. responsibilities are sufficiently clear and have operated sufficiently well; and t. policies, regulations, systems, and procedures, as well as business activities conducted by the Pension Fund, are sufficiently consistent with statutory regulations.

Rating	Definition	Rating
Rating 4 (Fairly Weak)	The quality of credit risk management implementation for credit risk is less than adequate; there are significant weaknesses in various aspects of credit risk management that require immediate corrective action.

Examples of Pension Fund characteristics included in Rating 4 (Fairly Weak) are as follows:
a. formulation of the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance) is less than adequate and not aligned with overall strategic objectives and business strategy; b. there are significant weaknesses in the awareness (awareness) and understanding of Management/Acting Management regarding credit risk, credit risk sources, and the level of credit risk in the Pension Fund;
c. credit risk management culture is less than strong and has not been internalized well at every organizational level;
d. the execution of duties by Management/Acting Management, Supervisory Board, and/or DPS is generally less than adequate and there are weaknesses in various assessment aspects that require immediate improvement; e. there are significant weaknesses in the credit risk management function that require immediate improvement; f. authority delegation is weak, not controlled, and not monitored well; g. investment strategy is less than aligned with the level of risk to be taken (risk appetite) and credit risk tolerance (risk tolerance); h. there are significant weaknesses in policies, procedures, and credit risk limit setting;
i. the credit risk management process is less than adequate in identifying, measuring, monitoring, and controlling credit risk;
j. analysis or investment instrument feasibility (due diligence) is less than good. There are some weaknesses that require immediate improvement; k. credit risk grading and application systems (credit risk grading) are less than good;
l. investment review (investment review) is less than good and there are some weaknesses that need to be repaired immediately;
m. there are significant weaknesses in the management information system for credit risk, including risk reporting to Management/Acting Management, Supervisory Board, and/or DPS that require immediate improvement; n. human resources are less than adequate in terms of both quantity and quality in the credit risk management function; o. the internal control system is less than effective in supporting the implementation of credit risk management; p. the implementation of independent review by the internal audit unit and functions performing independent review is less than adequate; there are weaknesses in methodology, frequency, and/or reporting to Management/Acting Management, Supervisory Board, and/or DPS that require immediate improvement; q. there are significant weaknesses based on the results of independent review that require immediate corrective action; r. follow-up on independent review is less than adequate; s. responsibilities are less than clear and have operated less than well; and t. policies, regulations, systems, and procedures, as well as business activities conducted by the Pension Fund, are less than consistent with statutory regulations.

Rating	Definition	Rating
Rating 5 (Weak)	The quality of credit risk management implementation for credit risk is not adequate; there are significant weaknesses in various aspects of credit risk management, the resolution of which is beyond management's capability.

Examples of Pension Fund characteristics included in Rating 5 (Weak) are as follows:
a. formulation of the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance) is not adequate and there is no connection with overall strategic objectives and business strategy; b. the awareness (awareness) and understanding of Management/Acting Management, Supervisory Board, and/or DPS regarding credit risk management, credit risk sources, and the level of credit risk in the Pension Fund are very weak;
c. credit risk management culture is not strong or does not exist at all;
d. the execution of duties by Management/Acting Management, Supervisory Board, and/or DPS is not adequate; there are significant weaknesses in almost all assessment aspects where actions and resolutions are beyond the Pension Fund's capability; e. there are significant weaknesses in the credit risk management function that require fundamental improvement; f. authority delegation is very weak or non-existent; g. investment strategy is less than aligned with the level of risk to be taken and credit risk tolerance; h. there are very significant weaknesses in policies, procedures, and credit risk limit setting;
i. the credit risk management process is not adequate in identifying, measuring, monitoring, and controlling credit risk;
j. analysis or investment instrument feasibility (due diligence) is not good; k. credit risk grading and application systems (credit risk grading) are not good;
l. the investment review (investment review) function is not good; there are some weaknesses that need to be repaired immediately;
m. there are fundamental weaknesses in the management information system for credit risk, including risk reporting to Management/Acting Management, Supervisory Board, and/or DPS that need to be repaired immediately; n. human resources are not adequate in terms of both quantity and quality in the credit risk management function; o. the internal control system is not effective in supporting the implementation of credit risk management; p. the implementation of independent review by the internal audit unit and functions performing independent review is not adequate; there are weaknesses in methodology, frequency, and/or reporting to Management/Acting Management, Supervisory Board, and/or DPS that require fundamental improvement; q. there are very significant weaknesses based on the results of independent review, the corrective actions of which are beyond management's capability; r. follow-up on independent review is not adequate or non-existent; s. responsibilities are not clear and have operated poorly; and t. policies, regulations, systems, and procedures, as well as business activities conducted by the Pension Fund, are inconsistent with statutory regulations.

Table II.D.1: Parameters or Indicators for Assessing Inherent Risk for Market Risk

Parameter or Indicator	Description
1. Investment Allocation and/or Portfolio	a. Investment Growth Ratio<br>$\frac{\text{Total Investment}{t1} - \text{Total Investment}{t0}}{\text{Total Investment}_{t0}} \times 100%$<br><br>Notes:<br>1. Total Investment $t_0$ is the total investment in the year prior to the current period year.<br>2. Total Investment $t_1$ is the total investment in the current year.<br>3. Total Investment is the total investment using market value.<br>4. Investment growth ratio is calculated in the current year and trend for at least the last 3 years.<br><br>b. Investment Ratio to Net Assets<br>$\frac{\text{Total Investment}}{\text{Total Net Assets}} \times 100%$<br><br>Notes:<br>Total investment is the total investment using market value.<br><br>c. Proportion of investment placement per type of investment affected by market volatility.<br>Investment instruments recorded using market value that can be affected by market volatility.<br><br>Examples: stocks, bonds, government securities, sukuk, mutual funds, and asset-backed securities.
2. Investment Objectives and Strategy	a. Investment Objectives and Strategy<br>The investment objectives set by the Pension Fund's Management/Acting Management will determine the investment strategy conducted by the Pension Fund.<br><br>In managing Pension Fund investments, Management/Acting Management may choose active, passive, or intermediate strategies between active and passive. Active strategy means management actively adjusts the investment portfolio to take advantage of financial market dynamics (e.g., changes in stock and bond prices). Active strategy is often interpreted as an aggressive strategy.<br><br>Contrary to active strategy, passive strategy means Management tends not to react to market dynamics and largely applies a buy-and-hold strategy.<br><br>In formulating investment objectives, Management/Acting Management must provide clear direction regarding the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance) of the Pension Fund. Furthermore, Management/Acting Management informs the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance) to all organizational levels in the Pension Fund.<br><br>The level of risk to be taken (risk appetite) is the level and type of risk that the Pension Fund can take in order to achieve investment objectives. The level of risk to be taken (risk appetite) is reflected in the investment strategy formulated in the Pension Fund's business plan and established in the form of a risk appetite statement.<br><br>b. Asset Allocation Strategy<br>Asset allocation strategy relates to the selection of investment instrument types (e.g., deposits, government securities, or stocks) and their composition. Asset allocation strategy is formulated in the Pension Fund's business plan and investment directives.<br><br>c. Alignment of Asset Allocation Strategy with Target Objectives<br>Asset allocation strategy is formulated in accordance with the liability portfolio held by the Pension Fund, including considering assumptions used, such as actuarial interest rates and investment return targets established in investment directives and business plans.<br><br>d. Investment Diversification<br>Distribution of investment placements in investment instruments in accordance with the asset allocation strategy formulated based on the Pension Fund's risk appetite and risk tolerance.
3. Investment Portfolio Volatility	a. Changes in Market Value of Pension Fund Assets<br><br>1. Investment Valuation Difference Growth<br>$\frac{SPIn - SPIn-1}{SPI n-1}$<br><br>Investment Valuation Difference is obtained by subtracting Fair Value from Acquisition Value as found in financial statements.<br><br>Notes:<br>a. $SPIn$ is the Investment Valuation Difference for the current year.<br>b. $SPIn-1$ is the Investment Valuation Difference in the year prior to the current period year.<br><br>2. Investment Increase/Decrease (Difference SPI on LPAN)<br>Trend of Investment Increase/Decrease over the last 12 months.<br><br>b. Potential Profit/Loss of Investment Assets Exposed to Market Risk<br>This ratio is used to measure the materiality of potential profit/loss from investment assets exposed to market risk against income and net assets. The more significant the potential profit/loss against income and net assets, the greater the market risk.<br><br>1. SPI compared to Total Income<br>$\frac{SPI}{\text{Total Income}}$<br><br>Notes:<br>a. SPI is the Investment Valuation Difference for instruments exposed to market risk that are actively traded.<br>Example: investments in the capital market and foreign currency-denominated deposits.<br><br>b. Total Income is the total realized and unrealized income on the statement of changes in net assets.<br><br>2. SPI compared to Net Assets<br>$\frac{SPI}{\text{Net Assets}}$<br><br>Notes:<br>a. SPI is the Investment Valuation Difference for instruments exposed to market risk that are actively traded.<br>Example: investments in the capital market and foreign currency-denominated deposits.<br><br>b. Total Income is the total realized and unrealized income on the statement of changes in net assets.
4. Investment Portfolio Transaction Ease	Proportion of Investment Portfolio without Market Value<br>$\frac{\text{Investments without Market Value}}{\text{Total Investment}}$<br><br>Notes:<br>a. Investments without market value are investments held by the Pension Fund that are not actively traded and do not have readily available market value.<br>Example: direct investments, land and buildings, "sleeping" stocks.<br><br>b. Total investment is the total investment on the Pension Fund's net asset statement.
5. Investment Valuation	a. Reliability Level of Investment Portfolio Valuation<br>Factors to be considered in valuation are as follows:<br>a. Availability of fair market price;<br>b. Market depth (market depth) – frequency of investment instruments;<br>c. Traded at market price;<br>d. Availability and frequency of asset valuation; and<br>e. Reliability of the model used for valuation.<br><br>b. Reputation of Valuation Service Providers<br>Independent valuers registered with the Financial Services Authority (OJK).

Table II.D.2: Guidelines for Determining Inherent Risk Level for Market Risk

Rating	Definition	Rating
Rating 1 (Low)	Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by market risk is classified as low during a certain period in the future.

Examples of characteristics of Pension Funds included in Rating 1 (low) include the following:
a. The Pension Fund's portfolio is dominated by non-complex financial instruments; b. Investment growth ratio is high, above the industry average;
c. The proportion of investment placements per type of investment affected by market volatility is low;
d. Investment-to-net-asset ratio is very good; e. Investment objectives and strategies are formulated very well; f. Asset allocation strategy is very suitable for the risk level (risk appetite) the Pension Fund will take; g. Asset allocation strategy with target goals to be achieved is very suitable; h. Pension Fund investments are very well diversified;
i. Market value fluctuations of Pension Fund assets are low;
j. Potential profit/loss of investment assets exposed to market risk is low; k. The proportion of the investment portfolio whose price is not available in the market compared to investments is low;
l. Investment portfolio valuation is carried out periodically and is based on valuation bases in accordance with laws and regulations and provisions; and
m. The appraiser services used by the Pension Fund have a very good reputation and are registered with the Financial Services Authority.

Rating	Definition	Rating
Rating 2 (Low-Medium)	Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by market risk is classified as low-medium during a certain period in the future.

Examples of characteristics of Pension Funds included in Rating 2 (low-medium) include the following:
a. The Pension Fund's portfolio is dominated by less complex financial instruments; b. Investment growth ratio is medium-high, above the industry average;
c. The proportion of investment placements per type of investment affected by market volatility is medium-low;
d. Investment-to-net-asset ratio is good; e. Investment objectives and strategies are formulated well; f. Asset allocation strategy is suitable for the risk level (risk appetite) the Pension Fund will take; g. Asset allocation strategy with target goals to be achieved is suitable; h. Pension Fund investments are well diversified;
i. Market value fluctuations of Pension Fund assets are medium-low;
j. Potential profit/loss of investment assets exposed to market risk is medium-low; k. The proportion of the investment portfolio whose price is not available in the market compared to investments is medium-low;
l. Investment portfolio valuation is carried out periodically but some are not based on valuation bases in accordance with laws and regulations and provisions; and
m. The appraiser services used by the Pension Fund have a good reputation and are registered with the Financial Services Authority.

Rating	Definition	Rating
Rating 3 (Medium)	Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by market risk is medium during a certain period in the future.

Examples of characteristics of Pension Funds included in Rating 3 (medium) include the following:
a. The Pension Fund's portfolio is dominated by fairly complex financial instruments; b. Investment growth ratio is medium and at the industry average;
c. The proportion of investment placements per type of investment affected by market volatility is medium;
d. Investment-to-net-asset ratio is fairly good; e. Investment objectives and strategies are formulated fairly well; f. Asset allocation strategy is fairly suitable for the risk level (risk appetite) the Pension Fund will take; g. Asset allocation strategy with target goals to be achieved is fairly suitable; h. Pension Fund investments are fairly well diversified;
i. Market value fluctuations of Pension Fund assets are medium;
j. Potential profit/loss of investment assets exposed to market risk is medium; k. The proportion of the investment portfolio whose price is not available in the market compared to investments is medium;
l. Investment portfolio valuation is fairly carried out periodically and some are not based on valuation bases in accordance with laws and regulations and provisions; and
m. The appraiser services used by the Pension Fund have a fairly good reputation and are registered with the Financial Services Authority.

Rating	Definition	Rating
Rating 4 (Medium-High)	Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by market risk is medium-high during a certain period in the future.

Examples of characteristics of Pension Funds included in Rating 4 (medium-high) include the following:
a. The Pension Fund's portfolio is dominated by complex financial instruments; b. Investment growth ratio is medium-low, below the industry average;
c. The proportion of investment placements per type of investment affected by market volatility is medium-high;
d. Investment-to-net-asset ratio is less good; e. Investment objectives and strategies are formulated less well; f. Asset allocation strategy is less suitable for the risk level (risk appetite) the Pension Fund will take; g. Asset allocation strategy with target goals to be achieved is less suitable; h. Pension Fund investments are less well diversified;
i. Market value fluctuations of Pension Fund assets are medium-high;
j. Potential profit/loss of investment assets exposed to market risk is medium-high; k. The proportion of the investment portfolio whose price is not available in the market compared to investments is medium-high;
l. Investment portfolio valuation is less carried out periodically and some are not based on valuation bases in accordance with laws and regulations and provisions; and
m. The appraiser services used by the Pension Fund have a less good reputation and are registered with the Financial Services Authority.

Rating	Definition	Rating
Rating 5 (High)	Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by market risk is high during a certain period in the future.

Examples of characteristics of Pension Funds included in Rating 5 (high) include the following:
a. The Pension Fund's portfolio is dominated by very complex financial instruments; b. Investment growth ratio is very low, below the industry average;
c. The proportion of investment placements per type of investment affected by market volatility is high;
d. Investment-to-net-asset ratio is not good; e. Investment objectives and investment strategies are formulated poorly; f. Asset allocation strategy is not suitable for the risk level (risk appetite) the Pension Fund will take; g. Asset allocation strategy with target goals to be achieved is not suitable; h. Pension Fund investments are not well diversified;
i. Market value fluctuations of Pension Fund assets are high;
j. Potential profit/loss of investment assets exposed to market risk is high; k. The proportion of the investment portfolio whose price is not available in the market compared to investments is high;
l. Investment portfolio valuation is not carried out periodically and is not based on valuation bases in accordance with regulations; and
m. The appraiser services used by the Pension Fund have a poor reputation and are not registered with the Financial Services Authority.

Table II.D.3: Guidelines for Determining the Quality of Risk Management Implementation for Market Risk

Rating	Definition	Rating
Rating 1 (Strong)	The quality of risk management implementation for market risk is very adequate, although there are minor weaknesses, but these weaknesses are not significant so they can be ignored.

