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Key points

  • Your approach to managing risks should depend on the circumstances of the scheme and your objectives as the employer.
  • Managing scheme funding risks effectively can have a number of benefits.
  • Work closely with your scheme trustees.

What is integrated risk management?

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Integrated risk management (IRM) is an approach that can help you and the trustees to identify, manage and monitor the main risks to meeting your scheme’s funding objectives. The outputs should inform your discussions with the trustees and help you decide the strategy for the scheme and your growth plans.

IRM examines how employer covenant, investment and funding risks relate to and are affected by each other. It also considers what to do if risks materialise.

IRM involves:

  • identifying risks
  • managing risks and developing contingency plans
  • documenting the process and the decisions you take
  • ongoing monitoring of the risks

Benefits of integrated risk management

It's essential that you know about the risks within the scheme investment and funding strategies and IRM helps with this. It enables you to predict and, where appropriate, quantify that risk so you understand the potential impact on your own growth plans.

IRM should inform your appetite for taking risk. It should help you to plan in advance to better control volatility to your scheme contributions while there is still time to do so. It also helps you keep up to date with the scheme's financial position so that your own investors are better protected from unpleasant surprises.

Your role in integrated risk management

You should work closely with your scheme trustees to identify, manage and monitor risks as part of IRM.

It’s essential that you understand the potential impact of the risks identified, eg the effect on your business plans if you need to pay more scheme contributions. This will enable you to evaluate that impact and compare it to the level of risk you’re able and willing to accept.

You can then work with the trustees on suitable risk management plans if you need to improve the current position of the scheme. You should also help the trustees to develop contingency plans to deal with significant risks as they emerge in the future.

IRM guide and checklist

Our IRM quick guide and checklist, aimed at trustees of smaller schemes who may have limited resources, highlight how a scheme could benefit from integrated risk management and how to get started. These resources should be used alongside the full IRM guidance.