With Prudential Standard SPS 515 Strategic Planning and Member Outcomes (SPS 515), the superannuation industry is tasked to submit their first annual assessment of outcomes delivered to members at the end of 2020.
“Poor performing funds will have nowhere to hide and will be required to notify their members of their underperformance,” said Josh Frydenberg, Treasurer, in his federal budget speech in October 2020.
For SPS 515, APRA requires every registrable superannuation entity (RSE) licensee to set strategic objectives for its business operations and to maintain a written business plan that articulates its approach to achieving these strategic objectives. SPS 515 contains prudential requirements to ensure that fund expenditure is in the best interests of members with comprehensive decision-making and monitoring processes for expenditure.
Finance, Risk, and Compliance executives now need to define their method of self-assessment, incorporating not just historical data but forecasts as well.
“While developing business strategy is not new, what is proving complex is structuring the reporting framework around the strategy.”
New and emerging regulatory requirements like SPS 515 are casting a spotlight on the data readiness of financial institutions. At Tridant, we have been helping super fund clients develop their regulatory and management reporting framework to prepare and review their data collection and processes to meet increasingly data-intensive reporting requirements.
Here are the top 4 questions we are asked by super fund clients, and key considerations to address reporting requirements for SPS 515:
“Where do we start, and how do we measure?”
First, you need a framework to meet your reporting obligations in an accurate and concise manner. Develop a comprehensive member-focussed strategy that covers key areas of the business. Determine the objectives to be achieved, and define metrics to measure these objectives, ensuring the metrics target all the membership cohorts. These metrics can, and will need to be, refined over time.
As you develop the member-focused strategy, objectives and metrics, it is critical to assign stakeholder ownership to each of the metrics. Usually senior management takes ownership of these metrics to be accountable, and directly influence the outcome of the metrics.
“How should we measure our performance?”
To be honest, the answer to this critical question is reliant on other variables, namely:
When will accurate and reliable data become available for each metric, who is responsible for it, and how do you measure it?
Define a methodology to measure these objectives and metrics. This can be a complex and time-consuming task. There are certain characteristics that need to be considered to define measuring a mechanism. For example, you need to:
- Measure metrics frequently: This allows time to intervene and implement corrective actions for positive member outcomes
- Use clear unbiased criteria: There should be clear unbiased criteria to determine success or failure for each metric. Metrics need to be measurable, with a clear set of rules.
- Use readily available data: The data source needs to be regularly available, reliable and verifiable.
- Set thresholds: Easily determine if the metrics have achieved the criteria by setting status thresholds at the outset.
Caution! Setting the status threshold is a balancing act between ‘what is achievable’ and ‘raising the bar’. The aim of setting a threshold should not be to achieve all metrics easily or make them unachievable. A preferred approach is to progressively adjust the threshold and be realistic.
“This process requires multiple teams and stakeholders to collaborate and support the application but can it be better managed? Rather than relying on spreadsheets and manually generated reporting, is there a way to make it less chaotic?”
At Tridant, we often see super funds trying to enact this complex reporting manually – ultimately, they find it a challenge to maintain consistency, accuracy and timelines.
A robust reporting framework can make the whole process much simpler to manage. Consider establishing a centralised platform which will not only empower stakeholders to contribute and collaborate, but the application will also then take all the inputs and generate a final result.
Another essential benefit of automation is that it embeds preservation and storage of historical reports for future reference.
Caution! While a vast amount and a variety of supporting data exists within organisations, it is often challenging, time-consuming and costly to extract. Starting simple and progressively building data extraction templates can be a more efficient option.
“We have all of this in place, what’s next? What do you mean we need to review and refine, then review and refine again. On repeat?”
Many stakeholders overlook a critical step – super funds need to review and update their strategies regularly, perhaps annually or every 2 years, to adjust to environmental changes. Continuous improvement is critical.
With SPS 515, super funds need to periodically self-assess and report its performance against a range of operational areas to identify areas of improvement to achieve better member outcomes. Your reporting framework needs to not only meet current requirements, but also have the flexibility to address future requirements as APRA continues to introduce new standards.
Future-ready your reporting frameworks
increasingly data-intensive reporting requirements from regulatory authorities.
will include ‘pull’ mechanisms – data extracted from the firm’s data repository by the relevant authority, instead of relying on registered licensees to ‘push’ data and/or reports out to its regulator. This means in-house technology and technical teams will need to be equipped to address the platform requirements prescribed. For smaller super funds, banks, or financial institutions with limited technical resources, this will drive a level of reliance on system vendors to efficiently mitigate risk and ensure compliance.
Future-ready your data frameworks for new and unforeseen regulatory reporting requirements, now. Request a demo to learn how Tridant is helping super fund clients reduce manual tasks, grow accuracy, and free up limited resources to focus on value-add activities for their business.