Examples of characteristics of Pension Funds included in Rating 1 (strong) include the following:
a. Formulation of risk level to be taken (risk appetite) and risk tolerance is very adequate and has aligned with overall strategic objectives and business strategy; b. Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS have very good awareness and understanding regarding market risk management, market risk sources, and market risk levels at the Pension Fund;
c. Market risk management culture is very strong and has been internalized very well at all organizational levels;
d. Execution of duties by Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS overall is very adequate; e. Market risk management function has operated very well; f. Delegation of authority is controlled and monitored periodically, and has operated very well; g. Management strategy for market risk is very adequate; h. Policies, procedures, and limit setting for market risk are very adequate and available for all areas of market risk management, aligned with implementation, and well understood by employees;
i. Market risk management process is very adequate in identifying, measuring, monitoring, and controlling market risk;
j. Management information system for market risk is very good so as to produce comprehensive and integrated market risk reports to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS; k. Human resources are very adequate both in quantity and quality in the market risk management function;
l. Internal control system is very effective in supporting the implementation of market risk management;
m. Independent review implementation by internal audit work units and functions conducting independent review is very adequate both in terms of methodology, frequency, and reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS; n. Generally, there are no significant weaknesses based on independent review results; and o. Follow-up on independent review has been implemented very adequately. p. The compliance function for market risk has very clear tasks and responsibilities and has operated very well; and q. Policies, provisions, systems, and procedures, as well as business activities conducted by the Pension Fund are very in accordance with laws and regulations.

Rating	Definition	Rating
Rating 2 (Fairly Strong)	The quality of risk management implementation for market risk is adequate, although there are some minor weaknesses, but these weaknesses can be resolved in normal business activities.

Examples of characteristics of Pension Funds included in Rating 2 (fairly strong) include the following:
a. Formulation of risk level to be taken (risk appetite) and risk tolerance is adequate and has aligned with overall strategic objectives and business strategy; b. Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS have good awareness and understanding regarding market risk management, market risk sources, and market risk levels at the Pension Fund;
c. Market risk management culture is strong and has been internalized well at all organizational levels;
d. Execution of duties by Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS is generally adequate, with some insignificant weaknesses that can be improved immediately; e. Market risk management function delegation of authority is controlled and monitored periodically, and has operated well; f. Management strategy for market risk is adequate; g. Policies, procedures, and limit setting for market risk are adequate and available for all areas of market risk management, aligned with implementation, and well understood by employees although there are minor weaknesses; h. Market risk management process is adequate in identifying, measuring, monitoring, and controlling market risk;
i. Management information system for market risk is good so as to produce comprehensive and integrated market risk reports to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS, but there are minor weaknesses that can be easily improved;
j. Human resources are adequate both in quantity and quality in the market risk management function; k. Internal control system is effective in supporting the implementation of market risk management;
l. Independent review implementation by internal audit work units and functions conducting independent review is adequate both in terms of methodology, frequency, and reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS;
m. There are weaknesses but not significant based on independent review results; n. Follow-up on independent review has been implemented adequately; o. The compliance function for market risk has clear tasks and responsibilities and has operated well; and p. Policies, provisions, systems, and procedures, as well as business activities conducted by the Pension Fund are in accordance with laws and regulations; and q. Policies, provisions, systems, and procedures, as well as business activities conducted by the Pension Fund are in accordance with laws and regulations.

Rating	Definition	Rating
Rating 3 (Fair)	The quality of risk management implementation for market risk is fairly adequate. Although minimum requirements are met, there are some weaknesses that require management attention.

Examples of characteristics of Pension Funds included in Rating 3 (fair) include the following:
a. Formulation of risk level to be taken (risk appetite) and risk tolerance is fairly adequate but not always aligned with overall strategic objectives and business strategy; b. Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS have fairly good awareness and understanding regarding market risk management, market risk sources, and market risk levels at the Pension Fund;
c. Market risk management culture is fairly strong and has been internalized fairly well but not always implemented consistently;
d. Execution of duties by Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS is generally fairly adequate, with weaknesses in some assessment aspects that need management attention; e. Market risk management function has operated fairly well; f. Delegation of authority is fairly good but control and monitoring are not always implemented well; g. Management strategy for market risk is fairly adequate; h. Policies, procedures, and limit setting for market risk are fairly adequate but not always consistent with implementation;
i. Market risk management process is fairly adequate in identifying, measuring, monitoring, and controlling market risk;
j. Management information system for market risk meets minimum expectations but there are some weaknesses including reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS that require management attention; k. Human resources are fairly adequate both in quantity and quality in the market risk management function;
l. Internal control system supports the implementation of market risk management;
m. Independent review implementation by internal audit work units and functions conducting independent review is fairly adequate, but there are some weaknesses in methodology, frequency, and/or reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS that require management attention; n. There are weaknesses that are fairly significant based on independent review results that require management attention; o. Follow-up on independent review has been implemented fairly adequately; p. The compliance function for market risk has fairly clear tasks and responsibilities and has operated fairly well; and q. Policies, provisions, systems, and procedures, as well as business activities conducted by the Pension Fund are fairly in accordance with laws and regulations.

Rating	Definition	Rating
Rating 4 (Fairly Weak)	The quality of risk management implementation for market risk is less adequate, with significant weaknesses in various aspects of market risk management that require immediate corrective action.

Examples of characteristics of Pension Funds included in Rating 4 (fairly weak) include the following:
a. Formulation of risk level to be taken (risk appetite) and risk tolerance is less adequate and not aligned with overall strategic objectives and business strategy; b. There are significant weaknesses in the awareness and understanding of the Board of Directors/Acting Board of Directors, market risk management, market risk sources, and market risk levels at the Pension Fund;
c. Market risk management culture is less strong and has not been internalized well at all organizational levels;
d. Execution of duties by Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS is generally less adequate, with weaknesses in various assessment aspects that require immediate improvement; e. Market risk management function has operated less well; f. Delegation of authority is weak, not controlled and not monitored well; g. Management strategy for market risk is less adequate; h. There are significant weaknesses in policies, procedures, and limit setting for market risk;
i. Market risk management process is less adequate in identifying, measuring, monitoring, and controlling market risk;
j. There are significant weaknesses in the market risk management information system including reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS that require immediate improvement; k. Human resources are less adequate in quantity and quality in the market risk management function;
l. Internal control system is less effective in supporting the implementation of market risk management;
m. Independent review implementation by internal audit work units and functions conducting independent review is less adequate, with some weaknesses in methodology, frequency, and/or reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS that require immediate improvement; n. There are significant weaknesses based on independent review results that require immediate corrective action; o. Follow-up on independent review is less adequate; p. The compliance function for market risk has less clear tasks and responsibilities and has operated less well; and q. Policies, provisions, systems, and procedures, as well as business activities conducted by the Pension Fund are less in accordance with laws and regulations.

Rating	Definition	Rating
Rating 5 (Weak)	The quality of risk management implementation for market risk is inadequate, with significant weaknesses in various aspects of market risk management whose resolution is beyond management's capability.

Examples of characteristics of Pension Funds included in Rating 5 (weak) include the following:
a. Formulation of risk level to be taken (risk appetite) and risk tolerance is inadequate and there is no connection with overall strategic objectives and business strategy; b. Awareness and understanding of the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS regarding market risk management, market risk sources, and market risk levels at the Pension Fund is very weak;
c. Market risk management culture is not strong or does not exist at all;
d. Execution of duties by Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS is inadequate, with significant weaknesses in almost all assessment aspects and actions, and the resolution is beyond the Pension Fund's capability; e. Market risk management function has operated poorly; f. Delegation of authority is very weak or non-existent; g. Management strategy for market risk is inadequate; h. There are very significant weaknesses in policies, procedures, and limit setting for market risk;
i. Market risk management process is inadequate in identifying, measuring, monitoring, and controlling market risk;
j. There are fundamental weaknesses in the market risk management information system; k. Human resources are inadequate in quantity and quality in the market risk management function;
l. Internal control system is ineffective in supporting the implementation of market risk management;
m. Independent review implementation by internal audit work units and functions conducting independent review is inadequate, with very significant weaknesses in methodology, frequency, and/or reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS that require fundamental improvement; n. There are very significant weaknesses based on independent review results whose corrective actions are beyond management's capability; o. Follow-up on independent review is inadequate or non-existent; p. The compliance function for market risk has unclear tasks and responsibilities and has operated poorly; and q. Policies, provisions, systems, and procedures, as well as business activities conducted by the Pension Fund are not in accordance with laws and regulations.

Table II.E.1: Parameters or Indicators for Assessing Inherent Risk for Liquidity Risk

Parameter or Indicator	Description
1. Current asset and current liability profile	a. Minimum liquidity ratio 1. DPPK<br><br>Current Assets or Investments for Minimum Liquidity Fulfillment / (Operational Costs + Investment Costs + Maturing Pension Benefits and Other Benefits within One Year)<br><br>Description:<br>1) Current assets or investments for minimum liquidity fulfillment are savings, on-call deposits, time deposits, deposit certificates at banks, and cash as presented in the Pension Fund's financial statements.<br>2) Operational costs as presented in the Pension Fund's financial statements are annualized.<br>3) Investment costs as presented in the Pension Fund's financial statements are annualized.<br>4) Maturing pension benefits and other liabilities as presented in the Pension Fund's financial statements.

Parameter or Indicator

Description

1. Current asset and current liability profile

a. Minimum liquidity ratio 1. DPPK Current Assets or Investments for Minimum Liquidity Fulfillment / (Operational Costs + Investment Costs + Maturing Pension Benefits and Other Benefits within One Year) Description: 1) Current assets or investments for minimum liquidity fulfillment are savings, on-call deposits, time deposits, deposit certificates at banks, and cash as presented in the Pension Fund's financial statements. 2) Operational costs as presented in the Pension Fund's financial statements are annualized. 3) Investment costs as presented in the Pension Fund's financial statements are annualized. 4) Maturing pension benefits and other liabilities as presented in the Pension Fund's financial statements.

Parameter or Indicator	Description

DPLK | Current assets or investments for meeting minimum liquidity
| Operating Costs + maturing pension benefits + transfer of funds to other pension funds + withdrawal of contributions

Description:

Current assets or investments for meeting minimum liquidity are savings, on-call deposits, time deposits, deposit certificates at banks, and cash as presented in the Pension Fund's financial statements.
Operating costs as presented in the Pension Fund's financial statements are annualized.
Investment costs as presented in the Pension Fund's financial statements are annualized.
Maturing pension benefits and other benefits as presented in the Pension Fund's financial statements.

b. Ratio of current assets to current liabilities | Current Assets / Current Liabilities

Description:

Current assets are assets with a maturity of less than 1 year (excluding operational assets and other assets) as presented in the Pension Fund's financial statements.
Current liabilities are liabilities with a maturity of less than 1 year (excluding operational assets and other assets) as presented in the Pension Fund's Financial Statements.

c. Ratio of current assets to total assets | Current Assets / Total Assets

Description:

Current assets are assets with a maturity of less than 1 year (excluding operational assets and other assets) as presented in the Pension Fund's Financial Statements.
Total assets as presented in the Pension Fund's Financial Statements.

d. Ratio of current liabilities to total liabilities | Current Liabilities / Total Liabilities

Description:

Current liabilities are liabilities with a maturity of less than 1 year as presented in the Pension Fund's Financial Statements.
Total Liabilities are the Actuarial Present Value for PPMP and Pension Benefit Liabilities for Defined Benefit Pension Programs (PPIP).

e. Profile (composition) of current assets and current liabilities | Analysis of the ratios, namely:

minimum liquidity ratio;
ratio of current assets to current liabilities;
ratio of current assets to total assets; and
ratio of current liabilities to total liabilities,
as well as the trend of these four ratios over the last 5 (five) years.

Cash Flow Profile | Cash flow from Pension Fund activities. Cash Inflow from Investment, Operational, and Financing Activities.
Cash Outflow from Investment, Operational, and Financing Activities

Description:

Cash flow from investment activities is all investment activities except placement and release of investments as presented in the financial statements.
Cash flow from operational activities is all operational activities except placement and release of operational assets and other assets as presented in the financial statements.
Cash flow from financing activities is as presented in the financial statements.

Long-Term Asset Profile | Assets with a life of more than 1 year
Current Pension Fund Assets with a life >1 year according to information as stated in the Pension Fund's Financial Statements.
Non-Current Pension Fund Assets with a life >1 year according to information as stated in the Pension Fund's Financial Statements.
Long-Term Liability Profile | Liabilities with a life of more than 1 year
Pension Fund Liabilities with a life >1 year according to information as stated in the Pension Fund's Financial Statements.
Non-Current Liabilities with a life >1 year according to information as stated in the Pension Fund's Financial Statements.
Comparison between long-term assets and long-term liabilities | Assets and Liabilities with a life of more than 1 year
Total Long-Term Assets x 100% / Total Long-Term Liabilities

Description:

The comparison between long-term assets and long-term liabilities is obtained from the Pension Fund's Financial Statements.
Assets with a life >1 year according to information as stated in the Pension Fund's Financial Statements.
Liabilities with a life <1 year according to information as stated in the Pension Fund's Financial Statements.

Difference between expected investment performance and achieved investment performance
a. Difference between the technical interest rate and achieved investment performance (PPMP) related to funding. b. Difference between achieved investment returns related to profitability

Clearly understood.

Table II.E.2: Guidelines for Determining the Level of Inherent Risk for Liquidity Risk

Ranking	Definition of Ranking
Rank 1 (Low)	Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants due to liquidity risk is classified as low over a certain period in the future. Examples of characteristics of Pension Funds included in Rank 1 (low) include the following:
a. having a non-complex current asset structure; b. not significantly exposed to liability return rate risk and liability exchange rate risk that could potentially harm the Pension Fund;
c. having high-quality current assets that are very adequate to cover maturing liabilities;
d. there is no significant gap between the average duration of assets and the average duration of the Pension Fund's liabilities; and e. The determination of the liquidity level takes into account the type, nature, and duration of investments owned by the Pension Fund.

Rank 2 (Low-Medium) | Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants due to liquidity risk is classified as low-medium over a certain period in the future. Examples of characteristics of Pension Funds included in Rank 2 (low-medium) include the following:
a. having a less complex current asset structure; b. less significantly exposed to liability return rate risk and liability exchange rate risk that could potentially harm the Pension Fund;
c. having high-quality current assets that are adequate to cover maturing liabilities;
d. there is a less significant gap between the average duration of assets and the average duration of the Pension Fund's liabilities, caused by external factors including interest rate changes and exchange rate changes; and e. the determination of the liquidity level takes into account the type, nature, and duration of investments owned by the Pension Fund.

Rank 3 (Medium) | Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants due to liquidity risk is classified as medium over a certain period in the future. Examples of characteristics of Pension Funds included in Rank 3 (medium) include the following:
a. having a fairly complex current asset structure; b. fairly significantly exposed to liability return rate risk and liability exchange rate risk that could potentially harm the Pension Fund;
c. having high-quality current assets that are fairly adequate to cover maturing liabilities;
d. there is a fairly significant gap between the average duration of assets and the average duration of the Pension Fund's liabilities, caused by external factors including interest rate changes, exchange rate changes, and internal factors such as asset valuation policies that do not match the liabilities owned; and e. the determination of the liquidity level fairly takes into account the type, nature, and duration of investments owned by the Pension Fund.

Rank 4 (Medium-High) | Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants due to liquidity risk is classified as medium-high over a certain period in the future. Examples of characteristics of Pension Funds included in Rank 4 (medium-high) include the following:
a. having a complex current asset structure; b. significantly exposed to liability return rate risk and liability exchange rate risk that could potentially threaten the sustainability of the Pension Fund's business;
c. having high-quality current assets that are less adequate to cover maturing liabilities, thus there are concerns regarding the quality of the Pension Fund's current assets;
d. there is a significant gap between the average duration of assets and the average duration of the Pension Fund's liabilities, indicated to threaten the sustainability of the Pension Fund's business in the short term; and e. the determination of the liquidity level less takes into account the type, nature, and duration of investments.

