Integrated Risk Management: What does it mean for pension schemes?

Integrated Risk Management (IRM) brings together covenant, funding and investment risks, and assesses how these components interact with each other.

10/06/2019
Hamburg
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Authors

Rosalind Scott-Douglas
Fiduciary Manager

–Integrated Risk Management (IRM) brings together covenant, funding and investment risks, and assesses how these components interact with each other

–Implementing an IRM framework allows better risk identification, increased collaboration among stakeholders and enhanced transparency and accountability

–Trustees and sponsors have an important role in the design and theimplementation of the IRM framework.

What is IRM?

IRM is a risk management tool that helps pension scheme trustees and sponsors to identify, quantify and manage the factors that affect the prospects of meeting their funding objectives. Instead of considering risks in isolation, an IRM framework encourages stakeholders to assess the interdependencies of the risks. While trustees have considerable flexibility in developing their own IRM framework, they are responsible for ensuring their scheme’s IRM approach is appropriate and effective. The figure below shows the three key risks to consider:

 

FM_IRM_short_img1

 

Why is IRM important?

The aim for an effective IRM framework is to deliver improved funding outcomes for pension schemes. While setting up an IRM framework requires an initial commitment of time and resources, there are material benefits in the long term:

FM_IRM_short_img2

Read full reportIntegrated-Risk-Management-What-Does-It-Mean-For-Pension-Schemes-June-2019
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Authors

Rosalind Scott-Douglas
Fiduciary Manager
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