Page 84 - BFSI CHRONICLE 10 th Issue (2nd Annual Issue ) .indd
P. 84
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
84