Many webpages of space could be spent analyzing the risks listed before, either together or individually, but it is evident that a thoughtful plan to manage them is critical for the effective management of a pension plan. It takes considerable planning, forecasting, and measurement to respond quickly and appropriately to risk, and in those areas where a quick response is not an option (illiquid assets for example) a strategy must be in place to ensure risks are balanced out elsewhere.
Every year, LAPP Corporation will complete an Environmental Risk Assessment to scope out all possible risks, whether expected or not, and share that with its Corporate Board. That means looking at economic and market trends, changes in the pension industry, growth or lack of growth in the public sector, workplace trends, changing demographics, and political risks including changes in government at home and elsewhere. This scan will then form the basis of a discussion on risk appetite so both the Corporate Board and the Sponsor Board can make decisions on how best to fund the Plan and keep it sustainable over time.