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What is Risk Management? 4 Key Topics to Know

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Understanding risk management in retirement programs 

Managing a retirement program is complex, with multiple layers of risk. For organizations and their leadership, understanding and mitigating these risks is crucial to ensuring the long-term success and reliability of these programs.  

It often leaves human resource professionals, employers and program administrators questioning, "What is risk management, and how can we excel at it?" 

This blog post explores the various aspects of risk management in retirement program administration and provides actionable insights to help organizations better manage these risks. 

The importance of risk management 

Retirement programs are designed to benefit participants and beneficiaries, but they come with their own set of risks. These risks can be broadly categorized into four main topics: 

  1. Fees 

  1. Administration 

  1. Investments 

  1. Cybersecurity 

Each of these topics requires meticulous attention and a well-documented process to ensure that the organization effectively meets its fiduciary responsibilities.  

1. Fees 

Understanding the fees associated with retirement programs is essential. Organizations need to know: 

  • what they are paying; 

  • who they are paying; and 

  • what services are covered. 

Ensuring the reasonableness of these fees is subjective and circumstantial. Therefore, it is crucial to have a process in place to demonstrate vigilance. This not only helps in making informed decisions but also in communicating these details to both leadership and participants. 

2. Administration 

Administrative lapses can result in costly corrections and open the plan to audits and examinations. Ensuring that the plan document matches plan operations is vital. Organizations should: 

  • understand gaps in processes; and 

  • have documented processes and backups. 

This will help mitigate the risk of administrative error and ensure smooth operations. 

3. Investments 

Investment performance and cost are often the focal points of retirement program management. However, plan sponsors should not focus solely on these components. It's important to: 

  • offer opportunities for diversification; 

  • demonstrate continued monitoring; and 

  • have a documented process. 

While there is no requirement to predict investment performance accurately, maintaining a diligent monitoring process is essential. 

4. Cybersecurity 

With the increasing prevalence of cyber breaches, organizations must routinely review all vendor partners. Retirement program administration is a prime target for cyberattacks as it involves the transmission of secure data and pools of assets. Regular reviews and updates to cybersecurity measures are imperative to protect against such risks. 

Final thoughts 

Effective risk management of retirement programs is not just about compliance; it’s about ensuring the long-term success and reliability of these programs. By focusing on fees, administration, investments and cybersecurity, organizations can manage risks more effectively and provide better benefits to participants and beneficiaries. 

How TruePlan can help 

TruePlan specializes in helping plan sponsors understand risk and create an action plan to mitigate these risks. By partnering with TruePlan, organizations can help ensure that their retirement programs are managed effectively and securely. 

Contact us today to learn how we can best support your needs. Don’t forget to explore our retirement plans and employee benefits solutions. 

 
TruePlan Benefit and Retirement Advisors is a marketing name of Healthcare Community Securities Corp., member FINRA/SIPC, and an SEC Registered Investment Advisor. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Past performance is not indicative or a guarantee of future returns.  

This content is for informational purposes only. It has been partially generated from an AI language model, which may not always be exhaustive or tailored to individual circumstances. We encourage you to contact one of our experts for more information. We assume no liability arising from any use of this content. 

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