Four Key Strategies for Managing Pension Risk
CFOs at companies that offer defined benefits might be forgiven for feeling frustrated that, in addition to oversight responsibility for company financial performance, shareholder relations, accounting, tax, and myriad other functions, they also have to manage a pension plan.
Compounding the challenge, the investment landscape has grown only more complex over the years, requiring greater day-to-day attention and oversight. Additionally, few internal or external constituents who influence plan direction have a clear 360-degree view, further confusing and distorting the picture for CFOs charged with plan oversight.
If managed ineffectively, pension plans can threaten cash flow, access to capital, liquidity, credit ratings, investor sentiment, and other corporate priorities. Their ultimate cost, while influenced by exogenous factors, depends greatly on strategic choices within each CFO’s control.
While there is no single silver bullet that can solve these challenges, CFOs have four levers at their disposal that we believe they should proactively employ to manage pension risk.
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