Own risk assessment – how effective is the ORA regime?

When the Pensions Regulator’s General Code introduced the requirement for occupational pension schemes with 100 or more members to carry out an Own Risk Assessment (“ORA”), the reaction across the industry was mixed.

Some trustees welcomed the increased focus on governance effectiveness and operational resilience. Others saw it as another compliance burden in an already crowded governance environment.

Although both reactions are understandable, there is a real risk that the ORA becomes a tick-box exercise: another lengthy governance document prepared, approved, and filed away. However, that risks missing the real value of the exercise. At its best, the ORA encourages trustees to really drill into how governance operates in practice, rather than simply how it appears on paper. 

Governance versus effective governance

A recurring issue across pension schemes is the gap between having governance processes and having governance processes that work effectively in practice. Many schemes have strong governance frameworks on paper, yet operational problems still arise, including:

• administration delays;
• inconsistent member communications;
• poor adviser coordination;
• unclear ownership of actions;
• inadequate escalation procedures; and
• overreliance on key individuals. 

Often, these issues do not arise because governance documentation is missing, but because the governance framework has never been properly tested in practice. That is where the ORA adds value. The strongest ORAs are not simply descriptive documents; they are analytical exercises. They ask:

• where are the operational weak spots?
• what are the “single points of failure”?
• which controls only work because certain individuals are holding things together?
• what happens if key advisers are unavailable during a major project?
• are committees receiving the right information at the right time?

These are necessary conversations.

Focusing on the real “banana skins”

Schemes often focus too heavily on theoretical risks while overlooking practical operational weaknesses:

• poor version control;
• unclear sign-off responsibilities;
• inadequate tracking of member communications;
• reliance on manual workarounds;
• incomplete management information; or
• unclear accountability during projects.

These are the “banana skins” that repeatedly emerge during buy-ins, Guaranteed Minimum Pensions (GMP) equalisation exercises, administration transitions and member complaints.

For example, schemes approaching endgame often find that adviser responsibilities have become blurred or that governance structures struggle under transaction pressure. Others discover weaknesses only after issues arise, such as communications being issued before sign-off, delays in identifying errors or uncertainty around escalation responsibilities.

The ORA provides an opportunity to identify and address these weaknesses before they become more significant problems.

Avoiding the trap of overengineering

One risk within the ORA regime is overcomplication. There can be a temptation to produce highly technical documents running to hundreds of pages in the belief that complexity demonstrates compliance. In reality, excessively long ORAs often obscure the most important points.

A focused and candid ORA will usually provide more value than an overly detailed document which simply describes governance structures without critically assessing whether they are genuinely effective.

Trustees should therefore resist approaching the ORA primarily as a drafting exercise.

A proportionate, focused and candid ORA can deliver real governance value. In many cases, the strongest ORAs are those which identify a relatively small number of meaningful improvements and then ensure those actions are properly implemented and monitored.

Proportionality matters

Importantly, the ORA regime was never intended to impose identical expectations on every scheme regardless of size, complexity or maturity. A proportionate approach is entirely appropriate.

A smaller scheme with stable operations and straightforward governance structures may not require an extensive ORA framework. Conversely, a scheme approaching buy-in or preparing for wind-up may benefit from a more focused and operationally driven assessment.

In practice, some of the most effective ORAs are targeted exercises built around the scheme’s current priorities. For example:

• schemes approaching buy-in may focus on transaction governance and operational readiness;
• schemes experiencing administration concerns may focus on controls and reporting quality; and
• schemes preparing for wind-up may focus on continuity planning and retained risks.

The key point is that the ORA should reflect the scheme’s actual risks rather than becoming a generic compliance template.

Final thoughts

There is a genuine risk that the ORA becomes treated as another governance hurdle to “get through”. But there is also a significant opportunity. A proportionate, focused and candid ORA can provide real governance value. It can help schemes identify weaknesses early, strengthen operational resilience, and avoid the kinds of preventable governance failures that create reputational, financial and member risks later.

The most effective ORAs are not necessarily the longest or most technical. They are the ones that ask the right questions, challenge assumptions honestly and result in meaningful action. 

If your scheme is considering how to undertake a focused and proportionate ORA exercise that delivers genuine governance value - rather than simply another compliance document - please get in touch with one of your contacts in our team.

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