Dealing with a super-sized risk environment

Superannuation Fund Directors and their Chief Risk Officers (CRO’s) find themselves in an emerging world of greater and more diverse risk than ever before. 

Members, Government and the media are all looking more closely at Superannuation Funds. Mergers continue, trust and social license are now competitive matters, member outcomes are sharply in focus and the legislative environment is shifting.

With APRA and ASIC applying ever increasing scrutiny to the superannuation industry, on issues including governance, accountability standards and culture. Existing risk management frameworks may not be effective in the face of this rapidly changing risk environment.

Martin Vassallo joined advisory firm Blackhall and Pearl to help Directors and Chief Risk Officers address this challenge. Having direct experience as a Superfund CRO, he understands the unique and complex challenges faced by CRO’s such as expectations of regulators, demands from the Board and Executive Teams.

“Superfunds need their risk management functions to perform as effectively as any other operating function of the organisation to genuinely manage their risks in a way that enables the achievement of their objectives” says Martin.

He says that in many cases risk framework design and deployment have not kept up with the evolution and change of their business or risk environment. In addition, many Directors are unaware of the vulnerabilities this creates for them and their organisations.

This can lead to Board surprise when things go wrong, or being unable to adequately respond when APRA descends upon them. Moreover, as is already happening elsewhere, it is clear that the regulators are going to focus more heavily on how Superannuation funds manage risk and seek evidence of their effectiveness.

The questions Directors should ask themselves and their risk teams should include;

“How well are our risks are being quantified, measured and reported? How well does this information translate into insight and foresight to support our decision making?”

“How well is our framework embedded and how confident are we that our business leaders and their teams are able to identify and mitigate risk?”

“Does our organisation have a genuine ‘three lines of defence’ structure in place and how well is each line delivering on their accountability?”

When lacking a reliable and effective risk framework, Boards and Executive Teams tend to manage events rather than manage risk; events, that in most cases could have been avoided. This leads to distraction and reputation loss and can jeopardise a Fund’s strategic plan and impact members.

Martin previously worked in the banking industry where risk framework design started evolving in the 1990s, before then successfully applying risk methodology in more diverse business environments. More recently, as Chief Risk Officer at Vic Super, advanced risk management solutions were designed into a new framework and deployed with highly successful results.

He joined Blackhall and Pearl because they are already delivering advanced risk management solutions to risk teams and boards across different industries. He has a platform to continue evolving these solutions and developing new tools for the emerging risk landscape – particularly for the Superannuation Industry.

The best place for many Funds to start is an independent perspective of their Risk Management Framework. Others may already be well on the road to implementing an advanced program – in those cases Martin can accelerate this with added skills and effective tools and solutions.

Some may have more specialised needs, such as access to the Enterprise Risk Appetite Model or preparation for APRA triennial reviews.

Every client has unique challenges in design and implementation, and Martin is here to help them deliver on their objectives to the highest of standards and with the least distraction.