Risk Management

A major concern for executive benefit plan sponsors is their exposure to financial risk, which may have an unanticipated impact on corporate earnings. These financial risks are due to multiple factors:

• Participant reallocations/market volatility. These actions create fluctuations in participants’ accounts and the aggregate plan liabilities. As a result, plan sponsors are required to “mark to market” these fluctuations in plan liabilities, which can impact corporate earnings.
• Hedge effectiveness. Any variance between the earnings on plan assets and plan liabilities creates a P&L mismatch. An effective hedge will result in a high correlation between the underlying participant plan liabilities and the investments funding or hedging these liabilities—mitigating volatility in corporate earnings.
• Corporate tax. Proactive tax mitigation strategies can be employed to reduce tax exposure that can result from frequent trading, to mitigate the variance between plan assets and liabilities.

We specialize in developing, implementing and managing comprehensive risk mitigation strategies to address these concerns.