Translate Risk Appetite Into Funding Terms
Convert one abstract pension risk appetite statement into measurable funding tolerances.
If trustees cannot name the funding threshold, they have not set risk appetite. They have only described a preference. The translation move COSO ERM asks organizations to connect risk, strategy, and performance. In pension fund management, the performance question is whether the plan can pay benefits with acceptable funding and contribution volatility. A risk appetite statement therefore needs to move from adjectives to tolerances. Use three translations. First, translate market risk into funded-status drawdown: how much decline over one year would require action? Second, translate sponsor affordability into contribution shock: what increase would require a funding conversation? Third, translate operational…
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