Rank 5 (High) | Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants due to liquidity risk is classified as high over a certain period in the future. Examples of characteristics of Pension Funds included in Rank 5 (high) include the following:
a. having a very complex current asset structure; b. very significantly exposed to liability return rate risk and liability exchange rate risk that are very high, threatening the sustainability of the Pension Fund's business;
c. poor quality current assets and inadequate to cover maturing liabilities;
d. There is a very significant gap between the average duration of assets and the average duration of the Pension Fund's liabilities, indicated to threaten the sustainability of the Pension Fund's business; and e. The determination of the liquidity level does not take into account the type, nature, and duration.

Table II.E.3: Guidelines for Determining the Quality of Risk Management Implementation for Liquidity Risk

Ranking	Definition of Ranking
Rank 1 (Strong)	The quality of risk management implementation for liquidity risk is very adequate, although there are minor weaknesses, but these weaknesses are not significant and can be ignored. Examples of characteristics of Pension Funds included in Rank 1 (strong) include the following:
a. the formulation of the level of risk to be taken (risk appetite) and risk tolerance is very adequate and has aligned with overall strategic objectives and business strategy; b. The Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS have very good awareness and understanding of risk management for liquidity risk, sources of liquidity risk, and the level of liquidity risk in the Pension Fund;
c. the Pension Fund's reporting mechanism containing asset and liability management risk issues is very good;
d. The Pension Fund has and applies asset and liability matching management or correspondence between asset allocation and liability maturity very well; e. the analysis and early warning system for Pension Fund liquidity management is very adequate; f. periodic evaluation by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS regarding Pension Fund liquidity management is very adequate; g. the risk management culture for liquidity risk is very strong and has been internalized very well at all organizational levels; h. the implementation of duties by the Board of Directors, Board of Supervisors, and/or Sharia Supervisory Board as a whole is very adequate;
i. the risk management function for liquidity risk is independent, has clear duties and responsibilities, and has operated very well;
j. delegation of authority is controlled and monitored periodically, and has operated very well; k. the risk management strategy for liquidity risk is very aligned with the level of risk to be taken and liquidity risk tolerance;
l. policies, procedures, and limit setting for liquidity risk are very adequate and available for all areas of risk management for liquidity risk, aligned with implementation, and well understood by employees;
m. the risk management process for liquidity risk is very adequate in identifying, measuring, monitoring, and controlling liquidity risk; n. the risk management information system for liquidity risk is very good, producing comprehensive and integrated liquidity risk reports to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS; o. human resources are very adequate in terms of quantity and quality in the risk management function for liquidity risk; p. the internal control system is very effective in supporting the implementation of risk management for liquidity risk; q. the implementation of independent review by the internal audit unit and functions conducting independent review is very adequate in terms of methodology, frequency, and reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS; r. generally, there are no significant weaknesses based on independent review results; s. follow-up on independent review has been implemented very adequately; t. the compliance function for liquidity risk has very clear duties and responsibilities and has operated very well; and u. the policies, regulations, systems, and procedures, as well as business activities conducted by the Pension Fund are very in accordance with regulatory provisions.

Rank 2 (Fairly Strong) | The quality of risk management implementation for liquidity risk is adequate. There are some minor weaknesses that can be resolved in normal business activities. Examples of characteristics of Pension Funds included in Rank 2 (fairly strong) include the following:
a. the formulation of the level of risk to be taken (risk appetite) and risk tolerance is adequate and has aligned with overall strategic objectives and business strategy; b. The Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS have good awareness and understanding of risk management for liquidity risk, sources of liquidity risk, and the level of liquidity risk in the Pension Fund;
c. the Pension Fund's reporting mechanism containing asset and liability management risk issues is good but not yet implemented;
d. The Pension Fund has and applies asset and liability matching management or correspondence between asset allocation and liability maturity well, but not continuously; e. the analysis and early warning system for Pension Fund liquidity management is adequate, but not conducted continuously; f. periodic evaluation by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS regarding Pension Fund liquidity management is adequate; g. the risk management culture for liquidity risk is strong and has been internalized well at all organizational levels; h. the implementation of duties by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS is generally adequate, with some weaknesses but not significant and can be improved immediately;
i. the risk management function for liquidity risk is independent, has clear duties and responsibilities, and has operated well, with minor weaknesses that can be resolved in normal business activities;
j. delegation of authority is controlled and monitored periodically and has operated well; k. the risk management strategy for liquidity risk is aligned with the level of risk to be taken and liquidity risk tolerance;
l. policies, procedures, and limit setting for liquidity risk are adequate and available for all areas of risk management for liquidity risk, aligned with implementation, and well understood by employees although there are minor weaknesses;
m. the risk management process for liquidity risk is adequate in identifying, measuring, monitoring, and controlling liquidity risk; n. the risk management information system for liquidity risk is good, including liquidity risk reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS, but there are minor weaknesses that can be easily fixed; o. human resources are adequate in terms of quantity and quality in the risk management function for liquidity risk; p. the internal control system is effective in supporting the implementation of risk management for liquidity risk; q. the implementation of independent review by the internal audit unit and functions conducting independent review is adequate in terms of methodology, frequency, and reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS; r. there are weaknesses but not significant based on independent review results; s. follow-up on independent review has been implemented adequately; t. the compliance function for liquidity risk has clear duties and responsibilities and has operated well; and u. the policies, regulations, systems, and procedures, as well as business activities conducted by the Pension Fund are in accordance with regulatory provisions.

Rank 3 (Sufficient) | The quality of risk management implementation for liquidity risk is fairly adequate. Although minimum requirements are met, there are some weaknesses that require management attention. Examples of characteristics of Pension Funds included in Rank 3 (sufficient) include the following:
a. the formulation of the level of risk to be taken (risk appetite) and risk tolerance is fairly adequate but not always aligned with overall strategic objectives and business strategy; b. The Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS have fairly good awareness and understanding of risk management for liquidity risk, sources of liquidity risk, and the level of liquidity risk in the Pension Fund;
c. the Pension Fund's reporting mechanism containing asset and liability management risk issues is fairly good, but not conducted continuously;
d. The Pension Fund has and applies asset and liability matching management fairly well, but does not cover all types of assets and liabilities; e. the analysis and early warning system for Pension Fund liquidity management is fairly adequate, but does not cover all types of assets and liabilities; f. periodic evaluation by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS regarding Pension Fund liquidity management is fairly adequate, but not conducted continuously; g. the risk management culture for liquidity risk is fairly strong and has been internalized fairly well but not always implemented consistently; h. the implementation of duties by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS regarding liquidity risk management is generally fairly adequate, but there are weaknesses in some assessment aspects that need management attention;
i. the risk management function for liquidity risk is fairly good, with some weaknesses including reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS that require management attention;
j. delegation of authority is fairly good, but control and monitoring are not always implemented well; k. the risk management strategy for liquidity risk is fairly aligned with the level of risk to be taken and liquidity risk tolerance;
l. policies, procedures, and limit setting for liquidity risk are fairly adequate but not always consistent with implementation;
m. the risk management process for liquidity risk is fairly adequate in identifying, measuring, monitoring, and controlling liquidity risk; n. the risk management information system for liquidity risk meets minimum expectations but has some weaknesses including reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS that require management attention; o. human resources are fairly adequate in terms of quantity and quality in the risk management function for liquidity risk; p. the internal control system is fairly effective in supporting the implementation of risk management for liquidity risk; q. the implementation of independent review by the internal audit unit and functions conducting independent review is fairly adequate, with some weaknesses in methodology, frequency, and reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS that require management attention; r. there are fairly significant weaknesses based on independent review results that require management attention; s. follow-up on independent review has been implemented fairly adequately; t. the compliance function for liquidity risk has fairly clear duties and responsibilities and has operated fairly well; and u. the policies, regulations, systems, and procedures, as well as business activities conducted by the Pension Fund are fairly in accordance with regulatory provisions.

Rank 4 (Fairly Weak) | The quality of risk management implementation for liquidity risk is less adequate. There are significant weaknesses in various aspects of risk management for liquidity risk that require immediate corrective action. Examples of characteristics of Pension Funds included in Rank 4 (fairly weak) include the following:
a. the formulation of the level of risk to be taken (risk appetite) and risk tolerance is less adequate and not aligned with overall strategic objectives and business strategy; b. there are significant weaknesses in the awareness and understanding of the Board of Directors/Acting Board of Directors, risk management for liquidity risk, sources of liquidity risk, and the level of liquidity risk in the Pension Fund;
c. the Pension Fund's reporting mechanism containing asset and liability management risk issues is poor, still under preparation and not yet implemented;
d. The Pension Fund has and applies asset and liability matching management poorly; e. The Pension Fund has an analysis and early warning system for liquidity management, but it is less adequate and not yet implemented; f. periodic evaluation by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS regarding Pension Fund liquidity management is less adequate and not conducted continuously; g. the risk management culture for liquidity risk is not strong and has not been internalized well at every organizational level; h. the implementation of duties by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS is generally less adequate, with weaknesses in various assessment aspects requiring immediate improvement;
i. there are significant weaknesses in the risk management function for liquidity risk that require immediate improvement;
j. delegation of authority is weak and not controlled and not monitored well; k. the risk management strategy for liquidity risk is less aligned with the level of risk to be taken and liquidity risk tolerance;
l. there are significant weaknesses in policies, procedures, and limit setting for liquidity risk;
m. the risk management process for liquidity risk is less adequate in identifying, measuring, monitoring, and controlling liquidity risk;

Rating Definition n. Significant weaknesses in the information management system for liquidity risk, including reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or Sharia Supervisory Board, requiring immediate improvement; o. Human resources are inadequate in both quantity and quality in the risk management function for liquidity risk; p. The internal control system is less effective in supporting the implementation of risk management for liquidity risk; q. The implementation of independent review by the internal audit unit and functions conducting independent reviews is inadequate, with weaknesses in methodology, frequency, or reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or Sharia Supervisory Board requiring immediate improvement; r. Significant weaknesses exist based on independent review results requiring immediate corrective action; s. Follow-up on independent reviews is inadequate; t. The compliance function for liquidity risk has unclear duties and responsibilities and has operated poorly; and u. The policies, regulations, systems, procedures, and business activities conducted by the Pension Fund are less consistent with statutory regulations.

Level 5
(Weak)
The quality of risk management implementation for liquidity risk is inadequate. There are significant weaknesses in various aspects of risk management for liquidity risk where corrective actions are beyond the management's capability. Examples of Pension Fund characteristics included in Level 5 (weak) are as follows:
a. The formulation of risk appetite and risk tolerance is inadequate and

Rating Definition there is no connection with strategic objectives and overall business strategy; b. The awareness and understanding of the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or Sharia Supervisory Board regarding risk management for liquidity risk, sources of liquidity risk, and the level of liquidity risk in the Pension Fund is very weak;
c. The Pension Fund does not have a reporting mechanism containing asset and liability management risk issues;
d. The Pension Fund does not have asset and liability matching management or consistency between asset allocation and liability maturity; e. The Pension Fund does not have a system for early analysis and warning regarding liquidity management; f. The Pension Fund does not have procedures for periodic evaluation by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or Sharia Supervisory Board regarding the Pension Fund's liquidity management; g. The risk management culture for liquidity risk is not strong or does not exist at all; h. The implementation of duties by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or Sharia Supervisory Board is inadequate, with significant weaknesses in almost all aspects of assessment and action, and the resolution is beyond the Pension Fund's capability;
i. There are very significant weaknesses in the risk management function for liquidity risk requiring fundamental improvement;
j. Delegation of authority is very weak or non-existent; k. The risk management strategy for liquidity risk is not aligned with the risk appetite and liquidity risk tolerance;
l. There are very significant weaknesses in policies, procedures, and the setting of limits for liquidity risk;

Rating Definition m. The risk management process for liquidity risk is inadequate in identifying, measuring, monitoring, and controlling liquidity risk; n. There are fundamental weaknesses in the information management system for liquidity risk; o. Human resources are inadequate in both quantity and quality in the risk management function for liquidity risk; p. The internal control system is ineffective in supporting the implementation of risk management for liquidity risk; q. The implementation of independent review by the internal audit unit and functions conducting independent reviews is inadequate, with weaknesses in methodology, frequency, or reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or Sharia Supervisory Board requiring fundamental improvement; r. There are very significant weaknesses based on independent review results where corrective actions are beyond management's capability; s. Follow-up on independent reviews is inadequate or non-existent; t. The compliance function for liquidity risk has unclear duties and responsibilities and has operated poorly; and u. The policies, regulations, systems, procedures, and activities statutory regulations.

Table II.F.1: Parameters or Indicators for Assessing Inherent Risk for Legal Risk
Parameter or Indicator Description

Absence of/
changes in statutory regulations a. The use of best practices for a standard agreement commonly used by the Pension Fund still refers to agreements that are not up-to-date even though there have been changes in best practices or statutory regulations or other matters. b. There are transactions conducted, pension programs, and services marketed by the Pension Fund Institution that are not regulated by statutory regulations in the Pension Fund sector. The absence of statutory regulations/references to statutory regulations that are not up-to-date causes increasingly weak legal protection for parties entering into transactions that lack clear rules or do not refer to current rules because law enforcement regarding these transactions becomes difficult to carry out, potentially giving rise to Legal Risk.
Weakness in
legal aspects
(legal issues) a. Failure to meet the requirements for a valid agreement. b. Weaknesses in agreement clauses and/or failure to meet agreed-upon requirements.
Weaknesses in the obligations undertaken by the Pension Fund are a source of future problems or disputes that can give rise to potential legal risk for the Pension Fund.

Parameter or Indicator Description
c. The understanding of the parties regarding the agreement, especially concerning risks in complex transactions using terms that are difficult to understand or unusual for the general public.
d. The inability to implement part or all of an agreement. e. The existence of supporting documents related to agreements conducted by the Pension Fund with third parties. f. The use of Indonesian law choice for agreements made by the Pension Fund and also the use of dispute resolution forums. What is meant by agreement is an agreement conducted by the Pension Fund with third parties. Examples of third parties include public accountants, actuaries, administrators, and investment managers.
3. Litigation/
dispute resolution a. History of legal claims against the Pension Fund. b. The magnitude of the claim amount and estimated losses that the Pension Fund may experience due to legal claims. Litigation can occur due to claims or demands from stakeholders/counterparties to the Pension Fund either through court or out of court. Such claims or demands essentially incur costs that can harm the Pension Fund's condition.

Parameter or Indicator Description
c. The magnitude of losses experienced by the Pension Fund due to a court decision that has permanent legal force compared to the Pension Fund's assets.
d. The basis of the claim that occurred and the party being sued or suing the Pension Fund in a filed lawsuit, as well as the actions taken by the Board of Directors regarding a filed lawsuit. e. The possibility of similar claims arising due to the same agreement standards and the estimated total losses that may arise compared to the Pension Fund's assets.

Table II.F.2: Guidelines for Setting the Level of Inherent Risk for Legal Risk
Rating Definition
Level 1
(Low)
Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund's failure to meet obligations to participants caused by legal risk is considered low during a certain period in the future. Examples of Pension Fund characteristics included in Level 1 (low) are as follows:
a. There are transactions and/or Pension Fund activities not regulated in statutory regulations with an insignificant amount; b. No legal cases related to the Pension Fund's assets;
c. No Proof of Ownership of Pension Fund assets not in the name of the Pension Fund; and
all three are very adequate.
Level 2
(Moderately
Low)
Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund's failure to meet obligations to participants caused by legal risk is considered moderately low during a certain period in the future. Examples of Pension Fund characteristics included in Level 2 (moderately low) are as follows:
a. There are transactions and/or Pension Fund activities not regulated in statutory regulations with a less significant amount; b. There are legal cases related to the Pension Fund's assets, with a financial impact on asset value of < 10% of net assets;
c. There is Proof of Ownership of Pension Fund assets not in the name of the Pension Fund amounting to < 10% of total investment assets; and
all three are adequate.

