IRM consulting, quants and analytics

IRM consulting, quants and analytics

Gazelle’s objective is to introduce IRM as the most advanced, efficient and economic modelling platform for monitoring and reporting on overall DB scheme risks for both trustees and employers for valuations, setting investment policy and transactions. By incorporating a stochastic sponsor module to the familiar ESG allows for the generation of results that reflect the uncertainty that exists within all sponsors; the ability to pay the recovery plan.

Stochastic Recovery Plans

Chart-with-border

A stochastic sponsor variable allows quantification of the uncertainty of recovery plan payments. Full customisability of conflicting uses of resources dividend payments, CAPEX and tax presents a realistic forward projecting representation of the stochastic sponsor. Sensitivities to changing sponsor conditions such as long term growth rate, credit ratings, debt limits can then be investigated.

Benchmarked IRM Covenant Grades:

It is important for trustees and employers to be able to consistently benchmark the covenant strength of their schemes over time and against the wider population of UK DB schemes. Gazelle creates average sponsor profiles for each of The Pension Regulator (tPR) covenant groups (CG1 – CG4) which is then integrated with the average scheme profiles for each covenant group drawn from tPR’s Annual Funding Statistics. This method allows us to attribute quantitative risk values to each of the covenant grades. Gazelle then compares the actual sponsor and scheme profile IRM results with the benchmarked risk values providing a consistent quantified benchmarked method of attributing and monitoring covenant grade.

IRM Reporting:

Gazelle’s standard IRM assessments provides defined benefit schemes and employers with new integrated risk analytics providing inter alia:

  • a covenant grade reflecting employer support for the particular scheme on an integrated basis
  • an integrated check on investment policy optimisation taking into account risk transfers when replacing returns with contributions
  • the longer term expected cost of supporting a DB scheme beyond the current recovery plan
  • relative measures of payment risk on DRC’s and dividends

Bespoke IRM Modelling:

Gazelle also designs bespoke IRM models and risk reporting formats to reflect the specific financial support provided by employers to their DB schemes. This can then be used by corporate finance and treasury teams to monitor the risk and cost posed by their DB schemes, informing corporate risk managers, allowing investigation of competing uses of capital, and providing DB pension risk measures for corporate viability statements.