Pension funds are entrusted with safeguarding the financial security of many individuals in retirement and play a crucial role in society. Mandatory social security pension schemes, designed to provide a safety net for the working population, can benefit from an additional layer of sophistication in their risk management systems.

In this presentation, we introduce a proposal for a generalised Risk Management Framework for social security systems in order to address identified gaps in social security risk management. We interpret the general principles of ERM from the perspective of pensions as financial institutions and identify the intrinsic features of social security pension schemes that differentiate them.
Still, it is recognised that risk management in pensions is basically a complex and challenging topic where further research is necessary.

This web session is intended for actuaries, statisticians, and economists who have an interest in risk analysis and management in Social Security Pension Systems. Prior knowledge in risk management frameworks or standards – like the COSO ERM or the ISO31000 – is an advantage but not a prerequisite. The Solvency II and Basle Framework regulations are not on the agenda.

Technical Requirements
Please check with your IT department if your firewall and computer settings support web session participation (the programme Zoom will be used for this online training). Please also make sure to join the web session with a stable internet connection.

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Our aim is to provide social security actuaries and other interested experts with a coherent and adaptable method to manage the risks that pension systems inherently entail.

While all enterprises and institutions have governance and organisational structures, what sets pension systems apart is their individual mission and approach to fulfilling it. Based on these unique characteristics, we have defined a new approach for the main risk categories for all organisations as governance and organizational structures, own specific business, and operations of these organisations. The general ERM approach has served as the common starting point in finding the similarities and differences between pensions and other financial institutions: their processes and methods are similar, but the objectives differ.

Pension funds as financial institutions trade in risk and money, collecting contributions, and paying out pension benefits. A multi-pillar system is an old-age risk management tool as it is. In a three-pillar pension system, the pillars are usually defined by their adequacy objectives and risk appetite of the targeted socio-economic group. By including affordability and robustness in the definition, we have arrived at the core concept of the COSO risk framework with appetite/tolerance and performance/target coordinates. This strategic integration not only enhances our understanding but also facilitates the systematic development of a Risk Management Framework tailored to social security pension systems.

Establishing a Risk Management Function and a regular Own Risk Assessment reporting framework would be beneficial for Social Security Administrators. Actuarial reviews of the financial health of social systems are contributing to risk monitoring and risk mitigation. A holistic approach to risk management will ultimately result in better government and improved benefits for social security systems.

Tibor Párniczky
Tibor is a senior expert in pension system regulation and development, with a wide range of experience in public and private pensions regulation and supervision. He is an independent consultant in the areas of pensions regulation and supervision, employee benefits, actuarial modeling and risk management. He has gained his key experiences in pension systems as one of the main architects of the Hungarian pension reforms and advisor to Eastern European Governments during the wake of the worldwide old age crisis. His participation in the development established his leadership career in civil service and relations with international organizations like the World Bank, the OECD and the EU. He was the initiator and founder of the International Organization of Pension Supervisors (IOPS).

Using his own experiences and international relations Tibor is now managing his independent consulting practice. He worked for leading multinational consultants and donor organisations. For example, he managed a common project of the USAID Partners for Financial Stability program and the OECD, covering countries from the Baltic region to Central and South Europe. His consulting practice now also includes Mongolia, Ukraine, Russia, Moldova, North Macedonia, Kosovo and African countries.

He graduated in mathematics at Eötvös Lóránd University and economics at Budapest Economics University and got actuarial training in program of the City University of London (UK) and the Corvinus Economic University (Hungary). Based on his actuarial background he also studied risk management and related issues of other financial sectors. Beside studying, he has experience in delivering training on financial supervisory and risk management topics. He is a delegate to the International Actuarial Association and the Actuarial Association of Europe and member of the Actuarial Committee of the Pension Fund of the United Nations (UNJSPF).