Resilience and holistic capital management

The current economic climate and recent law reform means trustee directors and senior executives must carefully consider their capital management strategies. And as the landscape and structure of the superannuation industry continues to shift Linda Elkins, National Sector Leader, Asset & Wealth Management, Partner at KPMG says “there, is a renewed focus on the financial stability of superannuation funds, which is critical to providing strong and stable outcomes for members”.

Elkins notes that the changing conditions now require a holistic approach to capital management that carefully considers a fund’s unique operating model, risk appetite and risk profile – essential for protecting members from unexpected, adverse outcomes and to fund significant growth and transformation initiatives.

APRA have also identified financial resilience in superannuation as one of their 2023 policy and supervision priorities and ensure entities have sufficient financial strength to act as a buffer against any emerging financial stresses. And there are numerous and complex moving parts that trustees and senior leaders need to be across.

Trustees today need to be clear about the purpose of capital and capital management principles, the various aspects of capital – operational risk capital, strategic capital, penalty risk capital, tailoring an assessment to the risk profile of a fund, the process to develop a holistic capital management framework, including determining required capital and how it should be held. Also, the treatment of capital on mergers, and of course, taxation considerations.

Redefining financial advice in super

Another area that is rapidly changing, and currently under the spotlight, is advice in super.

In addition to the on-going sanctions, regulatory scrutiny and now the Quality of Advice Review, there’s the fall-out from thousands of advice providers having exited the system, plus the surge in digital advice innovations. So, what does the future of advice look like for the superannuation industry?

Despite all the changes, Maree Pallisco, Partner – Financial Services, National Super Leader at EY sees the current times “as an opportunity for funds to redefine and provide advice in the Australian market”. She also acknowledges that there are conversations that need to be undertaken around member access, relevance and affordability.

Finding the right balance between proactive and reactive engagement with members will also be an important consideration for funds.

Cyber and operational resilience

Superannuation funds operate in a complex ecosystem, comprising numerous participants and significant amounts of outsourcing. And the many touchpoints increase vulnerabilities and risk.

Peter Malan, PwC Partner, Cybersecurity and Digital Trust says that “we are operating in a heightened cyber security threat environment” evident by the number of recent significant cyber incidents.

Therefore, fund leaders today need to be across the cyber security challenges and operational resilience considerations so as to be ready for the difficult and complex choices they may need to make to protect their members and reputations.

Understanding the current and proposed regulatory landscape as well as third party risk management considerations and regulations such as APRA CPS 234 are now a priority. Knowing the key aspects that make up a cyber-attack and undertaking training and immersive exercises to learn and experience what to do in the event of a cyber-attack is essential. It’s about knowing how to prepare and how to respond. Understanding holistic operational risk management and resilience practices (including APRA CPS 230) are key.


Workshopping and learning key strategies and techniques

Three masterclasses being held on the day before the ASFA Conference in Brisbane on Tuesday 21 February 11.30am-3.00pm (which include lunch) have been designed for  industry leaders and trustees to learn strategies and methods to best address these three hot topics.

Each comprise various expert presenters from KMPG, EY and PwC. Registrations are now open and classes are being kept small to ensure maximum interaction. To find out more or register here.