Naomi Brown: We can never fully eliminate the possibility of encountering a red face test. But we can take steps to ensure we would be well prepared to respond if we do.
When things don't go our way, it's only natural that we want answers. To ask those in charge, how did this happen (or, more likely, how did you let this happen)?
And given how important retirement benefits can be to an individual's financial wellbeing, it's not surprising that members might question or challenge trustees and employers if something happens that impacts, or that they fear might impact, the value or security of those benefits.
We can all imagine the excruciating moment when we are approached, either in person or in writing, by someone negatively affected by a decision we've made, or an action we've taken (or not taken), and we are put on the spot to explain what happened, and why, and to justify our approach.
Would our face flush red, as we reach for an explanation about something that doesn't sit all that comfortably with us? Or would we be ready to offer a clear and considered response, self-assured that, "hand on heart", we've done our job properly and can readily explain how we got to where we are.
But although such a moment is undoubtedly an uncomfortable thing to imagine, actively doing so as a standard part of your decision-making process can also be an incredibly useful tool.
Looking at a decision specifically from the perspective of how you would communicate it to members and how you would respond to a challenge (particularly what you would say if things go wrong) before you make a decision has the double benefit of making you better prepared for that situation, but, more importantly, improving the quality of your decision making in the first place.
Thinking about what might go wrong, and brainstorming the sorts of concerns and challenges members might raise, could make you look at things in a different way and identify new risks which you can then take steps to mitigate.
Preparing a sample communication (even if it is a "just in case"/reactive response that may never be issued) forces you to think about exactly how you would explain the situation to those most affected by it. If you are struggling to come up with the right form of words or positioning, it might mean you need to do some more work to get fully comfortable with the decision you are being asked to make or the approach you are taking.
Exactly how you'd want to be able to respond to a challenge will of course depend on the precise circumstances. But there are a number of points around good governance, decision making and risk management which you'd want to have up your sleeve in most situations. (Or looking at it the other way, points which if you couldn't demonstrate, could potentially leave you feeling more exposed.) For example, could you say the following -
- We involved the right people
- We received the necessary training
- We acted within our powers
- We complied with our duties and obligations
- We undertook reasonable enquiries and gathered enough information
- We considered all the options
- We took account of all relevant factors (and ignored the irrelevant)
- We checked our bias and looked at it from different perspectives
- We asked the right questions (of the right people)
- We gave it due time and consideration
- We assessed the risks robustly
- We weighed up the pros and cons
- We mitigated the downsides
- We took appropriate advice
- We followed the relevant guidance
- We were in line with standard industry practice
- We managed any conflicts
- We planned for contingencies
- We monitored the situation
- We were ready to respond
Many of these points may seem like no-brainers, but sometimes the more obvious a factor or step, the more easily it is missed. Especially if you are having to move very quickly.
Working through a checklist in a structured way could highlight areas where you might want to strengthen your process, or simply better document it (giving you a clear paper trail) and, hopefully, would also serve as a valuable reassurance that you have covered all your bases.
No one knows what the future will bring. Some decisions have unexpected outcomes or consequences and not everyone is going to like or accept every decision you make - despite your best efforts. This means we can never fully eliminate the possibility of encountering a red face test. But we can take steps to ensure we would be well prepared to respond if we do.
It could be that a first step is for someone to simply pause and ask the question – in the red face test, how would we fare?
Naomi Brown is senior counsel at Sackers
