Archived Insight | October 8, 2018

Operational Risk May Be a Challenge for Your Retirement Plan

In today’s environment, market risk tends to receive the most attention from the media and from stakeholders, but managing operational risk has become more important as plans have grown in size and complexity.

operational risk

Why operational risk is such a threat

Many experts believe operational risk, rather than market risk, is the leading threat to a plan’s reputation due to the breadth and complexity of the individual risks in this category.

For defined contribution plans, operational risk encompasses potential losses attributable to failures in Internal Revenue Code (IRC) compliance, participant financial reporting, transaction processing, data security, technology, business continuity and vendor management

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Getting a handle on operational risk

Effectively managing operational risk may lead to improved service quality, reduced costs, improved participant decision making and strengthened compliance. A first step is adopting a framework that includes:

  • Governance structure
  • Audits and assessments
  • Management of cybersecurity risks
  • Peer reviews and benchmarking
  • Comprehensive investment policy
  • Key performance and risk measures

Our team can help you reap these benefits by coming up with a plan that will reduce your operational risk. 

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This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.