In addressing new compliance standards for risk, QANTAS Super has increased the scope of its trustee liability insurance. The move is one of a range of measures to comply with the new prudential standards framework.
The insight from Hugh Loughrey, head of legal, risk and compliance for the fund, was made at an Association of Superannuation Funds of Australia (ASFA) forum in Sydney.
The decision to review trustee liability insurance came after QANTAS Super tested both its risk ratings and its operational risk financial requirements.
“With ratings, we have approached the extreme ratings from the view of a genuinely catastrophic event for the plan. The result is a much higher threshold [for insurance] than we would have previously used and a more appropriate risk profile for the fund,” said Loughrey.
The fund has taken a more streamlined and focused approach to managing this higher risk profile. Loughrey warns that it’s easy get loaded down in the detail with risk and compliance frameworks.
“To ensure this doesn’t occur, it is absolutely critical to get the board of trustees as well as management thinking strategically about risk, and how it relates to business planning and strategy.”
Stronger Super compliance
He added that Stronger Super provided the opportunity to get rid of redundant processes and streamline as many of the remaining processes as possible.
Loughrey was asked what advice he would give to a fund that was not fully compliant on July 1. He said a positive and constructive relationship with any regulator would enable funds to communicate openly with them, so that they understand the fund’s circumstances and the challenges they face.
“To me, the key is to demonstrate to APRA that you understand the requirements and what you have to achieve, that you have a plan to implement the changes, and that you also understand and are addressing the critical underlying policy objectives.
“APRA is expecting trustees to demonstrate they are focused on, and appropriately prepared for, implementation.”
Loughrey’s thoughts on keeping risk management simple were echoed by Lucienne Layton, executive general manager of corporate services at Superpartners, who said risk and compliance frameworks had become too complex.
“We are trying to do too much with them and we are trying to build too much process in them. We are not focusing on the outcomes. If you have got multiple compliance plans out there, then you will confuse staff. Not only that, you are probably going to confuse the board of directors too.”