A balanced and integrated approach to risk management
01 Mar 2019
Our client, a consumer goods company with a £4bn scheme, was under pressure from its scheme trustees to increase contributions and move quickly to a minimal risk basis. In 3 stages, we helped them implement a genuinely integrated approach to risk management which balanced the interests of all stakeholders.
Stage one: we aligned the scheme risks to the covenant.
Stage two: created time-based triggers for de-risking.
Stage three: we set contingency plans for additional contribution payments.
Through this approach, the scheme and sponsor benefit from:
- No increase in contributions;
- An immediate reduction in investment risk;
- A moderate-risk target in the same timeframe as the trustees wanted to reach a minimal-risk target;
- An agreed path for future de-risking with “intended” and “minimum” levels of de-risking; and
- Contingency plans that specified when additional contributions could be triggered – based on both funding and covenant indicators.
The outcome balanced the interests of all the stakeholders involved, and proved the advantages of setting an appropriate target, and integrating the three dimensions of funding, investment and covenant.
Download our full case study here which outlines each stage in more depth.