How Can “VUCA” Prepare You for the Future Post Brexit?”

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On Friday, June 24th, Britain voted to leave the European Union. It’s fair to say this surprised a lot of people (on both sides), including the markets. Falling interest rates, a weaker pound and political uncertainty has left a lot of people feeling on edge.

For those of us responsible for managing pension funds, can it be useful to reflect on the “VUCA” of our time.

Volatility, Uncertainty, Complexity and Ambiguity

Derived from the US military and now used in corporate strategy, VUCA is a term used to describe extreme conditions. For those of us in the world of saving and investments, VUCA refers to:

Volatility

Financial market volatility; the degree of variation in bond and equity markets.

Uncertainty

Inability to predict future changes. For example, what is going to happen post Brexit? It’s impossible to predict anything at this point.

Complexity

The proliferation and complexity of financial instruments, combined with new rules and regulation, all moving in ways we have never seen before. e.g. Central Clearing

Ambiguity

How we are feeling. Brexit has stirred up a lot of emotions. Will bond yields stay low for longer? What will happen with new regulation? Where should we invest? What is the best course of action?

Living in a VUCA world has changed the way we run pension funds. In turn, our current skills and abilities to thrive in such conditions are no longer enough or relevant.

The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic

– Peter Drucker

Post Brexit, we need strategic and critical-thinking skills to counter the effects of VUCA.

 

Vision

Imagine and design a long-term strategy that repairs the pension deficit and improves member security. A common purpose that pulls all stakeholders together and unifies their goals and effort.

Understanding

Understand the options available to pension funds to reach those goals; through education and hard work, a level of comfort and understanding about complex financial products can be reached in order to implement the opportunities that lead to success.

Clarity

Have goals, constraints and accountability by using SMART principles in goal setting.

Agility

Speed and efficiency in decision-making and implementing action.

Together, these four characteristics can be used to design a better future for pension funds and their members.

Author: Robert Gardner

Robert is Co-Founder and Non Executive Director at Redington Ltd. He started his career at Deutsche Bank before joining Merrill Lynch in 2003, working as Director in their Insurance and Pensions Solutions Group. In 2008, Robert also co-founded Mallowstreet, the online pensions community which continues to grow with presence and support from the industry. Robert is passionate about the impact of social media on business believing that education, collaboration and contributions are the best way to tackle pension challenges. In January 2019, Robert joined St. James's Place Wealth Management as Director of Investments.