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ERM for Pension Funds – References and other material

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This paper explores the application of ERM-style techniques to occupational pension schemes (known as IORPs in the EU). Its abstract is set out below.

 

Presentations linked to this paper given to the Groupe Consultatif and to the Institute and Faculty of Actuaries are available here and here. A Japanese translation of the paper is available here. References contained in the paper are set out below.

 

Abstract

 

This paper explores the application of ERM-style techniques to pension funds. It uses the term ‘entity-wide risk management’ rather than ‘enterprise risk management’, even though both have the same acronym (‘ERM’), because many pension funds do not view themselves as business ‘enterprises’ as such. Some of the techniques that business enterprises have for managing risk (e.g. raising new capital from shareholders or branching into new business areas if existing ones have unattractive risk-reward characteristics) may not be open to many pension funds. The paper argues that the holistic approach to risk management (and governance) that is a hallmark of ERM is as appropriate to pension funds as it is to any other type of entity. This is the case whether the fund is defined benefit or defined contribution in nature, or a hybrid. It is also the case whether the ‘entity’ is deemed to be the fund itself, the sponsor or the two combined. Indeed, there are aspects of pension arrangements, such as the relationship between the fund and its sponsor, that lend added impetus to the use of ERM-style techniques in practical pension fund management.

 

Author(s)

Title

Ambachtsheer, K.P. (2007)

Pension Revolution: A Solution to the Pensions Crises

Bank of England (2009)

Recovery and Resolution Plans - Remarks by Andrew Bailey

BAS (2009a)

Technical Actuarial Standard D: Data

BAS (2009b)

Technical Actuarial Standard M: Modelling

BAS (2010)

Technical Actuarial Standard R: Reporting Actuarial Information

Byrne, P., Mitchell, R., O’Sullivan, D. and Sykes, I. (2009)

Pension risk: Risk management for pension schemes

CEIOPS (2009a)

CEIOPS Advice for Implementing Measures on Solvency II: Supervisory Reporting and Public Disclosure Requirements

CEIOPS (2009b)

CEIOPS Advice for Implementing Measures on Solvency II: System of Governance

CEIOPS (2010)

CEIOPS response to European Commission Green Paper – “Towards adequate, sustainable and safe European pension systems”

Chapman, R.J. (2006)

Simple tools and techniques for enterprise risk management

Chapman, R.J., Gordon, T.J. and Speed, C.A. (2001)

Pensions, Funding and Risk

Clark, G. and Urwin, R. (2007)

Best-Practice Investment Management: Lessons for Asset Owners

Deighton, S.P., Dix, R.C., Graham, J.R. and Skinner, J.M.E. (2009)

Governance and Risk Management in United Kingdom Insurance Companies

EC (2010)

Towards adequate, sustainable and safe European pension systems

EIU (2009)

Beyond box-ticking: A new era for risk governance

FSA (2009)

Discussion Paper 09/4: Turner Review Conference Discussion Paper. A regulatory response to the global banking crisis: systemically important banks and assessing the cumulative impact

FSA (2010)

Consultation Paper 10/03: Effective corporate governance (Significant influence controlled functions and the Walker review)

Groupe Consultatif (2010)

Security in occupational pensions

Hatchett, J., Bowie, D. and Forrester, N. (2010)

Risk management for DB pension funds

Hitchcox, A.N., Klumpes, P. J. M., McGaughey, K. W., Smith, A. D. and Taverner, N. H. (2010)

ERM for Insurance Companies - Adding the Investor’s Point of View

HM Treasury (2009)

A review of corporate governance in UK banks and other financial industry entities - Final Recommendations

IAA (2009)

Note on Enterprise Risk Management for Capital and Solvency Purposes in the Insurance Industry

IASB (2010)

Defined benefit plans: Proposed amendments to IAS 19, Exposure Draft/2010/3

ICAEW (2002)

No surprises: working for better risk reporting

ICAEW (2005a)

Risk management: Risk Management among SMEs

ICAEW (2005b)

Risk management: A guide for finance professionals

IFRS (2010)

Management Commentary: A framework for presentation

Kelliher, P.O.J., Wilmot, D., Vij, J. and Klumpes, P.J.M. (2011)

Discussion Paper: A Common Risk Classification System for the Actuarial Profession

Kemp, M.H.D. (2005)

Risk Management in a Fair Valuation World

Kemp, M.H.D. (2009)

Market consistency: Model calibration in imperfect markets

Kemp, M.H.D. (2010)

Extreme Events. Robust Portfolio Construction in the Presence of Fat Tails

Kemp, M.H.D. (2010a)

Liquidity Risk - Its Relevance to Actuaries

Kemp, M.H.D. (2011)

Entity-wide risk management for pension funds

Kenyon, C. (2010)

Post-shock short-rate pricing

Knight, F. H. (1921)

Risk, Uncertainty and Profit

Kocken, T.P. (2006)

Curious Contracts: Pension Fund Redesign for the Future

Lam, J. (2003)

Enterprise Risk Management

Lewin, C. (2010)

The New ERM Guide

O’Brien, C., Woods, M. and Billings, M. (2010)

Pension risk disclosures by FTSE100 companies

OECD/IOPS (2011)

Good practices for pension funds’ risk management systems

Orros, G.C. and Smith, J. (2010)

ERM for health insurance from an actuarial perspective

Reinhart, C.M. and Rogoff, K.S. (2009)

This Time is Different: Eight Centuries of Financial Folly

Scott, P. (2010)

Making money safely: A personal view of risk management in non-financial corporates, insurance and banking

 


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