Risk . . . Rewarded

The environment in which pension plan sponsors operate is changing at a pace never seen before. Stock and bond analysts are digging below the surface of pension plan management and assessing organizations based on the financial risks that exist in their pension plan — favoring those companies that are demonstrating strategic management of their risk levels and penalizing those that don't.

We are now seeing risk become a board level agenda item for many companies. This has been accentuated by the recent credit crisis, highlighting poor risk management by some of the world's most sophisticated financial institutions.

Risk is central to Hewitt's ongoing consulting capabilities. Our dedicated Global Risk Services team has been formed to support our clients in this complex area. This team offers an end to end solution to risk management, from consulting on your strategic objectives, to implementation of risk management solutions that will form part of your strategic game-plan for pensions and other risks. These solutions include looking at both assets and liabilities — derivative-based solutions that lead to risk efficient investment strategies, as well as looking at liability management techniques.

No single solution . . .

Each company will have its own unique requirements and objectives when considering the risks they take on — there is no "one size fits all" solution for risk management. Risk management is more than just "risk reduction". In the context of pension plans, does reducing your risk simply increase the cost of your pensions? We work with our clients to consider both the risk and return aspects of pension plan financing. At Hewitt, we take an individually tailored approach to understanding a client's needs — helping them to explore their current levels of risk, determining whether this is acceptable, and designing innovative solutions which both adjust the risk to the preferred level, and optimise reward potential from these risks.

A more global approach . . .

Recognizing these differences in drivers and objectives is key to designing solutions to suit each of our clients. Hewitt's Global Risk Services will offer organisations the expertise, objectivity and tools to help them through a risk and reward framework:

• Identifying an organization's objectives and then identifying the risks that may prevent them from meeting those objectives.
  
• Quantifying those risks and the rewards you expect to receive for taking them.
  
• Acting to strategically retain, reduce, remove or raise each component of risk based on an organization's risk tolerance.
  
• Reassessing the results of the actions and how the organization's risks and objectives change over time.