A member’s superannuation fund journey is similar to that of a passenger on an ultra-long haul, Sydney-to-London, flight where the Chief Risk Officer (CRO) will combine the roles of flight engineer, navigator, radio officer and air traffic controller.
The passengers might see the CRO as their chief safe-arrival officer while the airline as their chief reputation officer. After all, our members are with us for a smooth, long haul and a predictable retirement arrival.
In this future leaders series we have met: the super-hero CEO with their 4Cs of competition, culture, cost, and clarity of mission plus a 5th C of community expectation; the conductor CIO orchestrating their way across the 4Rs of risk, regulation, return and reputation; and, our ninja-like CMO balancing the 5Ms: members, mass, maths, messages, and mergers.
The future trends impacting the CRO can be seen through the 4Ss of scope, scrutiny, speed and safety.
In conversations with CROs they expect to be increasing their involvement in strategic planning, stronger decision-making processes, working with their peers to build capability and capacity in better risk forecasting and management.
Along with dealing with the day-to-day challenges of leading a diverse expert governance, risk, legal and compliance team, our future CRO will be a masterful stakeholder manager, navigating the fund through the turbulence of regulator demands and responding to crises, finding calmer skies and better member outcomes.
The 4Ss: scope, scrutiny, speed and safety.
Scope of risks: The list just keeps growing as super funds become major financiers requiring them to focus on their social licence as banks must.
In addition, to the usual risks such as managing targeted risk/return outcomes, ensuring a delighted customer and doing all this competitively, we can add some newer risks. These include: conduct and cyber risks; and, those associated with digital transformation projects and running a fully digital enterprise. Throw in business and investment sustainability authenticity i.e. ‘walking the talk’ on ESG and we can see how reputation risk must be a permanent agenda item for all boards.
Scrutiny by regulators: Boards and their audit and risk committees, are under increased pressure to continuously demonstrate effective risk management linking up their risk appetite statements to effective controls. We see this with the implementation of banking-type regulations with the Financial Accountability Regime. Regulators are taking a stronger regulatory approach following major public reviews as recent fines show. A CRO reminded me only last week of the once ubiquitous enforceable undertakings which now appear to put out to the desert along with the A380s.
Add in the complexity of regulatory overlap and a political class very keen to be seen to be flexing their muscles over real or imagined issues. With super’s purpose still unsettled at law we could have more turbulence such as another Early Release Scheme with super becoming an ATM in the next crisis.
Speed of change: As per my CEO article, with funds embracing a B2C operating model, the collection and storage of more data, digitisation, more specialised service suppliers, IT upgrades, and AI, all mean new risks to deal with. Mergers bring their own risks and as do transformation programs. Regulators certainly accelerate change.
Constant change is a well-recognised stressor. As one CRO told me recently she likes to build some calm via “keeping everyone rowing in the same direction”. Again leading via navigating.
Safety of members: Just as Qantas was once seen as safe but dull, they have charged ahead in terms of customer experience so too must super funds. We often see member safety in terms of minimising account downside and data security. To achieve greater fund maturity and clarity in cyber risks, CROs with their CTOs will drive a broader and deeper understanding from their boards down. Every executive will need to be across risks in their IT and service providers’ supply chains. All sorted, our CRO will have all the latest avionics ready for our flight!
Funds will need to have their radar scanning well over the horizon. The future CRO cannot be excepted to be both broadly experienced and have complete enterprise-wide, deep-risk expertise. The best CROs, working in concert with their executive leadership team, will be able to upgrade their skills, teams and systems just as airlines have moved from 747s to the Dreamliner and beyond. They will use their experience to calmly navigate their funds on a flight path that allows for a rewarding journey and safe arrival for all.