Public pension systems face a number of risks in undertaking necessary investment activities. Some risks, such as normal market volatility, are generally unavoidable. Some risks, such as investing in emerging markets, are knowingly assumed and are necessary to implement certain investment policies. Other risks, such as legal exposure to some forms of liability, are unnecessary and avoidable.

Controlling or eliminating these risks has become a topic of great interest as well-publicized errors by investment funds have captured public and professional attention. In response, a number of organizations have discussed or promulgated risk principles, guidelines, standards, and other directives for various professional organizations. Very few, however, have been specifically oriented to the public pension system community or have approached the problem from the perspective of the basic disciplines and purposes of public pension systems.

In response to this need, a group of public pension system chief investment officers (CIOs) asked the Association of Public Pension Fund Auditors (APPFA) to consider participating in a joint project with them to develop a risk document specifically with the intent of identifying common risks faced by public pension systems and the practices being utilized to address those risks. As a result, the "Statement of Key Investment Risks and Common Practices to Address Those Risks" was created and endorsed by several professionals in the public fund arena. This document is used as the basis for managing investment risk at MOSERS.