Cyber threats take top spot in UK trustee risk list

Cyber threats and artificial intelligence (AI) are the risks at the forefront of UK pension trustees’ minds, research from LCP has found, with nearly a quarter (23 per cent) of trustees identifying cyber and AI risks as their top worry.

When asked to rate their worry on a scale of one to ten, over half (61 per cent) of respondents rated their worry about cyber risk as seven or higher.

However, trustees' views were more mixed when it came to describing how prepared they felt regarding cyber risk, with those from larger schemes generally feeling marginally more prepared than those from smaller schemes.

Aside from AI and cyber risk, the survey found that gilt or swap market collapse (21 per cent) and regulatory risk (18 per cent) were the next most common top concerns.

Meanwhile, climate change and deflation were ranked lowest amongst the risks surveyed, at 8 per cent and 1 per cent, respectively.

Reflecting on the findings, LCP senior consultant, Peter Shaw, argued that it is "encouraging" to see that cyber risk is being taken seriously, "not least because of the advancement of AI and other technologies".

"When dealing with cyber risk, trustees should have a proactive mindset that recognises the likelihood of cyber incidents occurring rather than assuming they will never happen," he continued.

“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.”

Adding to this LCP principal, Chris Potts, said: “It’s interesting that gilt/swap market collapse is still ranking so highly, and is a timely reminder that some schemes did not emerge unscathed from the market turmoil of late 2022."

But Potts said that "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".

"The impact of climate change is unfolding more rapidly than initially expected, and its effects are proving to be more severe," he warned.

"It's therefore crucial for trustees to actively consider and address climate risk as part of their agenda.”

This article was first published in our sister title, Pensions Age.

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