Rating Definition
Level 3
(Moderate)
Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund's failure to meet obligations to participants caused by legal risk is considered moderate during a certain period in the future. Examples of Pension Fund characteristics included in Level 3 (moderate) are as follows:
a. There are transactions and/or Pension Fund activities not regulated in statutory regulations with a fairly significant amount; b. There are legal cases related to the Pension Fund's assets, with a financial impact of 10% ≤ asset value < 20% of net assets.
c. There is Proof of Ownership of Pension Fund assets not in the name of the Pension Fund amounting to 10% ≤ total investment assets < 20%; and
all three are fairly adequate.
Level 4
(Moderately
High)
Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund's failure to meet obligations to participants caused by legal risk is considered moderately high during a certain period in the future. Examples of Pension Fund characteristics included in Level 4 (moderately high) are as follows:
a. There are transactions and/or Pension Fund activities not regulated in statutory regulations with a significant amount; b. There are legal cases related to the Pension Fund's assets, with a financial impact of 20% ≤ asset value ≤ 25% of net assets;
c. There is Proof of Ownership of Pension Fund assets not in the name of the Pension Fund amounting to 20% ≤ total investment assets ≤ 25%; and
all three are less adequate.

Rating Definition
Level 5
(High)
Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund's failure to meet obligations to participants caused by legal risk is considered high during a certain period in the future. Examples of Pension Fund characteristics included in Level 5 (high) are as follows:
a. There are transactions and/or Pension Fund activities not regulated in statutory regulations with a very significant amount; b. There are legal cases related to the Pension Fund's assets, with a financial impact on asset value of > 25% of net assets;
c. There is Proof of Ownership of Pension Fund assets not in the name of the Pension Fund > 25% of total investment assets; and
all three are inadequate.

Table II.F.3: Guidelines for Setting the Quality of Risk Management Implementation for Legal Risk
Rating Definition
Level 1
(Strong)
The quality of risk management implementation for legal risk is very adequate, although there are minor weaknesses, but these weaknesses are not significant and can be ignored. Examples of Pension Fund characteristics included in Level 1 (strong) are as follows:
a. The formulation of risk appetite and risk tolerance is very adequate and aligned with strategic objectives and overall business strategy; b. The Board of Directors/Acting Board of Directors, Board of Supervisors, and/or Sharia Supervisory Board have very good awareness and understanding regarding risk management for legal risk, sources of legal risk, and the level of legal risk in the Pension Fund;
c. The risk management culture for legal risk is very strong and has been internalized very well at all organizational levels;
d. The implementation of duties by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or Sharia Supervisory Board is overall very adequate; e. The risk management function for legal risk is independent, has clear duties and responsibilities, and has operated very well; f. Delegation of authority is controlled and monitored periodically, and has operated very well; g. The management strategy for legal risk is very aligned with the risk appetite and risk tolerance; h. Policies, procedures, and the setting of limits for legal risk are very adequate and available for all areas of risk management for legal risk, aligned with implementation, and well understood by employees;

Rating Definition
i. The risk management process for legal risk is very adequate in identifying, measuring, monitoring, and controlling legal risk;
j. The information management system for legal risk is very good, producing comprehensive and integrated legal risk reports to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or Sharia Supervisory Board; k. Human resources are very adequate in both quantity and quality in the risk management function for legal risk;
l. The internal control system is very effective in supporting the implementation of risk management for legal risk;
m. The implementation of independent review by the internal audit unit and functions conducting independent reviews is very adequate in terms of methodology, frequency, and reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or Sharia Supervisory Board; n. Generally, there are no significant weaknesses based on independent review results; o. Follow-up on independent reviews has been implemented very adequately; p. The compliance function for legal risk has very clear duties and responsibilities and has operated very well; and q. The policies, regulations, systems, procedures, and business activities conducted by the Pension Fund are very consistent with statutory regulations. Level 2 (Moderately Strong) The quality of risk management implementation for legal risk is adequate although there are some minor weaknesses that can be resolved in normal business activities. Examples of Pension Fund characteristics included in Level 2 (moderately strong) are as follows:
a. The formulation of risk appetite and risk tolerance is adequate and aligned

Rating Definition with strategic objectives and overall business strategy; b. The Board of Directors/Acting Board of Directors, Board of Supervisors, and/or Sharia Supervisory Board have good awareness and understanding regarding risk management for legal risk, sources of legal risk, and the level of legal risk in the Pension Fund;
c. The risk management culture for legal risk is strong and has been internalized well at all organizational levels;
d. The implementation of duties by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or Sharia Supervisory Board is generally adequate, with some weaknesses but not significant and can be improved immediately; e. The risk management function for legal risk has clear duties and responsibilities and has operated well, but there are minor weaknesses that can be resolved in normal business activities; f. Delegation of authority is controlled and monitored periodically, and has operated well; g. The management strategy for legal risk is aligned with the risk appetite and risk tolerance; h. Policies, procedures, and the setting of limits for legal risk are adequate and available for all areas of risk management for legal risk, aligned with implementation, and well understood by employees although there are minor weaknesses;
i. The risk management process for legal risk is adequate in identifying, measuring, monitoring, and controlling legal risk;
j. The information management system for legal risk is good, including legal risk reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors,

Rating Definition and/or Sharia Supervisory Board, but there are minor weaknesses that can be easily improved; k. Human resources are adequate in both quantity and quality in the risk management function for legal risk;
l. The internal control system is effective in supporting the implementation of risk management for legal risk;
m. The implementation of independent review by the internal audit unit and functions conducting independent reviews is adequate in terms of methodology, frequency, and reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or Sharia Supervisory Board; n. There are weaknesses but not significant based on independent review results; o. Follow-up on independent reviews has been implemented adequately; p. The compliance function for legal risk has clear duties and responsibilities and has operated well; and q. The policies, regulations, systems, procedures, and business activities conducted by the Pension Fund are consistent with statutory regulations. Level 3 (Adequate) The quality of risk management implementation for legal risk is fairly adequate. Although minimum requirements are met, there are some weaknesses that require management attention. Examples of Pension Fund characteristics included in Level 3 (adequate) are as follows:
a. The formulation of risk appetite and risk tolerance is fairly adequate but not always aligned with strategic objectives and overall business strategy; b. The Board of Directors/Acting Board of Directors, Board of Supervisors, and/or Sharia Supervisory Board have fairly good awareness and understanding regarding risk management

Rating Definition for legal risk, sources of legal risk, and the level of legal risk in the Pension Fund;
c. The risk management culture for legal risk is fairly strong and has been internalized fairly well but not always implemented consistently;
d. The implementation of duties by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or Sharia Supervisory Board is generally fairly adequate, but there are weaknesses in some assessment aspects that need management attention; e. The risk management function for legal risk is fairly good, but there are some weaknesses including reporting to the Board of Directors, Board of Supervisors, and/or Sharia Supervisory Board that require management attention; f. Delegation of authority is fairly good but control and monitoring are not always implemented well; g. The management strategy for legal risk is fairly aligned with the risk appetite and risk tolerance; h. Policies, procedures, and the setting of limits for legal risk are fairly adequate but not always consistent with implementation;
i. The risk management process for legal risk is fairly adequate in identifying, measuring, monitoring, and controlling legal risk;
j. The information management system for legal risk meets minimum expectations but there are some weaknesses including reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or Sharia Supervisory Board that require management attention; k. Human resources are fairly adequate in both quantity and quality in the risk management function for legal risk;

Rating Definition supporting the implementation of risk management for legal risk; m. The implementation of independent review by the internal audit unit and functions conducting independent reviews is fairly adequate, but there are some weaknesses in methodology, frequency, and/or reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or Sharia Supervisory Board that require management attention; n. There are fairly significant weaknesses based on independent review results that require management attention; o. Follow-up on independent reviews has been implemented fairly adequately; p. The compliance function for legal risk has fairly clear duties and responsibilities and has operated fairly well; and q. The policies, regulations, systems, procedures, and business activities conducted by the Pension Fund are fairly consistent with statutory regulations. Level 4 (Moderately Weak) The quality of risk management implementation for legal risk is less adequate. There are significant weaknesses in various aspects of risk management for legal risk that require immediate corrective action. Examples of Pension Fund characteristics included in Level 4 (moderately weak) are as follows:
a. The formulation of risk appetite and risk tolerance is less adequate and not aligned with strategic objectives and overall business strategy; b. There are significant weaknesses in the awareness and understanding of the Board of Directors/Acting Board of Directors, risk for legal risk, sources of legal risk, and the level of legal risk in the Pension Fund;

Definition Rating

c. risk management culture for legal risk is weak and has not been well internalized at every level of the organization;
d. the implementation of duties by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS is generally inadequate, with weaknesses in various assessment aspects requiring immediate improvement; e. there are significant weaknesses in the risk management function for legal risk requiring immediate improvement; f. delegation of authority is weak, uncontrolled, and not monitored well; g. management strategy for legal risk is not aligned with the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance); h. there are significant weaknesses in policies, procedures, and limit setting for legal risk;
i. the risk management process for legal risk is inadequate in identifying, measuring, monitoring, and controlling legal risk;
j. there are significant weaknesses in the management information system for legal risk, including reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS, requiring immediate improvement; k. human resources are inadequate in terms of both quantity and quality in the risk management function for legal risk;
l. the internal control system is ineffective in supporting the implementation of risk management for legal risk;
m. the implementation of independent review by the internal audit unit and functions performing independent review is inadequate, with weaknesses in methodology, frequency, and/or reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS requiring immediate improvement;

Definition Rating

n. there are significant weaknesses based on the results of independent review requiring immediate corrective action; o. follow-up on independent review is inadequate; p. the compliance function for legal risk has unclear tasks and responsibilities and has operated poorly; and q. the policies, provisions, systems, and procedures, as well as business activities conducted by the Pension Fund, are not in accordance with the provisions of legislation.

Rating 5

(Weak)

The quality of risk management implementation for legal risk is inadequate. There are significant weaknesses in various aspects of risk management for legal risk where the resolution actions are beyond the management's capability.

Examples of characteristics of Pension Funds included in rating 5 (weak) are as follows:
a. the formulation of the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance) is inadequate and has no connection with the strategic objectives and overall business strategy of the Pension Fund; b. the awareness and understanding of the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS regarding risk management for legal risk, sources of legal risk, and the level of legal risk in the Pension Fund is very weak;
c. the risk management culture for legal risk is not strong or does not exist at all;
d. the implementation of duties by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS is inadequate, with significant weaknesses in almost all assessment aspects, and resolution actions are beyond the Pension Fund's capability; e. there are significant weaknesses in the risk management function for legal risk requiring fundamental improvement;

Definition Rating

f. delegation of authority is very weak or non-existent; g. management strategy for legal risk is not aligned with the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance); h. there are very significant weaknesses in policies, procedures, and limit setting for legal risk;
i. the risk management process for legal risk is inadequate in identifying, measuring, monitoring, and controlling legal risk;
j. there are very significant weaknesses in the management information system for legal risk; k. human resources are inadequate in terms of both quantity and quality in the risk management function for legal risk;
l. the internal control system is ineffective in supporting the implementation of risk management for legal risk;
m. the implementation of independent review by the internal audit unit and functions performing independent review is inadequate, with weaknesses in methodology, frequency, and/or reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS requiring fundamental improvement; n. there are very significant weaknesses based on the results of independent review, with corrective actions beyond management's capability; o. follow-up on independent review is inadequate or non-existent; p. the compliance function for legal risk has unclear tasks and responsibilities and has operated poorly; and q. the policies, provisions, systems, and procedures, as well as business activities conducted by the Pension Fund, are not in accordance with the provisions of legislation.

Table II.G.1: Parameters or Indicators for Assessing Inherent Compliance Risk

Parameter or Indicator	Description
1. Type and significance of violations committed	a. Type of violation or non-compliance committed by the Pension Fund.<br>b. Amount of fine sanctions imposed on the Pension Fund by authorities.<br>c. Non-compliance with commitments to the Financial Services Authority (OJK) and other related authorities.<br>d. Type of violation or non-compliance regarding the application of Sharia principles committed by the Pension Fund based on DPS findings.
2. Frequency of violations (including sanctions) committed and track record of Pension Fund non-compliance	a. Type and frequency of violations against regulations and non-compliance with commitments, the same ones found every year in the last 3 (three) years.<br>b. Accumulation of types of violations against regulations and non-compliance with commitments found every year in the last 3 (three) years.<br>c. Follow-up on findings of violations and commitments by the Pension Fund.
3. Behavior underlying the violation	The violation was committed intentionally or due to negligence.
4. Follow-up on violations	Follow-up on violations of legislation and/or fulfillment of commitments, including fulfillment of the action plan submitted to the Financial Services Authority (OJK) and other related authorities.

Description of Parameters:

Coverage of violations: Violations against applicable legislation and commitments to the Financial Services Authority (OJK), including sanctions imposed for violations committed by the Pension Fund. Examples include notification letters, warning letters, reprimand letters, fine imposition letters, etc., in accordance with applicable regulations.
Sharia principle violations: Violations of fatwas issued by the National Sharia Council (DSN) or other generally applicable standards in the Sharia financial sector.
Trend of non-compliance: The Pension Fund's trend and accumulation of violations over the last 3 (three) years to determine whether the types of violations and non-compliance with commitments are recurring or if significant improvements have not been made by the Pension Fund regarding those errors.
Underlying behavior: Understanding whether a violation is an intentional act or negligence is important.
Follow-up: The Pension Fund must follow up on matters causing violations of regulations and/or commitments to the Financial Services Authority (OJK) and/or other related authorities within the established timeframe.
Other related authorities: Authorities with the power to regulate and supervise financial service institutions. Examples include the Center for Reporting and Analysis of Financial Transactions, the Corruption Eradication Commission, and the Ministry of Finance.

Table II.G.2: Guidelines for Determining the Level of Inherent Compliance Risk

Rating 1

(Low)

Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund's failure to fulfill obligations to participants caused by compliance risk is classified as low during a certain period in the future.

Examples of characteristics of Pension Funds included in rating 1 (low) are as follows:
a. no violations of legislation; b. the Pension Fund's compliance track record with the Financial Services Authority (OJK) in the last 3 (three) years is very good;
c. the Pension Fund fulfills all commitments to the Financial Services Authority (OJK) supervisor and other related authorities; and
d. no violations of Sharia principles regarding the Pension Fund's activities.

Rating 2

(Low-Medium)

Examples of characteristics of Pension Funds included in rating 2 (low-medium) are as follows:
a. there are relatively minor violations that can be immediately corrected by the Pension Fund during the assessment period; b. the Pension Fund's compliance track record with the Financial Services Authority (OJK) in the last 3 (three) years is good;
c. the Pension Fund generally fulfills most significant commitments to the Financial Services Authority (OJK) supervisor and other related authorities; and
d. there are insignificant violations of Sharia principles regarding the Pension Fund's activities.

Rating 3

(Medium)

Considering the business activities of the Pension Fund, the likelihood of the Pension Fund's failure to fulfill obligations to participants caused by Compliance Risk is classified as medium during a certain period in the future.

Examples of characteristics of Pension Funds included in rating 3 (medium) are as follows:
a. there are quite significant regulation violations requiring management attention; the violations have occurred several times because the improvements made were inadequate; b. the Pension Fund's compliance track record with the Financial Services Authority (OJK) in the last 3 (three) years is quite good;
c. the Pension Fund fulfills some significant commitments to the Financial Services Authority (OJK) supervisor and other related authorities; and
d. there are quite significant violations of Sharia principles regarding the Pension Fund's activities.

Rating 4

(Medium-High)

Examples of characteristics of Pension Funds included in rating 4 (medium-high) are as follows:
a. there are significant regulation violations requiring immediate corrective action; the violations occur quite frequently and no fundamental improvements are made to the existing problems; b. the Pension Fund's compliance track record with the Financial Services Authority (OJK) in the last 3 (three) years is not good;
c. the Pension Fund fulfills some non-significant commitments to the Financial Services Authority (OJK) supervisor and other related authorities; and
d. there are significant violations of Sharia principles regarding the Pension Fund's activities.

