At the time of writing of this annual report in March 2020, PGGM faced one of the biggest challenges in its existence: the outbreak of the coronavirus pandemic. Although we are well-prepared for the various scenarios relating to potential disruptions of the normal course of business, it became clear to us at an early stage, well before the WHO announced the pandemic, that we would need to take radical measures.
The pandemic will certainly have major consequences for the economy as well as for the public and for social life. In particular, a difficult period has begun for the health care and welfare sector, with which we feel such a close connection. The utmost will be demanded of countless health care professionals for whom we administer pensions.
There was already an immediate major impact on the assets of our clients and the coverage of the pension funds was put under pressure. We are doing everything possible to support them with this and to assure the continuity of PGGM and our service provision. We also complied with the government’s call to facilitate work from home wherever possible and the necessary IT and other support was quickly arranged. Only a few employees remain at the office for critical processes that can only be performed there. Within a very short space of time, working from home reached a level not previously seen at PGGM and the organisation is preparing to continue to serve the interests of clients and their millions of participants in a time of unprecedented dynamism and uncertainty. Without knowing how long this crisis will last or how deep its effect will be, our organisation is showing determination to address it.
For the time being, we are not seeing concrete major financial consequences of the coronavirus crisis for PGGM’s business operations. It is conceivable that arrears will arise in the work flow if the coronavirus measures last for a longer period. These will then have to be caught up at a later time, at higher costs. The increase in working from home has also given rise to an increased risk of operational errors. These could possibly also have significant negative financial consequences. In order to minimise the risk of operational errors, the PGGM office remains open with limited staffing. There is also increased attention to continued application of the necessary operational control mechanisms.
It can also be reported that the work for our clients (pension funds) continues in full and contacts have been intensified. Customer demand, and consequently the jobs, are therefore assured. Our clients are also sufficiently solvent, so that no payment risk arises. In addition, we are maintaining close contacts with our suppliers to ensure the continuity of their services to us for after the end of the coronavirus measures.
The causes for the optimism at the end of last year are, for the rest, still there: a truce in the trade war between China and the US and improved financial conditions thanks to the turnaround to a more relaxed monetary policy in many developed and emerging economies. The contraction in production in industry has also caused significantly lower inventories, which is normally positive for the industrial growth outlook.
Politically, during the second half of the year, the risk of a hard Brexit and the US presidential elections could cause an increase in volatility.