Risk management Key Function Holder services

LCP have four recognised pension experts acting as risk management key function holders to Irish pension schemes. We are appointed as risk manager to over 80 schemes, with over €8 billion of assets.

As the appointed risk KFH for defined benefit, defined contribution and master trust schemes, we have developed a holistic approach to the Risk Management Framework, embedding a risk culture aligned to the trustee boards and schemes that we work with. Our aim is to make a tangible difference to managing risk, acknowledging that no one size fits all.

There are four key distinct components to our risk management framework: the risk management policy, the risk register, regular risk monitoring and the own risk assessment process.

Risk Management policy

The Risk Management policy sets out the roles and responsibilities in managing risk. It establishes the risk management principles, provides an overview of risk identification, analysis, evaluation, monitoring and reporting for the scheme. We work with trustees to ensure that their scheme is taking on the correct balance of risks and that all key risks are identified, monitored and managed.

Maintaining a risk register

Based on practical experiences, we have developed a risk register and, by collaborating with trustees, we created a dynamic approach that allows the trustees to monitor, take control and act on areas of increased risk. Risk is assessed in a consistent and transparent manner, focusing on severity and likelihood with the inherent risk severity and likelihood mitigated to an acceptable residual level through well-defined controls. It is an intuitive, iterative process and the outcome from the risk register can help trustees make better-informed risk management decisions. Trustee response to this tool in the risk management framework has been beneficial, enabling us to fine-tune the risk register over time.

Risk monitoring and regular reporting

A key element of a well-functioning risk management framework is an effective risk monitoring and reporting structure. The risk KFH reports directly to the trustees. Our risk KFHs assist the trustees by attending trustee meetings and advising on matters relating to risk management. They monitor ongoing management of identified risks and provide the trustees with appropriate updates.

Own Risk Assessment

IORP II has imposed a requirement for the completion of a comprehensive Own Risk Assessment (ORA) at least once every three years. This assessment needs to include a review of the effectiveness of the risk management system and detailed qualitative and quantitative assessment of risks. LCP’s ORA process was developed with collaboration and input from the Risk, Governance, Actuarial and Investment Teams in LCP Ireland and leveraging expertise from our LCP UK colleagues. Following the completion of the ORA, we continue to work with trustees to progress an action plan with clear responsibilities and deliverables, ensuring the findings from the ORA are integrated into the management and into the decision-making processes of the scheme.