Rating 5

(High)

Examples of characteristics of Pension Funds included in rating 5 (high) are as follows:
a. there are very significant regulation violations requiring immediate improvement; the violations occur repeatedly, and the Pension Fund makes no effort to correct the errors; b. the Pension Fund's compliance track record with the Financial Services Authority (OJK) in the last 3 (three) years is not good;
c. the Pension Fund does not fulfill commitments to the Financial Services Authority (OJK) supervisor and other related authorities; and
d. there are very significant violations of Sharia principles regarding the Pension Fund's activities.

Table II.G.3: Guidelines for Determining the Quality of Risk Management Implementation for Compliance Risk

Rating 1

(Very Strong)

The quality of risk management implementation for compliance risk is very adequate. Although there are minor weaknesses, they are not significant and can be ignored.

Examples of characteristics of Pension Funds included in rating 1 (very strong) are as follows:
a. the formulation of the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance) is very adequate and aligned with strategic objectives and overall business strategy; b. the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS have very good awareness and understanding regarding risk management for compliance risk, sources of compliance risk, and the level of compliance risk in the Pension Fund;
c. the risk management culture for compliance risk is very strong and has been very well internalized at all levels of the organization;
d. the implementation of duties by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS is overall very adequate; e. the risk management function for compliance risk is independent, has clear tasks and responsibilities, and has operated very well; f. delegation of authority is controlled and monitored periodically, and has operated very well; g. management strategy for compliance risk is very aligned with the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance); h. policies, procedures, and limit setting for compliance risk are very adequate and available for all areas of risk management for compliance risk, aligned with implementation, and well understood by employees;
i. the risk management process for compliance risk is very adequate in identifying, measuring, monitoring, and controlling compliance risk;
j. the management information system for compliance risk is very good, producing comprehensive and integrated compliance risk reports to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS; k. human resources are very adequate in terms of both quantity and quality in the risk management function for compliance risk;
l. the internal control system is very effective in supporting the implementation of risk management for compliance risk;
m. the implementation of independent review by the internal audit unit and functions performing independent review is very adequate in terms of methodology, frequency, and reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS; n. generally, there are no significant weaknesses based on the results of independent review; o. follow-up on independent review has been implemented very adequately; p. the compliance function for compliance risk has very clear tasks and responsibilities and has operated very well; and q. the policies, provisions, systems, and procedures, as well as business activities conducted by the Pension Fund, are very in accordance with the provisions of legislation.

Rating 2

(Strong)

The quality of risk management implementation for compliance risk is adequate, although there are some minor weaknesses that can be resolved in normal business activities.

Examples of characteristics of Pension Funds included in rating 2 (strong) are as follows:
a. the formulation of the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance) is adequate and aligned with strategic objectives and overall business strategy; b. the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS have good awareness and understanding regarding risk management for compliance risk, sources of compliance risk, and the level of compliance risk in the Pension Fund;
c. the risk management culture for compliance risk is strong and has been well internalized at all levels of the organization;
d. the implementation of duties by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS is generally adequate, with some weaknesses that are not significant and can be improved immediately; e. the risk management function for compliance risk has clear tasks and responsibilities and has operated well, but there are minor weaknesses that can be resolved in normal business activities; f. delegation of authority is controlled and monitored periodically and has operated well; g. management strategy for compliance risk is aligned with the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance); h. policies, procedures, and limit setting for compliance risk are adequate and available for all areas of risk management for compliance risk, aligned with implementation, and well understood by employees, although there are minor weaknesses;
i. the risk management process for compliance risk is adequate in identifying, measuring, monitoring, and controlling compliance risk;
j. the management information system for compliance risk is good, including reporting compliance risk to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS, but there are minor weaknesses that can be easily improved; k. human resources are adequate in terms of both quantity and quality in the risk management function for compliance risk;
l. the internal control system is effective in supporting the implementation of risk management for compliance risk;
m. the implementation of independent review by the internal audit unit and functions performing independent review is adequate in terms of methodology, frequency, and reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS; n. there are weaknesses but not significant based on the results of independent review; o. follow-up on independent review has been implemented adequately; p. the compliance function for compliance risk has clear tasks and responsibilities and has operated well; and q. the policies, provisions, systems, and procedures, as well as business activities conducted by the Pension Fund, are in accordance with the provisions of legislation.

Rating 3

(Fair)

The quality of risk management implementation for compliance risk is fairly adequate. Although minimum requirements are met, there are some weaknesses requiring management attention.

Examples of characteristics of Pension Funds included in rating 3 (fair) are as follows:
a. the formulation of the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance) is fairly adequate but not always aligned with strategic objectives and overall business strategy; b. the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS have fairly good awareness and understanding regarding risk management for compliance risk, sources of compliance risk, and the level of compliance risk in the Pension Fund;
c. the risk management culture for compliance risk is fairly strong and has been fairly well internalized but not always implemented consistently;
d. the implementation of duties by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS is generally fairly adequate, with weaknesses in some assessment aspects that need management attention; e. the risk management function for compliance risk is fairly good, but there are some weaknesses, including reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS, requiring management attention; f. delegation of authority is fairly good, but control and monitoring are not always implemented well; g. management strategy for compliance risk is fairly aligned with the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance); h. policies, procedures, and limit setting for compliance risk are fairly adequate but not always consistent with implementation;
i. the risk management process for compliance risk is fairly adequate in identifying, measuring, monitoring, and controlling compliance risk;
j. the management information system for compliance risk meets minimum expectations but has some weaknesses, including reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS, requiring management attention; k. human resources are fairly adequate in terms of both quantity and quality in the risk management function for compliance risk;
l. the internal control system supports the implementation of risk management for compliance risk;
m. the implementation of independent review by the internal audit unit and functions performing independent review is fairly adequate, but there are some weaknesses in methodology, frequency, and/or reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS requiring management attention; n. there are fairly significant weaknesses based on the results of independent review requiring management attention; o. follow-up on independent review has been implemented fairly adequately; p. the compliance function for compliance risk has fairly clear tasks and responsibilities and has operated fairly well; and q. the policies, provisions, systems, and procedures, as well as business activities conducted by the Pension Fund, are fairly in accordance with the provisions of legislation.

Rating 4

(Weak)

The quality of risk management implementation for compliance risk is inadequate. There are significant weaknesses in various aspects of risk management for compliance risk requiring immediate corrective action.

Examples of characteristics of Pension Funds included in rating 4 (weak) are as follows:
a. the formulation of the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance) is inadequate and not aligned with strategic objectives and overall business strategy; b. there are significant weaknesses in the awareness and understanding of the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS regarding risk management for compliance risk, sources of compliance risk, and the level of compliance risk in the Pension Fund;

Rating Definition Rating
c. risk management culture for compliance risk is weak and has not been well internalized at every level of the organization;
d. the implementation of duties by the Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS is generally inadequate, with weaknesses in various assessment aspects requiring immediate improvement; e. there are significant weaknesses in the risk management function for compliance risk requiring immediate improvement; f. delegation of authority is weak, not controlled, and not monitored well; g. management strategy for compliance risk is not aligned with the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance); h. there are significant weaknesses in policies, procedures, and limit setting for compliance risk;
i. the risk management process for compliance risk is inadequate in identifying, measuring, monitoring, and controlling compliance risk;
j. there are significant weaknesses in the compliance risk management information system, including reporting to the Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS, requiring immediate improvement; k. human resources are inadequate in terms of both quantity and quality in the risk management function for compliance risk;
l. the internal control system is less effective in supporting the implementation of risk management for compliance risk;
m. the implementation of independent review by the internal audit unit and functions performing independent review is inadequate, with weaknesses in methodology, frequency, and/or reporting to the

Rating Definition Rating
Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS requiring immediate improvement; n. there are significant weaknesses based on independent review results requiring immediate corrective action; o. follow-up on independent review is inadequate; p. the compliance function for compliance risk has unclear tasks and responsibilities and has operated poorly; and q. the policies, regulations, systems, and procedures, as well as business activities conducted by the Pension Fund, are not in accordance with statutory regulations.

Rating 5
(Weak)
The quality of compliance risk management implementation is inadequate. There are significant weaknesses in various aspects of compliance risk management, the resolution of which is beyond management's capability. Examples of characteristics of Pension Funds included in Rating 5 (weak) are as follows:
a. the formulation of the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance) is inadequate and there is no connection with strategic objectives and overall business strategy; b. the awareness (awareness) and understanding of the Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS regarding compliance risk management, sources of compliance risk, and the level of compliance risk in the Pension Fund are very weak;
c. the risk management culture for compliance risk is not strong or does not exist at all;
d. the implementation of duties by the Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS is inadequate, with significant weaknesses in almost all assessment aspects, and corrective actions are beyond the Pension Fund's capability;

Rating Definition Rating e. there are significant weaknesses in the risk management function for compliance risk requiring fundamental improvement; f. delegation of authority is very weak or non-existent; g. management strategy for compliance risk is not aligned with the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance); h. there are very significant weaknesses in policies, procedures, and limit setting for compliance risk;
i. the risk management process for compliance risk is inadequate in identifying, measuring, monitoring, and controlling compliance risk;
j. there are fundamental weaknesses in the information management system for compliance risk; k. human resources are inadequate in terms of both quantity and quality in the risk management function for compliance risk;
l. the internal control system is ineffective in supporting the implementation of risk management for compliance risk;
m. the implementation of independent review by the internal audit unit and functions performing independent review is inadequate, with weaknesses in methodology, frequency, and/or reporting to the Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS requiring fundamental improvement; n. there are very significant weaknesses based on independent review results, with corrective actions beyond management's capability; o. follow-up on independent review is inadequate or non-existent, p. the compliance function for compliance risk has unclear tasks and responsibilities and has operated poorly; and

Rating Definition Rating q. the policies, regulations, systems, and procedures, as well as business activities conducted by the Pension Fund, are not in accordance with statutory regulations.

Table II.H.1: Parameters or Indicators for Assessing Inherent Reputation Risk
Parameter or Indicator Description

Reputation influence
from the Founder and/or affiliated company a. credibility of the Pension Fund Founder, management, and/or affiliated company with the Financial Institution Pension Fund b. reputational events occurring at the Pension Fund Founder and/or affiliated company with the Financial Institution Pension Fund Reputation influence or negative news from the Pension Fund Founder and/or affiliated company with the Financial Institution Pension Fund is one of the factors that can cause an increase in Reputation Risk in the Pension Fund.
Violation of
business ethics a. type and significance of violations committed b. frequency of violations committed
c. behavior underlying the violation (intent or ignorance)
What needs to be noted is that when the Pension Fund violates generally applicable business ethics or norms.
Product
complexity
Complexity of products owned by the Financial Institution Pension Fund Products owned by the Pension Fund that are complex can be exposed to reputation risk in case of misunderstanding by Participants or other parties regarding pension benefits and/or other benefits managed by the Pension Fund.
Frequency and
materiality a. complaints and/or participant grievances currently being faced Frequency and materiality of negative reporting about the Pension Fund, including the Board of Directors/Acting Board of Directors of the Pension Fund,

Parameter or Indicator Description complaints or grievances from participants, including legal issues b. frequency of complaints and/or grievances
c. materiality of participant complaints/grievances measured during the assessment period

Table II.H.2: Guidelines for Setting the Level of Inherent Risk for Reputation Risk
Rating Definition Rating
Rating 1
(Low)
Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by reputation risk is classified as low during a certain period in the future. Examples of characteristics of Pension Funds included in Rating 1 (low) are as follows:
a. generally, there is no negative reputation influence from the Pension Fund Founder and affiliated companies; on the contrary, it is expected that the Pension Fund Founder and affiliated companies can provide a very positive influence on the Pension Fund's reputation; b. violations or potential violations of business ethics are very minimal, and the Pension Fund has a reputation that highly upholds business ethics;
c. pension products owned by the Pension Fund are not complex and are easy for participants to understand;
d. the number and value of business collaborations with business partners are not significant; e. the frequency, nature, and scope of negative reporting are not significant; and f. the frequency and substance of participant complaints are not material. Rating 2 (Medium Low) Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by reputation risk is classified as medium-low during a certain period in the future. Examples of characteristics of Pension Funds included in Rating 2 (medium-low) are as follows:
a. there is negative reputation influence from the Pension Fund Founder and affiliated companies, but the scale of influence is small and can be well mitigated;

Rating Definition Rating b. violations or potential violations of business ethics are not very significant, and the Pension Fund has a reputation that upholds business ethics;
c. pension products owned by the Pension Fund are not very simple but relatively do not require special understanding from participants;
d. the number and value of business collaborations with business partners are not very significant; e. the frequency, nature, and scope of negative reporting are not very significant; and f. the frequency and substance of participant complaints are not very material. Rating 3 (Medium) Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by reputation risk is classified as medium during a certain period in the future. Examples of characteristics of Pension Funds included in Rating 3 (medium) are as follows:
a. there is negative reputation influence from the Pension Fund Founder and affiliated companies with a scale of influence that is quite significant but still controllable; b. violations or potential violations of business ethics occur, but the scale of influence is quite significant and requires management attention;
c. pension products owned by the Pension Fund are quite complex, so to some extent they require special understanding from participants;
d. the number and value of business collaborations with business partners are quite significant; e. the frequency, nature, and scope of negative reporting are quite significant; and f. the frequency and substance of participant complaints are quite material.

Rating Definition Rating
Rating 4
(Medium
High)
Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by reputation risk is classified as medium-high during a certain period in the future. Examples of characteristics of Pension Funds included in Rating 4 (medium-high) are as follows:
a. there is negative reputation influence from the Pension Fund Founder and affiliated companies with a scale of influence that is significant and requires special management attention; b. violations or potential violations of business ethics occur with a scale of influence that is significant and requires special attention;
c. pension products owned by the Pension Fund are complex, so they require special understanding from participants;
d. the number and value of business collaborations with business partners are significant; e. the frequency, nature, and scope of negative reporting are significant; and f. the frequency and substance of participant complaints are material. Rating 5 (High) Considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund failing to meet its obligations to participants caused by reputation risk is classified as high during a certain period in the future. Examples of characteristics of Pension Funds included in Rating 5 (high) are as follows:
a. there is negative reputation influence from the Pension Fund Founder and affiliated companies with a scale of influence that is very significant and requires immediate follow-up and management;

Rating Definition Rating b. violations or potential violations of business ethics occur with a scale that is very significant and requires immediate follow-up from management;
c. pension products owned by the Pension Fund are very complex and very much require special understanding from participants;
d. the number and value of business collaborations with business partners are very significant; e. the frequency, nature, and scope of negative reporting are very significant; and f. the frequency and substance of participant complaints are very very material.

