How to take a proactive approach to decision-making

Originally published in Pensions Expert, here Brian Kilpatrick looks are proactive decision making.

Proactive decision-making is a function of a pension plan’s governance framework, the knowledge of the individual trustees and the quality of the advice they receive from their advisers.

How the trustee organises its board and committee structure will be specific to its own particular needs and ways of working, but there are a number of generic principles that will help trustees be proactive decision-makers.

It is important to make sure there is a clearly agreed trustee strategic mission statement. This should detail the scheme’s objectives across funding, investment, member administration, communication and risk management to make clear the trustee’s objectives and how they should be met.

The statement should also be supported by more detailed risk management planning documents such as an annual business plan and risk register.

Furthermore, there should be a trustee organisational structure at board and committee level. The roles and terms of reference should be clearly defined and appropriate delegations in place to ensure decisions can be made at the appropriate level.

The appointment of experienced trustees acting as chairpersons is important. Each committee and the board require experienced professionals who can manage the advisers and the meetings to drive good outcomes and facilitate the groups progress to reaching informed decisions.

There should also be sufficient resource in place. This relates to both experienced individuals and budget for advisers who can support the trustee and maintain momentum with projects and general scheme business between meetings.

Clarity of their role and the extent of any delegations in place that facilitate ongoing management of scheme business is also required at this level.

Trustees should make sure there is a conflict of interest policy. All stakeholders should be aware of the process to properly manage conflicts where they cannot be avoided.

A trustee evaluation framework is also needed, because it allows the trustee to critically assess its own performance.

Lastly, application of a framework for sponsor interaction is important. This should drive regular communication and feedback with the sponsor to ensure a healthy dialogue is maintained and the sponsor informed and consulted on key decisions.