Integrated risk management (IRM) helps scheme trustees to assess, prioritise and manage the employer covenant, investment and funding risks. It enables them to engage with the sponsoring employer to develop a common understanding of the relationships between these risks in order to maintain a balance of risk which is sustainable for both the scheme and employer.
The new regulatory guidance on integrated risk management is not prescriptive. It provides practical help on what a proportionate and integrated approach to risk management might look like and how trustees can use it as part of their plans for meeting their scheme’s funding objectives.
Andrew Warwick-Thompson, Executive Director, Regulatory Policy, at The Pensions Regulator, said: "IRM is about more than merely understanding risks. It concerns managing them. Our guidance sets out how trustees and employers should be thinking about risks materialising and how to manage their possible impact. It should be seen as a valuable tool for both employers and trustees to agree a sustainable plan for the delivery of promised member benefits.
"Last month we published research on the skills and competencies of trustees and we have started an open debate with industry about what a 21st Century trustee should look like.
"Our role is to provide trustees, who are operating in a challenging economic environment, with practical and accessible information.
Our IRM guidance is another example of our commitment to helping trustees to improve their knowledge and understanding. Trustees have told us that this is an area in which they would particularly value further specific guidance and we have responded."
A commitment to IRM can result in the following benefits:
• Better decision making resulting from greater trustee and employer understanding of risks.
• Better working relationships between trustees and employers because of open and constructive dialogue.
• More effective risk assessment, contingency planning and monitoring arrangements resulting from an evidence-based focus on the most important risks.
• Greater efficiency due to more effective use of trustee, employer and adviser resources.
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