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Integrated Risk Management

The Pensions Regulator states “IRM (Integrated Risk Management) is an important tool for managing the risks associated with scheme funding”. In general, employer covenant, funding and investment decisions interact so that a material change to one can affect the other two.

A proper understanding of the risks a scheme is exposed to and the correlation between them is crucial in formulating a robust plan for funding and investment.

IRM is deeply embedded in our approach to covenant, and we help trustees to understand how the employer covenant underpins investment and funding risks, as well as the correlation of the employer covenant to those risks (e.g. changes in economic circumstances may damage the employer covenant and scheme funding at the same time or vice versa).

We have extensive experience in providing practical advice, considering how different economic scenarios might impact employers, how changes to one element of risk might be counterbalanced elsewhere, and what an appropriate overall risk budget might be.

In addition, we have developed PensionSim, a bespoke simulation that allows trustees and sponsors to experience real life scenarios and their impact on a pension scheme and its sponsor in a safe environment. It is a dynamic, integrated risk management training system that enables a deeper understanding of IRM and how to make holistic integrated decisions that take into account the wide range of factors involved in managing a pension scheme.

Key contact

Michael Bushnell Michael Bushnell
Managing Director
T: +44 (0)20 3889 6316

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    Plotting a stable route using a variety of tools and resources

    Journey Planning

    Few people get in a car without knowing where to go or a rough idea of how to get there. Yet pension schemes are often managed without a clearly expressed end-game target, or a plan of how to reach it. Like a map or GPS unit, journey planning provides you with much-needed guidance to help your scheme achieve its objectives.

    Below we set out what resources are available to help you plot a stable and achievable route, taking into account The Pensions Regulator’s 2019 Annual Funding Statement and integrated risk management (“IRM”) guidance.

    Reassessing how contributions and investment returns are balanced


    Valuations are important pit-stops along your pension scheme’s journey, giving you a chance to check you have enough gas left in your tank to easily reach your destination. For your pension scheme this means balancing the risk capacity and affordability of your sponsor with your scheme’s investment strategy and funding needs — making sure your journey stays on track.

    In keeping with current TPR guidance, here, we set out a risk-centric approach to a funding valuation – it’s a natural evolution of the traditional funding-focused approach.

    Keeping your journey on track by monitoring what matters


    While on the road you should be keeping a close eye on your car’s dashboard and GPS unit, making sure your engine runs smoothly and you remain on course. Similarly, between valuations, balanced and timely covenant, investment, and funding-level monitoring is crucial to spot any issues early and respond quickly. This will also help you avoid any surprises at the next valuation.

    Prepare for and respond to the unexpected; get back on track quickly

    Unexpected Events

    What do you do if the road is blocked and you have to take a diversion – or worse, your tyre explodes on the motorway? Unforeseen events can derail any journey. Pension schemes need to be prepared for a wide variety of events, ranging from corporate transactions that impact their sponsor’s risk capacity or affordability profile to market shocks that affect a scheme’s funding level. Effective governance, truly diverse investments, and good contingency plans will help you remain focused on protecting members’ benefits, even when the unexpected happens.