Table II.H.3: Guidelines for Setting the Quality of Implementation of Risk Management for Reputation Risk
Rating Definition Rating
Rating 1
(Strong)
The quality of compliance risk management implementation for reputation risk is very adequate. There are minor weaknesses that are not significant and can be ignored.
Examples of characteristics of Pension Funds included in Rating 1 (strong) are as follows:
a. the formulation of the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance) is very adequate and has been aligned with strategic objectives and overall business strategy; b. the Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS have very good awareness (awareness) and understanding regarding risk management for reputation risk, sources of reputation risk, and the level of reputation risk in the Pension Fund;
c. the risk management culture for reputation risk is very strong and has been very well internalized at all levels of the organization;
d. the implementation of duties by the Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS is overall very adequate; e. the risk management function for reputation risk is independent, has clear tasks and responsibilities, and has operated very well; f. delegation of authority is controlled and monitored periodically, and has operated very well; g. management strategy for reputation risk is very aligned with the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance); h. policies, procedures, and limit setting for reputation risk are very adequate and available for all areas of risk management for reputation risk, aligned with implementation, and well understood by employees;

Rating Definition Rating
i. the risk management process for reputation risk is very adequate in identifying, measuring, monitoring, and controlling reputation risk;
j. the information management system for reputation risk is very good, producing comprehensive and integrated reputation risk reports to the Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS; k. human resources are very adequate in terms of both quantity and quality in the risk management function for reputation risk;
l. the internal control system is very effective in supporting the implementation of risk management for reputation risk;
m. the implementation of independent review by the internal audit unit and functions performing independent review is very adequate in terms of methodology, frequency, and reporting to the Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS; n. generally, there are no significant weaknesses based on independent review results; o. follow-up on independent review has been implemented very adequately; p. the compliance function for reputation risk has very clear tasks and responsibilities and has operated very well; and q. the policies, regulations, systems, and procedures, as well as business activities conducted by the Pension Fund, are very in accordance with statutory regulations. Rating 2 (Relatively Strong) The quality of compliance risk management implementation for reputation risk is adequate despite having some minor weaknesses, but these weaknesses can be resolved in normal business activities. Examples of characteristics of Pension Funds included in Rating 2 (relatively strong) are as follows:

Rating Definition Rating a. the formulation of the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance) is adequate and has been aligned with strategic objectives and overall business strategy; b. the Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS have good awareness (awareness), support, and understanding regarding risk management for reputation risk;
c. the risk management culture for reputation risk is strong and has been well internalized at all levels of the organization;
d. the implementation of duties by the Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS is generally adequate, with some weaknesses that are not significant and can be improved immediately; e. the risk management function for reputation risk has clear tasks and responsibilities, and has operated well, but there are minor weaknesses that can be resolved in normal business activities; f. delegation of authority is controlled and monitored periodically, and has operated well; g. management strategy for reputation risk is aligned with the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance); h. policies, procedures, and limit setting for reputation risk are adequate and available for all areas of risk management for reputation risk, aligned with implementation, and well understood by employees, although there are minor weaknesses;
i. the risk management process for reputation risk is adequate in identifying, measuring, monitoring, and controlling reputation risk;
j. the information management system for reputation risk is good, including reporting reputation risk to the Board of Directors/Acting Board of Directors, Supervisory Board,

Rating Definition Rating and/or DPS, but there are minor weaknesses that can be easily improved; k. human resources are good in terms of both quantity and quality in the risk management function for reputation risk;
l. the internal control system is effective in supporting the implementation of risk management for reputation risk;
m. the implementation of independent review by the internal audit unit and functions performing independent review is adequate in terms of methodology, frequency, and reporting to the Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS; n. there are weaknesses but not significant based on independent review results; o. follow-up on independent review has been implemented adequately; p. the compliance function for reputation risk has clear tasks and responsibilities and has operated well; and q. the policies, regulations, systems, and procedures, as well as business activities conducted by the Pension Fund, are in accordance with statutory regulations. Rating 3 (Adequate) The quality of compliance risk management implementation for reputation risk is quite adequate. Although minimum requirements are met, there are some weaknesses that require management attention. Examples of characteristics of Pension Funds included in Rating 3 (adequate) are as follows:
a. the formulation of the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance) is quite adequate but not always aligned with strategic objectives and overall business strategy; b. the Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS have quite good awareness (awareness) and understanding regarding risk management

Rating Definition Rating for reputation risk, sources of reputation risk, and the level of reputation risk in the Pension Fund;
c. the risk management culture for reputation risk is quite strong and has been quite well internalized, but not always implemented consistently;
d. the implementation of duties by the Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS is generally quite adequate, but there are weaknesses in some assessment aspects that need management attention; e. the risk management function for reputation risk is quite good, but there are some weaknesses, including reporting to the Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS, which require management attention; f. delegation of authority is quite good, but control and monitoring are not always implemented well; g. management strategy for reputation risk is quite aligned with the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance); h. policies, procedures, and limit setting for reputation risk are quite adequate but not always consistent with implementation;
i. the risk management process for reputation risk is quite adequate in identifying, measuring, monitoring, and controlling reputation risk;
j. the information management system for reputation risk meets minimum expectations but has some weaknesses, including reporting to the Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS, which require management attention; k. human resources are quite good in terms of both quantity and quality in the risk management function for reputation risk;

Rating Definition Rating supporting the implementation of risk management for reputation risk; m. the implementation of independent review by the internal audit unit and functions performing independent review is quite adequate, but there are weaknesses in methodology, frequency, and/or reporting to the Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS that require management attention; n. there are quite significant weaknesses based on independent review results that require management attention; o. follow-up on independent review has been implemented quite adequately; p. the compliance function for reputation risk has quite clear tasks and responsibilities and has operated quite well; and q. the policies, regulations, systems, and procedures, as well as business activities conducted by the Pension Fund, are quite in accordance with statutory regulations. Rating 4 (Relatively Weak) The quality of compliance risk management implementation for reputation risk is less adequate. There are significant weaknesses in various aspects of reputation risk management requiring immediate corrective action. Examples of characteristics of Pension Funds included in Rating 4 (relatively weak) are as follows:
a. the formulation of the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance) is less adequate and not aligned with strategic objectives and overall business strategy; b. there are significant weaknesses in the awareness (awareness) and understanding of the Board of Directors/Acting Board of Directors, risk for reputation risk, sources of reputation risk, and level of reputation risk in the Pension Fund;

Rating Definition Rating
c. the risk management culture for reputation risk is weak and has not been well internalized at every level of the organization;
d. the implementation of duties by the Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS is generally less adequate, with weaknesses in various assessment aspects requiring immediate improvement; e. there are significant weaknesses in the risk management function for reputation risk requiring immediate improvement; f. delegation of authority is weak, not controlled, and not monitored well; g. management strategy for reputation risk is not aligned with the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance); h. there are significant weaknesses in policies, procedures, and limit setting for reputation risk;
i. the risk management process for reputation risk is inadequate in identifying, measuring, monitoring, and controlling reputation risk;
j. there are significant weaknesses in the reputation risk management information system, including reporting to the Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS, requiring immediate improvement; k. human resources are inadequate in terms of both quantity and quality in the risk management function for reputation risk;
l. the internal control system is less effective in supporting the implementation of risk management for reputation risk;
m. the implementation of independent review by the internal audit unit and functions performing independent review is inadequate, with weaknesses in methodology, frequency, and/or reporting to the

Rating Definition Rating
Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS requiring immediate improvement; n. there are significant weaknesses based on independent review results requiring immediate corrective action; o. follow-up on independent review is inadequate; p. the compliance function for reputation risk has unclear tasks and responsibilities and has operated poorly; and q. the policies, regulations, systems, and procedures, as well as business activities conducted by the Pension Fund, are not in accordance with statutory regulations.

Rating 5
(Weak)
The quality of reputation risk management implementation is inadequate. There are significant weaknesses in various aspects of reputation risk management, the resolution of which is beyond management's capability. Examples of characteristics of Pension Funds included in Rating 5 (weak) are as follows:
a. the formulation of the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance) is inadequate and there is no connection with strategic objectives and overall business strategy; b. the awareness (awareness) and understanding of the Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS regarding reputation risk management, sources of reputation risk, and the level of reputation risk in the Pension Fund are very weak;
c. the risk management culture for reputation risk is not strong or does not exist at all;
d. the implementation of duties by the Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS is inadequate, with significant weaknesses in almost all assessment aspects, and corrective actions are beyond the Pension Fund's capability;

Rating Definition Rating e. there are significant weaknesses in the risk management function for reputation risk requiring fundamental improvement; f. delegation of authority is very weak or non-existent; g. management strategy for reputation risk is not aligned with the level of risk to be taken (risk appetite) and risk tolerance (risk tolerance); h. there are very significant weaknesses in policies, procedures, and limit setting for reputation risk;
i. the risk management process for reputation risk is inadequate in identifying, measuring, monitoring, and controlling reputation risk;
j. there are fundamental weaknesses in the information management system for reputation risk; k. human resources are inadequate in terms of both quantity and quality in the risk management function for reputation risk;
l. the internal control system is ineffective in supporting the implementation of risk management for reputation risk;
m. the implementation of independent review by the internal audit unit and functions performing independent review is inadequate, with weaknesses in methodology, frequency, and/or reporting to the Board of Directors/Acting Board of Directors, Supervisory Board, and/or DPS requiring fundamental improvement; n. there are very significant weaknesses based on independent review results, with corrective actions beyond management's capability; o. follow-up on independent review is inadequate or non-existent, p. the compliance function for reputation risk has unclear tasks and responsibilities and has operated poorly; and

Rating Definition Rating q. the policies, regulations, systems, and procedures, as well as business activities conducted by the Pension Fund, are not in accordance with statutory regulations.

Rating Definition

c. risk management culture for reputational risk is weak and has not been well internalized at every organizational level;
d. the implementation of duties by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS is generally inadequate, with weaknesses in several assessment aspects requiring immediate improvement; e. significant weaknesses exist in the risk management function for reputational risk requiring immediate improvement; f. delegation of authority is weak, not controlled, and not monitored well; g. management strategy for reputational risk is not aligned with the risk appetite and risk tolerance; h. significant weaknesses exist in policies, procedures, and setting of limits for reputational risk;
i. the risk management process for reputational risk is inadequate in identifying, measuring, monitoring, and controlling reputational risk;
j. significant weaknesses exist in the information management system for reputational risk, including reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS, requiring immediate improvement; k. human resources are inadequate in quantity and quality in the risk management function for reputational risk;
l. the internal control system is less effective in supporting the implementation of risk management for reputational risk;
m. the implementation of independent review by the internal audit unit and functions conducting independent review is inadequate, with weaknesses in methodology, frequency, and/or reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS requiring immediate improvement; n. significant weaknesses exist based on review results requiring immediate corrective action; o. follow-up on independent review is inadequate; p. the compliance function for reputational risk has unclear duties and responsibilities and has operated poorly; and q. the policies, provisions, systems, procedures, and business activities conducted by the Pension Fund are less in accordance with statutory regulations.

Rating 5
(Weak)
The quality of risk management implementation for reputational risk is inadequate. Significant weaknesses exist in various aspects of risk management for reputational risk, the resolution of which is beyond the management's capability. Examples of characteristics of Pension Funds included in Rating 5 (weak) are as follows:
a. the formulation of risk appetite and risk tolerance is inadequate and there is no link with strategic objectives and overall business strategy; b. the awareness and understanding of the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS regarding risk management for reputational risk, sources of reputational risk, and the level of reputational risk in the Pension Fund is very weak;
c. the risk management culture for reputational risk is not strong or does not exist at all;
d. the implementation of duties by the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS is inadequate, with weaknesses in almost all assessment aspects, and corrective actions are beyond the Pension Fund's capability;

e. significant weaknesses exist in the risk management function for reputational risk requiring fundamental improvement; f. delegation of authority is very weak or non-existent; g. management strategy for reputational risk is not aligned with risk appetite and risk tolerance; h. very significant weaknesses exist in policies, procedures, and setting of limits for reputational risk;
i. the risk management process for reputational risk is inadequate in identifying, measuring, monitoring, and controlling reputational risk;
j. fundamental weaknesses exist in the information management system for reputational risk; k. human resources are inadequate in quantity and quality in the risk management function for reputational risk;
l. the internal control system is ineffective in supporting the implementation of risk management for reputational risk;
m. the implementation of independent review by the internal audit unit and functions conducting independent review is less or not adequate, with weaknesses in methodology, frequency, and/or reporting to the Board of Directors/Acting Board of Directors, Board of Supervisors, and/or DPS requiring fundamental improvement; n. very significant weaknesses exist based on independent review results, with corrective actions beyond management's capability; o. follow-up on independent review is inadequate or non-existent; p. the compliance function for reputational risk has unclear duties and responsibilities and has operated poorly; and q. policies, provisions, systems, procedures, and business activities are less in accordance with statutory regulations.

Table II.I: Guidelines for Setting Risk Levels for Each Type of Risk

Risk Analysis:
Final Conclusion on the Pension Fund's Risk Level: encompassing inherent risk level and the quality of risk management implementation, thereby describing the Pension Fund's risk level. Inherent Risk:
Description of inherent risk assessment based on analysis of assessment factors using both quantitative and qualitative indicators, thereby describing the Pension Fund's inherent risk level. Quality of Risk Management Implementation:
Analysis of the quality of risk management implementation consists of risk governance, risk management framework, risk management process, human resources, and information management systems, as well as risk control.

Table II.J: Format for Setting Risk Profile Ratings

Table II.K: Guidelines for Setting Risk Profile Factor Ratings

Rating Definition
Rating 1 The Pension Fund's risk profile included in this rating generally has characteristics as follows:
a. considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund's failure to meet obligations to participants caused by composite inherent risk is classified as low during a certain period in the future; and b. the quality of risk management implementation is very adequate, in case there are minor weaknesses, such weaknesses can be ignored.

Rating 2 The Pension Fund's risk profile included in this rating generally has characteristics as follows:
a. considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund's failure to meet obligations to participants caused by composite inherent risk is classified as low-medium during a certain period in the future; and b. the quality of risk management implementation is adequate, in case there are minor weaknesses, such weaknesses require management attention.

Rating 3 The Pension Fund's risk profile included in this rating generally has characteristics as follows:
a. considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund's failure to meet obligations to participants caused by composite inherent risk is classified as medium during a certain period in the future; and b. the quality of risk management implementation is sufficiently adequate, although minimum requirements are met, there are some weaknesses requiring management attention and improvement.

Rating 4 The Pension Fund's risk profile included in this rating generally has characteristics as follows:
a. considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund's failure to meet obligations to participants caused by composite inherent risk is classified as medium-high during a certain period in the future; and b. the quality of risk management implementation is less adequate, with significant weaknesses in various aspects of risk management requiring immediate corrective action.

Rating 5 The Pension Fund's risk profile included in this rating generally has characteristics as follows:
a. considering the business activities conducted by the Pension Fund, the likelihood of the Pension Fund's failure to meet obligations to participants caused by composite inherent risk is classified as high during a certain period in the future; and b. the quality of risk management implementation is inadequate, with significant weaknesses in various aspects of risk management, the resolution of which is beyond management's capability.

Established in Jakarta on 6 November 2020
EXECUTIVE HEAD OF INSURANCE, PENSION FUND,
FINANCING INSTITUTION, AND OTHER
FINANCIAL SERVICE INSTITUTIONS SUPERVISOR
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, sd
RISWINANDI

APPENDIX III
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA NUMBER 22 /SEOJK.05/2020 CONCERNING ASSESSMENT OF PENSION FUND HEALTH LEVEL

ASSESSMENT OF PROFITABILITY FACTOR
PENSION FUND HEALTH LEVEL

Table III.A: Parameters or Indicators for Assessing the Profitability Factor

Instructions for Filling:

The parameters or indicators for assessing the profitability factor in Appendix III are minimum standards that must be used in conducting the profitability factor assessment.
Pension Funds may add other parameters or indicators according to the characteristics and complexity of the Pension Fund's business.
Assessment is conducted per position and period for the last 12 (twelve) months for parameters or indicators that are quantitative.
For certain parameters or indicators, assessment may be conducted by considering trends for at least a period of 3 (three) years.
In assessing the Pension Fund's profitability factor on a consolidated basis, parameters or indicators for assessing the Pension Fund's profitability factor on an individual basis may be used, adjusted to the scale, characteristics, and complexity of the Subsidiary's business.

Table III.A: Parameters or Indicators for Assessing the Profitability Factor

Parameter or Indicator | Description

Pension Fund Performance in Generating Investment Income (Profitability) | a. Return on Asset (RoA): (Total Investment Income + Non-Investment Income) - (Investment Expenses + Operational Expenses + Non-Investment and Operational Expenses) / Total Available Assets
Description:

Total investment income is income that is realized and unrealized. Total investment income is as presented in the statement of changes in net assets.
Non-investment income is as presented in the statement of changes in net assets.
Investment expenses are as presented in the statement of changes in net assets.
Operational expenses are as presented in the statement of changes in net assets.
Total available assets use the average assets throughout the year. Total available assets are as presented in the net assets report.

