The concept of IRM was introduced by the Pensions Regulator primarily to provide guidance to Trustees as to how they could more effectively manage the risks associated with ensuring adequate funding levels for their pension arrangements.
The Pensions Regulator has identified three activities which impact most on a defined benefit pension arrangement’s funding position i.e. the Employer Covenant, funding assumptions and investment strategy and has asked Trustees to consider in more detail the potential co-dependencies between each of these risks.
We recognise that understanding the co-dependencies between the three key risk areas is important but we are concerned that little additional work is taking place focusing on the other risk areas we describe above.
We support Trustees in reviewing their risk management programmes in the context of IRM and, in fact, encourage clients to apply the principles underpinning IRM to all risks not just the key financial risks identified by the Pensions Regulator.