Cybersecurity and AI at top of risk list for trustees, LCP says

The annual ‘Chart Your Own Course’ survey, which is set to be released in full later this month, found 23% of defined benefit (DB) scheme trustees rated the above risks as their top worry.

LCP said over half of surveyed trustees rated their worry about cyber security and AI as seven out of ten or higher, while those from larger schemes said they felt more prepared to deal with the risks compared to those from trustees of smaller schemes.

The survey also found one in five (21%) rated “gilt or swap market collapse” as their number one risk, while a similar percentage (18%) put regulatory risk as their top concern.

One in ten (10%) said “societal upheaval” was their top concern, while 9% listed “longevity swap change” and liability-driven investment leverage spiral as their top risk.

The survey found the least concerning risks for trustees were climate change, with just 8%, and deflation, with 1% listing this as their top concern.

LCP senior consultant Peter Shaw said the survey results were “encouraging” in highlighting cyber risk is being “taken seriously”, adding trustees need to have a “proactive mindset” and recognise the likelihood of such incidents occurring rather than “assuming they will never happen”.

“By embracing a mentality of ‘when’ rather than ‘if’, trustees can take positive steps to prepare for and reduce cyber risks. This includes understanding your scheme’s cyber footprint, conducting regular risk assessments, and establishing a comprehensive response plan to address cyber incidents when they happen.”

LCP principal Chris Potts added the “interesting” result that gilt and swap market collapse was still a highly ranked risk, noting it comes as a “timely reminder” that many schemes “did not emerge unscathed” from the 2022 gilts crisis.

“It was somewhat of a surprise to see climate change near the bottom of the list, perhaps reflecting trustees’ view that this is a longer-term risk. However, the impact of climate change is unfolding more rapidly than initially expected, and its effects are proving to be more severe. It’s therefore crucial for trustees to actively consider and address climate risk as part of their agenda.”