and at home. We remain fundamentally committed to supporting efforts to mitigate the impact of COVID-19 on the most vulnerable members of our society through the work of the PPS Foundation. Weak economic environment Defining the issue: The pandemic has exacerbated what was an alreadyconstrained economic environment in South Africa. Growth slipped into negative territory in 2020 and started to recover somewhat in 2021. It is expected to still take the local economy some time to recover to pre-pandemic levels. This naturally makes it more difficult for PPS to sign up new members, puts pressure on lapse rates, impacts on costs and has the potential to have a negative influence on profitability. Existing members may also choose to reduce their premiums or forego certain products when they find their personal budgets coming under strain. PPS’s response: Our culture at PPS is to look for opportunities when the environment is challenging. The past year proved that we can indeed be successful in a weak environment, achieving record inflows. We take a long-term view of wealth creation and focus on delivering lifetime value for our members. A range of asset managers, asset classes and types are used to diversify investment risk, and our portfolios are positioned appropriately according to market conditions. This approach yields the best results in the medium to long term, mitigating the negative effects of short-term conditions. Normal economic cycles and key events are considered when developing investment strategies to either maximise or mitigate their effect. As far as lapse rates are concerned, retention initiatives are implemented by management on an ongoing basis to mitigate controllable lapses. Costs are also stringently managed. Cybersecurity Defining the issue: Cyber security and the risk of our systems being compromised in any way – either through an external attack or through system failure – is one of the most pressing material matters for the business. This is especially of relevance following an incident that impacted functionality in March 2021. But, we are not alone; across the world businesses and governments face bigger cyber risks and continue to be impacted by cyber events. The move to remote working has made systems more vulnerable than they were before the pandemic and there was a 50% increase in the number of cyberattacks globally in 2021 (source: Check Point Research). During the year, financial institutions around the world experienced an average of 703 attacks a week, most of which were successfully counteracted due to stringent system security. PPS’s response: We constantly review our information management strategy. We manage development centrally and invest substantially in best-of-breed technological solutions. We do this to secure and grow our business and to ensure that we can consistently improve our total member experience. As part of our comprehensive cyber risk management process, we cooperate with worldwide providers and, through a third-party provider, obtain alerts about known and evolving risks. Automated responses to attacks also minimise their impact and give our system an important additional level of security. Protecting our member data remains the top priority and the Board has recently approved further measures to improve an already advanced security posture to minimise the possible impact of cyberattacks. Sustaining stakeholder value Defining the issue: PPS’s purpose is to create sustainable financial and lifestyle value for members and their families during their working lives and beyond. The principles of mutuality are key considerations in determining our risk appetite as a Group. These principles include endeavouring to ensure inter-generational fairness and include operating the business for the benefit of all members without favouring any specific group of members over another. PPS’s response: To fulfil this objective, we consistently improve on and expand our range of products and services which are designed to meet members’ changing needs throughout their lives. Highly qualified and experienced PPS financial advisers not only assist in developing unique financial solutions for each member but help to minimise the time that busy professionals need to spend on financial planning. We also strive to add value through system, product and service innovation, as well as through our specialist advisory units. PPS Integrated Report 2021 Material matters and risk management | 78
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