Whilst they may not have attracted as much news attention as their sponsors, pension funds have also had to confront the impact of the crisis on both their funding levels and how they face into the future. Here's a non-exhaustive list of issues that require reflecting upon:
- How have recent events impacted upon the strength of plan sponsors and how might this be expected to evolve over the coming months? Such considerations are too important to await the results of your next triannual fund valuation.
- Are we asking ourselves whether the current assumptions underlying long term strategy are still valid? Are the business procedures that funds are working to still relevant, such as established asset rebalancing processes for example?
- If you are a pension fund, has the experience of the crisis thus far indicated anythhing about your organisational resource levels that you are concerned about? It could be argued that the industry has for too long been pressurised to seek cost minimisation as if it were the Holy Grail. Perhaps it is time to pay more attention to the need to maximise organisational effectiveness, signalling additional resources are required.
- Is pension fund organisational culture sufficiently robust to manage with a military mindset? After all we are at war with an invisible enemy, so it may be necessary for your people act without a normal plan for a time.
- What about stress-testing? Do the scenarios your fund has been working to incorporate any that have been sufficiently extreme to test yourself against? If not, how could you attend to that?
- What about the robustness of your crisis planning process? It is impossible to predict the precise nature of every potential crisis, but if your processes are sufficiently understood and tested at least you can be prepared to manage through whatever may come your way.
We can all agree that the current crisis has tested all of our individual resources in way we could never have envisaged a mere six months ago. The “new normal”, whatever it may be, is on its way and whilst we await its arrival it is important, we need to question our current assumptions as they are rooted in a different past.