Ronald Sijsenaar: Project governance for the new pension system

November 7, 2023

By Ronald Sijsenaar, Partner at Probability & Partners

Many questions remain unanswered regarding the introduction of the new pension system. It is a complex issue surrounded by political uncertainty and requiring many negotiations. That demands a lot from pension fund managers and other stakeholders. The sleeves must be rolled up to meet all challenges. But for its realization, good project governance is also necessary.

Good governance gives freedom. After all, you have thought carefully about how to achieve your goals. But are you there? No of course not. The introduction of the new system requires continuous reconsideration, maintenance and adjustment. This requires a disciplined approach. It is tempting to think that there is more than enough time for the transition to the new system.

Even before a pension fund draws up the implementation plan, it is necessary to set up project governance. The pension provider can do this before the social partners have made choices. In this way, the various possible choices of the social partners can be included as scenarios and the governance of the project can be organized in such a way that these choices can be anticipated.

Risk issues in the design are matters such as the understandability of the project structure, flexibility and the correct allocation of tasks, authorities and responsibilities. The structure of governance will also have to be in line with the daily practice of a pension fund.

Risks surrounding governance in practice?

Most funds have of course been working on the Wtp project for some time and have already set up their project governance. Nevertheless, continued attention to governance is needed. What do we see in practice:

• The gap between project participants and those not directly involved is in danger of becoming too large.
• Decreasing attention to knowledge sharing, especially with internal stakeholders such as the VO, the Supervisory Board and key functions, but also externally such as accountants.
• Slow decision-making by social partners.
• Pressure on basic project management matters such as (progress) reports and supervision of the operation of control measures.
• Project reporting (demonstrability) is given less priority, while it forms the basis for the implementation plan and the substantiation of the choices made.
• Unclear structures, where boards and social partners talk to each other without leading to concrete results or consult with each other without all parties involved sitting at the table.
• The above factors lead to risks in decision-making, in the balanced weighing of interests and in sufficient substantiation to support the implementation plan. Directors can experience a lot of pressure to go along with the majority and become less critical. After all, everything becomes liquid under pressure.

Sometimes a way out is sought by moving things forward by, for example, recognizing 'must haves' and 'nice to haves'. This can of course be a good way to set real priorities, but it often takes place under pressure from not meeting deadlines. The 'nice to haves' also need to be implemented and an accumulation can lead to essential problems during the transition. In other words: there is a lot of pressure on the implementation process, which can lead to an uncontrolled situation.

What can the risk management key function holder do?

It is the job of the key function holders to be alert to this and to clearly and forcefully indicate what the risks are. Discipline in maintaining good project governance is a prerequisite for success.

In my role as Key Function Holder for Risk Management, I prefer to use 'what if' scenarios to encourage the board to remain focused on the need for good governance, supplemented with frequent interim evaluations of the progress of the project. Ask critical questions about the project reporting and initiate a discussion about the usefulness and necessity of a 'plan B'.

A point of attention is the incorporation of triggers into the project, in order to be able to scale up in a timely manner if there is a threat of backlogs. How often do you hear that extra capacity cannot be absorbed by the time required to deploy it. That is also part of good project governance.

Probability & Partners is a Risk Advisory Firm that provides integrated risk management and quantitative modeling solutions to the financial sector and data-driven enterprises.