Expert panel: Is risk management the new frontier in pension governance?
The importance of risk management isn’t new for the majority of defined benefit pension plan sponsors and administrators.
The impact of long-term interest rates, market volatility, changing demographics and increasing longevity, inflation concerns, geopolitical events and other large economic, environmental and social factors are all contributing to the need to manage the financial risks associated with sponsoring and managing a pension plan.
Pension regulators have increased their focus on risk management as a way to address investment risk and promote plan members’ benefit security. Simply put, in an increasingly complex environment, pension regulators are now attempting to address pension plan risk management in a more focused and coordinated way.
One early signal — in February 2022 — was when the Canadian Association of Pension Supervisory Authorities established a new committee with a mandate to develop a risk management guideline. The CAPSA said it was establishing the committee “to be responsive to the International Monetary Fund’s call to regulators to strengthen their oversight of large pension plans and gain a greater understanding of vulnerabilities in the system.”