Page 84 - BFSI CHRONICLE 10 th Issue (2nd Annual Issue ) .indd
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BFSI Chronicle, 2 Annual Issue, 10  Edition July 2022
                                                                nd
                                                                                th
        fluctuations can be monitored to red flag any  is vulnerable to macro level fluctuations and
        deviations.                                  its impact on the related financial instruments.
                                                     However, considering long term nature of
        Parallels a stress testing mechanism for the   accumulation, the impact of such events/risks
        pension portfolios at institutional level maybe   should be kept minimal.
        contemplated to foresee the quantification of
        changes and effects of geopolitical events on  Suitable risk mitigation measure should
        the overall as well as individual’s pension  be undertaken along with the monitoring
        portfolio/corpus.                            mechanism to keep necessary checks and
                                                     balances in place and to ensure that the
        Another risk management tool which can be    corrective measures can be adopted and
        contemplated is by the way of diversification.
                                                     implemented in a timely manner.
        Adding asset classes to the pension portfolio
        shall help not only in benefiting from higher  An individual availing annuity with distressed
        returns from alternate and maybe riskier assets,  financial markets at the time of retirement may
        it also helps providing stability to the overall  be better off deferring to avail the annuity. Also,
        portfolio in case of any shocks that might arise  to ensure that the level of savings towards an
        in any particular asset class which otherwise  important life event such as retirement doesn’t
        might be having a higher weightage.          get ignored, the individuals can establish and
                                                     maintain an ‘emergency fund’ in a certain
        Conclusion
                                                     multiplier of the monthly income and expenses.
        Geopolitical events can be categorized as low   Such emergency fund shall safeguard that any
        frequency-high impact events. But considering
                                                     income related fluctuations are taken care off
        the nature of such happenings their magnitude   by the side pocketed money instead of loosing
        and impact on associated economies may       onto the long-term benefit of compounding on
        vary. Interlinkages with the financial systems
                                                     the retirement corpus.
        & markets can be considered to be one of the
        major variables defining such ramifications.
                                                     *The views expressed are personal and do not
        Pensions just like any other financial product  necessarily represent that of the Authority.

























                                                                The Institute Of Cost Accountants Of India

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