Parameter or Indicator | Description b. Return on Investment (RoI) Total Investment Income - Investment Expenses / Average Investments Description:

Total investment income is as presented in the statement of changes in net assets.
Investment expenses are as presented in the statement of changes in net assets.
For the calculation of average investments, the geometric mean is used.
G = n x1 X x2 X ... X xn
G: Geometric mean;
X: End-of-month investment value; n: Number of months (12 months).

c. Operational Expenses to Income Ratio Operational Expenses / (Investment Income + Non-Investment Income)
Description:

Operational expenses are as presented in the statement of changes in net assets.
Investment Income is as presented in the statement of changes in net assets.
Non-Investment Income is as presented in the statement of changes in net assets.

d. Total Expenses and Operational Ratio (Operational Expenses + Investment Expenses + Non-Investment and Operational Expenses) / (Investment Income + Non-Investment Income) Description:

Operational expenses are as presented in the statement of changes in net assets.
Investment expenses are as presented in the statement of changes in net assets.
Non-investment expenses are as presented in the statement of changes in net assets.
Investment income is as presented in the statement of changes in net assets.
Non-investment income is as presented in the statement of changes in net assets.

e. Investment Income Performance against Investment Income Projection Total Investment Income / Projected Total Investment Income Description:

Total investment income is income that is realized and unrealized. Total investment income is as presented in the statement of changes in net assets.
Projected total investment income is as presented in the business plan.

Sources Supporting Profitability | a. Realized Investment Income to Total Investment Income Ratio Realized Investment Income / Total Investment Income
Description:

Realized investment income is total investment income as presented in the statement of changes in net assets.
Total investment income is income that is realized and unrealized. Total investment income is as presented in the statement of changes in net assets.

Parameter or Indicator | Description b. Unrealized Investment Income to Total Investment Income Ratio Unrealized Investment Income / Total Investment Income Description:

Unrealized investment income is the increase (decrease) in investment value as presented in the statement of changes in net assets.
Total investment income is income that is realized and unrealized. Total investment income is as presented in the statement of changes in net assets.

c. Operational Expenses to Total Available Assets Ratio Operational Expenses / Total Available Assets
Description:

Operational expenses are as presented in the statement of changes in net assets.
Total available assets use the average assets throughout the year. Total available assets are as presented in the net assets report.

Future Profitability Prospects | Continuity of components supporting profitability
External factors that have an impact on the Pension Fund's profitability, including:

macroeconomic outlook;
financial market conditions; and
capital market conditions.

Profitability Management | Pension Fund's ability to manage profitability
The Pension Fund's ability to manage profitability is an analysis of, among other things, the ability to:

generate income; and
manage expenses,
sustainably.

Table III.B: Guidelines for Setting Profitability Factor Ratings

Rating Definition
Rating 1 Profitability is very adequate, investment income exceeds targets, and supports funding growth.
Pension Funds included in Rating 1 meet all or most of the example characteristics as follows:
a. the Pension Fund's performance in generating investment income (profitability) is very adequate; b. the main source of profitability from investment income is very dominant;
c. the ability of investment income to increase funding and the prospect of investment income in the future is very high; and
d. the Pension Fund's ability to manage profitability is very adequate.

Rating 2 Profitability is adequate, investment income exceeds targets, and supports funding growth.
Pension Funds included in Rating 2 meet all or most of the example characteristics as follows:
a. the Pension Fund's performance in generating investment income (profitability) is adequate; b. the main source of profitability from investment income is dominant;
c. the ability of investment income to increase funding and the prospect of investment income in the future is high; and
d. the Pension Fund's ability to manage profitability is adequate.

Rating 3 Profitability is sufficiently adequate, investment income meets targets, although there is pressure on investment income performance that may cause a decrease in investment income, it is still sufficiently supportive of the Pension Fund's funding growth. Pension Funds included in Rating 3 meet all or most of the example characteristics as follows:
a. the Pension Fund's performance in generating investment income (profitability) is sufficiently adequate; b. the main source of profitability from investment income is sufficiently dominant, although there is a fairly large influence from income other than investment income;
c. the ability of investment income to increase funding and the prospect of investment income in the future is fairly good; and
d. the Pension Fund's ability to manage profitability is sufficiently adequate.

Rating 4 Profitability is less adequate, investment income does not meet targets, and is estimated to remain in such conditions in the future, thus less supporting the Pension Fund's funding growth and business continuity. Pension Funds included in Rating 4 meet all or most of the example characteristics as follows:
a. the Pension Fund's performance in generating investment income (profitability) is less adequate; b. the dominant profitability source comes from income other than investment income;
c. the ability of investment income to increase funding and the prospect of investment income in the future is less good or may even negatively affect the Pension Fund's funding; and
d. the Pension Fund's ability to manage profitability is less adequate.

Rating 5 Profitability is inadequate, investment income does not meet targets and is unreliable, and immediately requires improvement in investment income performance to ensure the Pension Fund's business continuity. Pension Funds included in Rating 5 meet all or most of the example characteristics as follows:
a. the Pension Fund's performance in generating investment income (profitability) is inadequate; b. the profitability source is very dominant from income other than investment;
c. the ability of investment income to increase funding and the prospect of investment income in the future is not good or may even have a very negative impact on the Pension Fund's funding; and
d. the Pension Fund's ability to manage profitability is inadequate.

APPENDIX IV
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA NUMBER 22 /SEOJK.05/2020 CONCERNING ASSESSMENT OF PENSION FUND HEALTH LEVEL

ASSESSMENT OF FUNDING FACTOR
PENSION FUND HEALTH LEVEL

Table IV.A: Parameters or Indicators for Assessing the Funding Factor
Table IV.B: Guidelines for Setting Funding Factor Ratings for PPMP Pension Funds
Table IV.C: Guidelines for Setting Funding Factor Ratings for PPIP Pension Funds

Instructions for Filling:

The parameters or indicators for assessing the funding factor in Appendix IV are minimum standards that must be used in conducting the funding factor assessment.
Pension Funds may add other parameters or indicators according to the characteristics and complexity of the Pension Fund's business.
Assessment is conducted per position and period for the last 12 (twelve) months for parameters or indicators that are quantitative.
For certain parameters or indicators, assessment may be conducted by considering trends for at least a period of 3 (three) years.
In assessing the Pension Fund's funding factor on a consolidated basis, parameters or indicators for assessing the Pension Fund's funding factor on an individual basis may be used, adjusted to the scale, characteristics, and complexity of the Subsidiary's business.

Table IV.A: Parameters or Indicators for Assessing the Funding Factor

Funding Position (for PPMP only) | a. Determination of Wealth for Funding
Wealth for Funding = Net Assets - Wealth in dispute in court or controlled/seized by competent authorities + Contributions, whether partially or fully, that on the actuarial valuation date have not been paid to the Pension Fund Administration Agency for more than 3 (three) months since the due date + Types of wealth categorized as other receivables and other assets. Description:
Wealth for funding is as presented in the Pension Fund's monthly financial statements.

b. Fairness of Actuarial Assumption Determination Actuarial liability value is greatly influenced by the determination of actuarial assumptions. Actuarial assumptions used include:

Economic Assumptions, including interest rates/discount rates, PhDP increase rates, and benefit increase rates.
Actuarial depreciation (demographic) assumptions, including resignation rates, mortality rates, and disability rates.
Other assumptions, including program cost management assumptions and tax assumptions.
The fairness of these assumptions must be evaluated based on the professional judgment of the actuary appointed by the Pension Fund.

c. Surplus or Deficit
Wealth for Funding - Actuarial Present Value
Description:
The difference between wealth for funding and actuarial present value.

d. Pension Fund Funding Quality
Pension Fund funding quality for those implementing PPMP includes:

First level, if the Pension Fund implementing PPMP is in a state of fulfilled funds;
Second level, if wealth for funding is less than actuarial present value and not less than solvency liability; and
Third level, if wealth for funding is less than solvency liability.

e. Pension Fund Funding and Solvency Ratios

Wealth for Funding to Actuarial Present Value Ratio (Funding Ratio)
Wealth for Funding / Actuarial Present Value
Wealth for Funding to Solvency Liability Ratio (Solvency Ratio)
Wealth for Funding / Solvency Liability

Funding Position (for PPIP only) | a. Pension Fund Funding Quality
Fulfilled Funds for Pension Funds implementing PPIP:
Monthly due contributions have been paid to the Pension Fund Administration Agency implementing PPIP.

b. Pension Fund Funding Net Total Assets – Unpaid Due Contribution Receivables Pension Benefit Liabilities Notes:

Net total assets are as presented in the net asset statement.
Pension benefit liabilities are as presented in the balance sheet.

Employer's Ability
to Fund the Pension Program a. Employer's Financial Condition

Liquidity Ratio (Current Ratio)
Employer's Current Assets
Employer's Current Liabilities
Profitability Ratio using the Return on Equity Ratio method
Employer's Net Profit After Tax
Employer's Shareholders' Equity
Debt to Equity Ratio
Employer's Long-term Debt
Employer's Capital
Debt to Asset Ratio
Employer's Long-term Debt
Employer's Assets
Contribution Due to Earning Ratio
Contributions Due
Employer's Responsibility
Employer's Revenue

b. Employer's Business Prospects Funding for pension funds is heavily influenced by the employer's future financial condition.
To determine the employer's business prospects, it is necessary to analyze elements including:

Employer's Business Plan (if available);
Employer's Annual Report (if available);
Employer's Financial Statements; and
Cash-Flow Projections
Shows the incoming and outgoing cash flows that the employer will experience in the future. Accurate cash flow projections are the basis for assessing the employer's funding capability.

c. Employer's Commitment At the time of the pension fund's establishment, one of the requirements is a statement from the employer that the employer is willing to finance the administration of the pension program for its employees.
Employer's Commitment can be in the form of a statement of willingness to fulfill funding in the Actuarial Report.

Contributions
a. Influence of Participant Distribution on Contributions

Participant distribution due to the employer having branches/units/representatives distributed locally, regionally, and nationally creates potential risks of difficulty in contribution collection and receipt.
Participant distribution due to the Pension Fund having founding partners distributed locally, regionally, and nationally creates potential risks of difficulty in contribution collection and receipt.
The composition of participants between active participants and retirees.

b. Setting of Due Contributions
Due contributions are contributions that must be paid by the employer to fund the pension program for its employees in a period, including:

Normal due contributions for participants
Setting of normal participant contributions only applies to employers who include their employees in participating in funding their pension program (contributory system).
The greater the change in the percentage of contributions or PhDP components, and the longer the error in applying due contributions for participants, the greater the risk of contributions that will occur.
Normal due contributions for employers
In PPMP, the setting of normal due contributions for employers is based on actuarial calculation results.
The setting of due contributions for employers in PPIP is based on the percentage established in their PDP. In PPIP, the amount of normal due contributions for employers should be greater than normal participant contributions.
Additional due contributions
Setting of additional due contributions only applies to PPMP based on actuarial calculation results.
Types of additional contributions include:
a) additional contributions to cover pre-Act deficit; b) additional contributions to cover past service deficits categorized as deficiencies; and c) additional contributions to cover past service deficits categorized outside solvency deficiencies.

c. Contribution Collection Methods
Contribution Collection Methods:

Centralization
A contribution collection method where all branches/units/founding partners deposit their contributions not directly to the Pension Fund but are first collected at the founding entity, and subsequently, the founding entity deposits to the Pension Fund.
Decentralization
A contribution collection method where all branches/units/founding partners deposit their contributions directly to the Pension Fund and are not first collected at the founding entity.

d. Contribution Receipt

Contribution receipt from participants
Reconciliation between normal due contributions, contributions billed, and contributions received by the Pension Fund.
Contribution receipt from employers
Reconciliation between normal and additional due contributions, normal and additional contributions billed, and normal and additional contributions received by the Pension Fund.
Contribution receipt in cash, transfer, or book transfer.

e. Contribution Receivables

Ratio of contribution receivables to net assets
Contribution Receivables
Net Assets
Notes:
a) Contribution receivables as presented in the net asset statement; b) Net assets as presented in the net asset statement.
Ratio of contribution receivables to average monthly due contributions
Contribution Receivables
Average Monthly Due Contributions
Notes:
a) Contribution receivables as presented in the Net Asset Statement; b) Average monthly due contributions as presented in the Statement of Changes in Net Assets divided by 12 months.

f. Late Payment Penalties
Late payment penalties occur when there are contribution receivables with an age of more than 3 months. The purpose of the assessment is to test the accuracy of the late payment penalty calculation. The setting of late payment penalties is contained in the PDP applied for delays in payment for:
a. normal participant contributions (contributory system); b. normal employer contributions; and
c. additional contributions (specifically for PPMP).

Table IV.B: Guidelines for Determining Funding Factor Ratings for DPPK PPMP
Rating Definition
Rating 1 The Pension Fund has very adequate funding quality and sufficiency relative to its risk profile, accompanied by very strong funding management according to the Pension Fund's characteristics, business scale, and business complexity. Pension Funds included in Rating 1 meet all or most of the following example characteristics:
a. The Pension Fund has a very adequate funding level, is very capable of anticipating all risks faced, and supports the Pension Fund's future business expansion; b. there are no errors in setting assets for funding;
c. the actuarial assumptions used are reasonable;
d. the quality of funding components is generally very good, permanent, and able to absorb losses; e. The Pension Fund has very good funding management and/or has a very good funding sufficiency assessment process; f. has conditions: Funding Adequacy Ratio (RKD) ≥120, Solvency Ratio (RS) ≥120%, and Revenue to Operational Expenditure and Pension Benefit Payment Ratio ≥120%; g. The Pension Fund has very good funding support from the Founder/Founding Partner; h. the Founder's financial condition and business prospects are very good;
i. The Pension Fund has no contribution receivables and administration of contribution collection and payment is conducted very well; and

Rating Definition contribution payment is conducted very well.
Rating 2 The Pension Fund has adequate funding quality and sufficiency relative to its risk profile, accompanied by strong management according to the Pension Fund's characteristics, business scale, and business complexity. Pension Funds included in Rating 2 meet all or most of the following example characteristics:
a. The Pension Fund has an adequate funding level and is capable of anticipating almost all risks faced; b. there are errors in setting assets for funding but not significant;
c. the actuarial assumptions used are reasonably fair;
d. the quality of funding components is generally good, permanent, and able to absorb losses; e. The Pension Fund has good funding management and/or has a good funding sufficiency assessment process; f. has conditions: 100% ≤ RKD <120, 100% ≤ RS < 120%, and 100% ≤ Revenue to Operational Expenditure and Pension Benefit Payment Ratio <120%; g. The Pension Fund has good funding support from the Founder/Founding Partner; h. the Founder's financial condition and business prospects are good;
i. The Pension Fund has a ratio of contribution receivables to net assets <5%, Contribution Receivables equivalent to average due contributions between less than 3 months, and administration of contribution collection and payment is conducted well; and
contribution payment is conducted well.

Rating Definition
Rating 3 The Pension Fund has fairly adequate funding quality and sufficiency relative to its risk profile, accompanied by fairly strong funding management according to the Pension Fund's characteristics, business scale, and business complexity. Pension Funds included in Rating 3 meet all or most of the following example characteristics:
a. The Pension Fund has a fairly adequate funding level, and is fairly capable of anticipating risks faced; b. there are errors in setting assets for funding that are fairly significant;
c. the actuarial assumptions used are less fair;
d. the quality of funding components is generally fairly good, fairly permanent, and fairly able to absorb losses; e. The Pension Fund has fairly good funding management and/or has a fairly good funding sufficiency assessment process; f. has conditions: 75% ≤ RKD < 100%, 80% ≤ RS < 100%, and 90% ≤ Revenue to Operational Expenditure and Pension Benefit Payment Ratio <100%; g. The Pension Fund has fairly good funding support from the Founder/Founding Partner; h. the Founder's financial condition and business prospects are fairly good;
i. The Pension Fund has conditions: 5% ≤ Ratio of contribution receivables to net assets <10%, Contribution Receivables equivalent to average due contributions between 3 to 6 months, and administration of contribution collection and payment is conducted fairly well; and
contribution payment is conducted fairly well.

