There are many risks posed to organisations by their pension arrangements, particularly defined benefit schemes, and it is important that these risks are managed in the same way as other business risks are managed. The difference with pension schemes is that the amounts involved often exceed the value of the organisation and, due to legislation and other regulation, particularly with defined benefit schemes, the company may be at serious risk without being aware of it.
The first step to managing your pensions’ risk is to ensure that the company has its own independent actuary advising it, who can provide a clear objective assessment of the company’s pensions exposure and the risk that it poses. The major risk is financial for most companies, but in addition there are risks associated with governance, trusteeship, data and reputational risk if anything goes wrong.
It is important for the company to understand the risk it faces and to have a plan in place to monitor or to deal with the risk in an appropriate timeframe. It is much easier to deal with something that you understand in a planned way than when it becomes critical.