Management checklist for a crisis

 UK actuarial and consulting firm Lane Clark & Peacock has issued an advisory note on how pension fund management should handle the global credit crunch.

The firm’s top 10 tips for (corporate) funds are:

• Prepare a list of key third-party exposures - such as banks, funds managers and insurers - and identify the ultimate group company in each case.
• If you think there is a chance the fund’s money on deposit may be at risk, set up an alternative account with another bank as soon as possible.
• Check that all banking and investment authorisations are up to date to make sure decisions can be implemented quickly if necessary.
• Review all standard transactions procedures for buying and selling assets such as re-balancing and automated switching between asset classes. They may no longer be appropriate in times of high volatility and illiquidity.
• Consider the extent to which material transactions are likely to arise in the coming months and whether they should be deferred or phased in.
• Consider the risks at the next trustee meeting. Trustees should update their risk register. Reconsider the potential implications of recession on the plan sponsor’s covenant.
• Ensure the finance department is aware of the consequences of falling asset values on balance sheets and next year’s pension charge.
• Consider the impact of possible redundancies on the fund’s finances and continuity for key roles such as trustees and fund staff.
• Watch out for notifiable events, such as credit rating downgrades and breaches of banking covenants, which may have to be reported to the pensions regulator.
• Communicate with members to allay their concerns either about the plan sponsor or events in the financial world in general.