In the brave new world of the revised TPR Code 3 funding defined benefits the phrase ‘Integrated Risk Management’ appears. Furthermore, our friends in Brighton go on to explain to Trustees that ‘Accepting appropriate risk can significantly help to minimise any adverse impact on the employer’s sustainable growth which in turn helps the trustees to meet their key funding objective to pay promised benefits.’ Or to put it another way, not all risk is bad and actually can be good.
The tricky bit is how do Trustees go about understanding, and as importantly, applying this?
A cunning plan
At the risk of repeating ourselves, there is no one size fits all solution. That said, in our experience we have seen a six point plan operate:
- Set your objectives – see our ‘if you don’t know where you are going‘ August 2014 newsletter. Trustees need to have a journey plan. What are the Trustees and the sponsor looking to do in the long term, self-sufficiency, buy-out or something else?
- Agree the Scheme funding and investment strategy – engage with the scheme sponsor
- Know the risks in your portfolio, what the potential consequences of these are, and as importantly, why you are content to run with them
- Understand the Trustees appetite for risk, or how much risk are you prepared to accept in pursuing your financial and strategic objectives. This requires that you have discussed (consulted in the legal speak) with the sponsor.
- Plan for the unexpected, the known and the unknown, in putting together a contingency plan (it’s a lot easier to do this before stuff has hit the fan). See our May 2015 newsletter for more on this
- Finally adopt a framework to monitor steps 1-5 in order to make the best use of trustee meeting time. That way making sure that you spend your most precious resource, time, wisely
We don’t say all of this is easy – it’s not. What we do say is that Trustees should have a similar template by which to develop and monitor a strategic plan. In an age of ever increasing expectation on Trustee Boards, doing this stuff on the hoof is no longer (if it ever was) a viable option.
To find out more about how we work on trustees boards to bring both experience and equally importantly, a practical approach to trusteeship which we bring click here for more information.