Rating Definition
Rating 4 The Pension Fund has less adequate funding quality and sufficiency relative to its risk profile, accompanied by weak funding management compared to the Pension Fund's characteristics, business scale, and business complexity. Pension Funds included in Rating 4 meet all or most of the following example characteristics:
a. The Pension Fund has less adequate funding levels and is less capable of anticipating all risks faced; b. there are significant errors in setting assets for funding;
c. the actuarial assumptions used are unfair;
d. the quality of funding components is generally less good, less permanent, and less able to absorb losses; e. The Pension Fund has less good funding management and/or has a less good funding sufficiency assessment process; f. has conditions: 50% ≤ RKD <75%, 60% ≤ RS <80% and 80% ≤ Revenue to Operational Expenditure and Pension Benefit Payment Ratio <90%; g. The Pension Fund has less good funding support from the Founder/Founding Partner; h. the Founder's financial condition and business prospects are less good;
i. The Pension Fund has conditions: 10% ≤ Ratio of contribution receivables to net assets above ≤ 15%, Contribution Receivables equivalent to average due contributions between 3 to 6 months, and administration of contribution collection and payment is conducted less well; and
contribution payment is conducted less well.

Rating Definition
Rating 5 The Pension Fund has inadequate funding quality and sufficiency relative to its risk profile, accompanied by very weak funding management compared to the Pension Fund's characteristics, business scale, and business complexity. Pension Funds included in Rating 5 meet all or most of the following example characteristics:
a. The Pension Fund has inadequate funding levels, so the Pension Fund must increase funding to anticipate all risks faced under normal conditions and during crisis conditions; b. there are very significant errors in setting assets for funding;
c. the actuarial assumptions used are very unfair;
d. the quality of funding instruments is generally not good, not permanent, and not able to absorb losses; e. The Pension Fund has not good funding management and/or has a not good funding sufficiency assessment process; f. has conditions: RKD <50%, RS <60% and Revenue to Operational Expenditure and Pension Benefit Payment Ratio <80%; g. The Pension Fund has not good funding support from the Founder/Founding Partner; h. the Founder's financial condition and business prospects are not good;
i. The Pension Fund has conditions: Ratio of contribution receivables to net assets > 15%, Contribution Receivables equivalent to average due contributions above 12 months, and administration of contribution collection and payment is conducted not well; and
contribution payment is conducted not well.

Table IV.C: Guidelines for Determining Funding Factor Ratings for DPPK PPIP
Rating Definition
Rating 1 The Pension Fund has very adequate funding quality and sufficiency relative to its risk profile, accompanied by very strong funding management according to the Pension Fund's characteristics, business scale, and business complexity. Pension Funds included in Rating 1 meet all or most of the following example characteristics:
a. The Pension Fund has a very adequate funding level, is very capable of anticipating all risks faced, and supports the Pension Fund's future business expansion; b. the quality of funding components is generally very good, permanent, and able to absorb losses;
c. The Pension Fund has very good funding management and/or has a very good funding sufficiency assessment process;
d. The Pension Fund has very good funding support from the Founder/Founding Partner. e. the Founder's financial condition and business prospects are very good; f. The Pension Fund has no contribution receivables and administration of contribution collection and payment is conducted very well; and g. The Pension Fund conducts collection of late payment penalties for contributions very well. Rating 2 The Pension Fund has adequate funding quality and sufficiency relative to its risk profile, accompanied by strong management according to the Pension Fund's characteristics, business scale, and business complexity. Pension Funds included in Rating 2 meet all or most of the following example characteristics:

Rating Definition a. The Pension Fund has an adequate funding level and is capable of anticipating almost all risks faced; b. the quality of funding components is generally good, permanent, and able to absorb losses;
c. The Pension Fund has good funding management and/or has a good funding sufficiency assessment process;
d. The Pension Fund has good funding support from the Founder/Founding Partner; e. the Founder's financial condition and business prospects are good; f. The Pension Fund has a ratio of contribution receivables to net assets <5%, Contribution Receivables equivalent to average due contributions less than 3 months, and administration of contribution collection and payment is conducted well; and g. The Pension Fund conducts collection of late payment penalties for contributions well. Rating 3 The Pension Fund has fairly adequate funding quality and sufficiency relative to its risk profile, accompanied by fairly strong funding management according to the Pension Fund's characteristics, business scale, and business complexity. Pension Funds included in Rating 3 meet all or most of the following example characteristics:
a. The Pension Fund has a fairly adequate funding level, and is fairly capable of anticipating risks faced; b. the quality of funding components is generally fairly good, fairly permanent, and fairly able to absorb losses;

Rating Definition
c. The Pension Fund has fairly good funding management and/or has a fairly good funding sufficiency assessment process;
d. The Pension Fund has fairly good funding support from the Founder/Founding Partner; e. the Founder's financial condition and business prospects are fairly good; f. The Pension Fund has conditions: 5% ≤ Ratio of contribution receivables to net assets <10%, Contribution Receivables equivalent to average due contributions between 3 to 6 months, and administration of contribution collection and payment is conducted fairly well; and g. The Pension Fund conducts collection of late payment penalties for contributions fairly well. Rating 4 The Pension Fund has less adequate funding quality and sufficiency relative to its risk profile, accompanied by weak funding management compared to the Pension Fund's characteristics, business scale, and business complexity. Pension Funds included in Rating 4 meet all or most of the following example characteristics:
a. The Pension Fund has less adequate funding levels and is less capable of anticipating all risks faced; b. the quality of funding components is generally less good, less permanent, and less able to absorb losses;
c. The Pension Fund has less good funding management and/or has a less good funding sufficiency assessment process;
d. The Pension Fund has less good funding support from the Founder/Founding Partner; e. the Founder's financial condition and business prospects are less good;

Rating Definition f. The Pension Fund has conditions: 10% ≤ Ratio of contribution receivables to net assets above <15%, Contribution Receivables equivalent to average due contributions between 3 to 6 months, and administration of contribution collection and payment is conducted less well; and g. The Pension Fund conducts collection of late payment penalties for contributions less well. Rating 5 The Pension Fund has inadequate funding quality and sufficiency relative to its risk profile, accompanied by very weak funding management compared to the Pension Fund's characteristics, business scale, and business complexity. Pension Funds included in Rating 5 meet all or most of the following example characteristics:
a. The Pension Fund has inadequate funding levels, so the Pension Fund must increase funding to anticipate all risks faced under normal conditions and during crisis conditions; b. the quality of funding instruments is generally not good, not permanent, and not able to absorb losses;
c. The Pension Fund has not good funding management and/or has a not good funding sufficiency assessment process;
d. The Pension Fund has not good funding support from the Founder/Founding Partner; e. the Founder's financial condition and business prospects are not good; f. The Pension Fund has conditions: Ratio of contribution receivables to net assets > 15%, Contribution Receivables equivalent to average due contributions above 12 months, and administration of contribution collection and payment is conducted not well; and

This copy is consistent with the original
Legal Director 1
Legal Department signed
Mufli Asmawidjaja
Rating Definition g. The Pension Fund conducts collection of late payment penalties for contributions not well.
Established in Jakarta on November 6, 2020
EXECUTIVE HEAD OF INSURANCE, PENSION FUND,
FINANCING INSTITUTION, AND
OTHER FINANCIAL SERVICE INSTITUTIONS SUPERVISOR FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA, signed RISWINANDI

APPENDIX V
FINANCIAL SERVICES AUTHITY CIRCULAR
REPUBLIC OF INDONESIA
NUMBER 22 /SEOJK.05/2020
CONCERNING
ASSESSMENT OF PENSION FUND HEALTH LEVELS

Guidelines for Determining Composite Health Rating Levels of Pension Funds Rating Explanation PK-1 Reflects the condition of a Pension Fund that is generally very healthy, so it is assessed as very capable of facing significant negative influences from changes in business conditions and other external factors, as reflected in the factor assessment ratings, including the application of good corporate governance for the Pension Fund, risk profile, profitability, and funding which are generally very good. In case of weaknesses, generally these weaknesses are not significant. PK-2 Reflects the condition of a Pension Fund that is generally healthy, so it is assessed as capable of facing significant negative influences from changes in business conditions and other external factors, as reflected in the factor assessment ratings, including the application of good corporate governance for the Pension Fund, risk profile, profitability, and funding which are generally good. In case of weaknesses, generally these weaknesses are less significant. PK-3 Reflects the condition of a Pension Fund that is generally fairly healthy, so it is assessed as fairly capable of facing significant negative influences from changes in business conditions and other external factors, as reflected in the factor assessment ratings, including the application of good corporate governance for the Pension Fund, risk profile, profitability, and funding which are generally fairly good. In case of weaknesses, generally these weaknesses are fairly significant and if not successfully addressed well by management, it can disrupt the continuity of the Pension Fund's business. PK-4 Reflects the condition of a Pension Fund that is generally less healthy, so it is assessed as less capable of facing significant negative influences from changes in business conditions and other external factors, as reflected in the factor assessment ratings, including the application of good corporate governance for the Pension Fund, risk profile, profitability, and funding which are generally less good. There are weaknesses that are generally significant and cannot be addressed well by management and disrupt the continuity of the Pension Fund's business. PK-5 Reflects the condition of a Pension Fund that is generally not healthy, so it is assessed as unable to face significant negative influences from changes in business conditions and other external factors, as reflected in the factor assessment ratings, including the application of good corporate governance for the Pension Fund, risk profile, profitability, and funding which are generally not good. There are weaknesses that are generally very significant. For DPPK, to

This copy is consistent with the original
Legal Director 1
Legal Department signed
Mufli Asmawidjaja
Rating Explanation overcome these weaknesses, funding support from the founder is required to strengthen the DPPK's financial condition.
*) Applicable for individual and consolidated Pension Fund Health Level assessments.
Established in Jakarta on November 6, 2020
EXECUTIVE HEAD OF INSURANCE, PENSION FUND,
FINANCING INSTITUTION, AND
OTHER FINANCIAL SERVICE INSTITUTIONS SUPERVISOR FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA, signed RISWINANDI

APPENDIX VI
FINANCIAL SERVICES AUTHITY CIRCULAR
REPUBLIC OF INDONESIA
NUMBER 22 /SEOJK.05/2020
CONCERNING
ASSESSMENT OF PENSION FUND HEALTH LEVELS

FORMAT OF REPORT AND WORKING PAPERS
ASSESSMENT OF PENSION FUND HEALTH LEVEL
Pension Fund Name : .................................................
Report submission letter number : .................................................
Date of report submission letter : .................................................
Person responsible for the report:
Name : .................................................
Position : .................................................
Telephone : .................................................
Electronic mail (e-mail) : .................................................

A. Report on Pension Fund Health Level Assessment Results No. Assessment Factor Rating Individual Consolidated*) 1 Good corporate governance for Pension Funds 2 Risk Profile 3 Profitability 4 Funding ) Pension Fund Health Level Rating *) In the event that the Pension Fund has a Subsidiary Company that is consolidated ) The assessment of the Funding factor is only conducted by the DPPK

Analysis
The analysis regarding the overall condition of the Pension Fund is reflected in the four assessment factors of the Pension Fund Health Level as follows:

analysis of the implementation of good corporate governance for Pension Funds;
risk profile analysis covering inherent risk, quality of risk management implementation, and the level of risk for each risk as well as the Risk Rating;
profitability analysis; and
funding analysis.

In the event that the Pension Fund has a Subsidiary Company that is consolidated, the Pension Fund takes into account:
a. the significance or materiality of the Subsidiary Company's share in the Pension Fund on a consolidated basis; and b. Subsidiary Company issues regarding good corporate governance for the Pension Fund, risk profile, profitability, and funding that have a significant influence on the Pension Fund on a consolidated basis.

Date : Date :
Prepared by: Approved by:

B. Assessment of the Good Corporate Governance Factor for Pension Funds Rating of Good Corporate Governance for Pension Funds Individual Consolidated

Analysis
Description regarding the conclusion on the performance of good corporate governance for the Pension Fund, considering the assessment factors of Good Corporate Governance for Pension Funds comprehensively and structurally, covering both structure (structure), process (process), and outcome (result) of Good Corporate Governance for Pension Funds.

In the event that the Pension Fund has a Subsidiary Company that is consolidated, the Pension Fund takes into account:
a. the significance or materiality of the Subsidiary Company's share in the Pension Fund on a consolidated basis; and b. Subsidiary Company issues regarding Good Corporate Governance for Pension Funds, risk profile, profitability, and funding that have a significant influence on the Pension Fund on a consolidated basis.

C. Assessment of the Risk Profile Factor for Pension Funds and Pension Funds
That Conduct Part of Their Business with Sharia Principles C.1 Assessment of the Risk Profile Factor for Pension Funds Risk Profile Individual Consolidated Rating Inherent Risk Rating Quality of Risk Management Implementation Rating Risk Level Rating Inherent Risk Rating Quality of Risk Management Implementation Rating Risk Level Risk Strategic Risk Operational Credit Risk Market Risk Liquidity Risk Legal Risk Compliance Risk Reputation Risk Composite Rating Risk Profile Rating Risk Profile Rating

Analysis
Description regarding the conclusion on the overall risk profile of the Pension Fund includes the assessment of inherent risk and the quality of Risk Management implementation, with analysis focus on significant risk exposures in the Pension Fund. In the event that the Pension Fund has a Subsidiary Company that is consolidated, the Pension Fund takes into account:
a. the significance or materiality of the Subsidiary Company's share in the Pension Fund on a consolidated basis; and b. Subsidiary Company issues regarding good corporate governance for the Pension Fund, risk profile, profitability, and funding that have a significant influence on the Pension Fund on a consolidated basis.

C.2 Assessment of the Risk Profile Factor for Pension Funds That Conduct Part of Their Business with Sharia Principles Risk Profile Pension Funds That Conduct Part of Their Business with Sharia Principles Inherent Risk Rating Quality of Risk Management Implementation Rating Risk Level Rating Strategic Risk Operational Risk Credit Risk Market Risk Liquidity Risk Legal Risk Compliance Risk Reputation Risk Composite Rating Risk Profile Rating

Description regarding the conclusion on the overall risk profile of the Pension Fund that conducts part of its business with Sharia principles includes the assessment of inherent risk and the quality of Risk Management implementation, with analysis focus on significant risk exposures in the Pension Fund that conducts part of its business with Sharia principles.

D. Assessment of the Profitability Factor
Profitability Rating Individual Consolidated

Analysis
Final conclusion regarding the profitability performance of the Pension Fund, considering the profitability assessment factors. In the event that the Pension Fund has a Subsidiary Company that is consolidated, the Pension Fund calculates the impact of the Subsidiary Company's profitability performance on the overall profitability of the Pension Fund, considering the significance and materiality of the Subsidiary Company.

This copy is consistent with the original
Director of Law 1
Legal Department signed
Mufli Asmawidjaja

E. Assessment of the Funding Factor
Funding Rating Individual Consolidated

Analysis
Final conclusion regarding the funding performance of the Employer Pension Fund, considering the funding assessment factors. In the event that the Employer Pension Fund has a Subsidiary Company that is consolidated, the Employer Pension Fund calculates the impact of the Subsidiary Company's capital performance on the overall funding of the Employer Pension Fund, considering the significance and materiality of the Subsidiary Company.

Established in Jakarta on 6 November 2020
EXECUTIVE HEAD OF THE INSURANCE,
PENSION FUND,
LENDING INSTITUTION, AND
OTHER FINANCIAL SERVICE INSTITUTIONS SUPERVISOR FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA, signed RISWINANDI

Circular Letter of the Financial Services Authority Number 22/SEOJK.05/2020 Concerning Pension Fund Health Assessment

Definition Rating

Definition Rating

Rating 5

Definition Rating

Table II.G.1: Parameters or Indicators for Assessing Inherent Compliance Risk

Table II.G.2: Guidelines for Determining the Level of Inherent Compliance Risk

Rating 1

Rating 2

Rating 3

Rating 4

Rating 5

Table II.G.3: Guidelines for Determining the Quality of Risk Management Implementation for Compliance Risk

Rating 1

Rating 2

Rating 3

Rating 4

Lineage: Superseded

Timeline