Pensions and Retirement Training Course on Concentration Risk Management

Module 1: Introduction to Concentration Risk
Definition, importance, and types of concentration risk
Sources: sector, asset class, geographic, and single issuer exposures
Historical examples of concentration-related losses in pension portfolios
Case study: Lessons learned from concentration failures

Module 2: Measurement and Quantification of Risk
Quantitative metrics: Herfindahl-Hirschman Index, exposure limits, stress tests
Scenario analysis and sensitivity testing for concentrated positions
Portfolio monitoring tools and dashboards
Workshop: Calculating concentration risk in sample portfolios

Module 3: Regulatory and Fiduciary Considerations
Regulatory limits on concentration risk
Fiduciary responsibilities for trustees and portfolio managers
Compliance frameworks for monitoring exposures
Case study: Regulatory enforcement and best practices

Module 4: Strategies for Risk Mitigation
Diversification across sectors, asset classes, and geographies
Use of derivatives and hedging techniques
Rebalancing and exposure management strategies
Workshop: Developing a mitigation plan for a concentrated portfolio

Module 5: Governance, Reporting, and Practical Application
Governance frameworks for concentration risk oversight
Reporting to trustees, regulators, and stakeholders
Integrating concentration risk into ALM and investment strategy
Capstone exercise: Designing a comprehensive concentration risk management plan