Mitigating the COVID-19 impact on your super fund

ASFA’s Planning for a Possible Pandemic is intended to help trustees think through the issues, look at how they apply to their individual fund – and to help with the development of a workable and flexible business continuity plan (BCP) based on the risk profile and resources of each individual fund.

A pandemic is different from other unwelcome events. No matter how devastating, bushfires, storms, floods and even terrorist attacks are far better understood – they have finite time frames, and a trajectory which is to some extent known.

In comparison, the course and outcome of a pandemic like COVID-19 is largely unknown. This isn’t the first pandemic the world has faced, and the WHO describes the six phases we can realistically expect, but there is no hard and fast rule about the way each phase will play out. This makes a pandemic very difficult to predict and manage – which in turn means that a robust BCP is imperative to an effective response.

The purpose of ASFA’s Best Practice Paper is to help you create such a BCP by identifying key considerations and suggested responses. It contains checklists, and external reference documents from Government and the WHO.

Implications of COVID-19 for all organisations

Some of the implications of COVID-19 will hold true for all organisations, including superannuation funds. These include:

Staff absences: Staff absences are, and will continue to be, the reality for all organisations as we live through COVID-19. Super funds should expect that at least 20 per cent, and up to 40 per cent, of staff will be absent from work for periods between two to eight weeks over the course of the pandemic.

Disruption to the supply chain: Every element of your supply chain will be affected – from the financial system, to service providers – and any disruption to your service providers will disrupt you. For example, your administrator may have a ‘force majeure’ clause which allows for the suspension of services if the pandemic makes it impossible to operate normally. You can read in more detail about force majeure clauses in section eight.

Impact on investment returns: Markets have already reacted negatively, and with increased volatility, to the COVID-19 outbreak. This will continue and may get worse as more businesses fail. Difficult decisions may need to be made and communicating honestly and transparently with members is essential.

The planning process – a step-by-step guide

This process is designed as a guide. Given the difficulties inherent in planning for the impact of COVID-19, it’s crucial to stay flexible and adapt your plan as events unfold. There are a wide range of possible outcomes for individual funds, but it is also likely that some strategies will fail due to the impact of the pandemic on other organisations. So, beware of falling into the trap of planning paralysis which can easily happen when it seems impossible to plan for all eventualities, and therefore easier to do nothing. Before you start, consider the following:

Establish responsibility and ‘ownership’ by a member of the senior management team. The ‘owner’ is responsible for managing and liaising with other teams set up to work together while responding to different aspects of COVID-19. Other teams include:

• A pandemic planning team, responsible for scoping, devising, communicating, testing and updating the pandemic plan; and
• A crisis management team, responsible for managing your fund’s response should some members of the planning team be unable to fulfil their roles.

Raise Awareness, even if your plan is not fully developed. Trustees, management and members should be regularly informed about the likely impact of COVID-19 on the fund, as far as this is known. Risk should be acknowledged. There are many sources of information which provide a useful starting point. Please see page 18 of the guide for a list of these.

Liaise with other organisations, particularly major service providers, including administrators, custodians, investment managers, insurers and banks. Make sure you understand their COVID-19 plans. In additions, understand what providers of essential services are doing, including government bodies. On page 18 and 22 of the guide is a list of useful websites.

What should my plan include?

There are important areas which should be included in all BCP, and we have listed the most important of these below. The full guide has more detailed information of each of the sections as well as checklists to help you work through the issues.

Staffing is of paramount importance during a pandemic. Once the planning group has identified the skills and number of staff required to maintain key functions, the next step is to ensure availability of staff as much as possible. Issues for consideration here including cross-training to ensure continuity, as well as succession planning.

Staff welfare is also paramount during a pandemic. Employees are looking to you for guidelines on how to protect their own health, but also for leadership when they are affected by the pandemic in other ways. Family members could fall ill, others lose their jobs and many employees will have a natural anxiety about the impact of the virus and the future, combined with a sense of isolation if they are working from home for an extended period.

In the guide is a detailed list of considerations and possible actions. These include tips on reducing the chance of infection, guidelines around travel and face-to-face meetings, and policies relating to leave.

Operational issues should be addressed by identifying the critical functions which the fund must be able to continue to carry out, followed by identifying the resources needed to maintain those critical functions. Considerations include access to premises, preparation for the unlikely case that public utilities and/or financial services are significantly affected.

Pandemic proofing your IT should be a top priority, given the reliance of superannuation funds (and most businesses) on their computer systems. With most employees now working from home where possible, reliance on IT is higher than ever.

Investment issues are also vital, as members naturally become concerned about losses and the long-term effect of COVID-19 on their investment portfolios. Considerations include whether adjustments to asset allocations are called for, making a call about liquidity required to meet anticipated higher than usual benefit payment requests. These decisions should be made by the investment team and communicated clearly to members.

Risk management including the possibility of staff shortages resulting in compliance failures, or the capacity of the IT system should also be thought through.

Communication with staff and members should be clear, honest and transparent. Maintaining a regular schedule will reduce anxiety and indicate that the leadership team is ‘showing up’ and in control.

Test, update and adapt your plan, partly because the best laid plans can fail in practice, and because events are unfolding in an unpredictable way, the plan needs to evolve in line with the latest development and advice from government.

The full impact of COVID-19 is still unknown, but the fallout to-date has already created unprecedented challenges for superannuation funds, and will continue to do so for the foreseeable future. There are no black and white or easy responses – but a robust BCP is good first step. It creates a roadmap which will allow you to better navigate the path ahead and in turn provide comfort to members and staff alike. We hope this guide is helpful.