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AIST Governance Group APRA Prudential Standards – Industry Scorecard 12 months on 15 October 2014

AIST Governance Group APRA Prudential Standards – Industry Scorecard 12 months on 15 October 2014 Stephen Glenfield, General Manager South-West Region. ORFR (SPS 114) Trustee Practices/Observations. Adopting the minimum 0.25% ORFR Target Amount

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AIST Governance Group APRA Prudential Standards – Industry Scorecard 12 months on 15 October 2014

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  1. AIST Governance Group APRA Prudential Standards – Industry Scorecard 12 months on 15 October 2014 Stephen Glenfield, General ManagerSouth-West Region

  2. ORFR (SPS 114) Trustee Practices/Observations • Adopting the minimum 0.25% ORFR Target Amount • Clearly defined definitions of Operational Risk Events • Well defined material trigger events • Investing the ORFR target amount monies in an investment strategy matched to the majority of the Fund assets

  3. ORFR (SPS 114) Trustee Practices/Observations Watch out for: • Non-operational risks included in the determination of the ORFR Target amount • Lack of availability Operational Risk Data

  4. Defined Benefit Matters (SPS 160)Trustee Practices/Observations • Shortfall limits – a solid rationale and regular monitoring • Restoration Plans • Forward planning around reduced timeframes for obtaining an actuarial report

  5. Risk Management (SPS 220)Trustee Practices/Observations • Clearly articulated Risk Appetite Statement (RAS) • RAS aligns with strategic direction • Measurable risk tolerances • Risk culture driven from the top and evidenced • Effective and regular reporting on risk

  6. Risk Management (SPS 220)Trustee Practices/Observations Watch out for: • Risk management vs compliance • Meaningful & measureable risk tolerances • Business Plan doesn’t align with RAS

  7. Outsourcing (SPS 231) Trustee Practices/Observations • Outsourcing policies reflect practices in place • Alignment of outsourcing risks and risk management framework • Early consultation with APRA

  8. Outsourcing (SPS 231) Trustee Practices/Observations Watch out for: • Outsourcing policies replicate/quote SPS 231

  9. Insurance in Superannuation (SPS 250)Trustee Practices/Observations • Rigour around tender and due diligence processes • Thought and research in development of benefit design

  10. Insurance in Superannuation (SPS 250)Trustee Practices/Observations Watch out for: • Insurance Management Framework documentation is too high level • Lack of focus on data management

  11. Business Continuity Management (SPS 232)Trustee Practices/Observations Watch out for: • Business Continuity Management Policy lacks detail • Business Impact Analysis ad-hoc and lacks structure • Business Continuity Plan lacks clarity • Testing and Reporting ad-hoc

  12. Governance (SPS 510) Trustee Practices/Observations • Governance policy addresses board renewal and board performance • Remuneration Policy aligns remuneration and risk management • Board Audit Committee is in place • Trustee has or uses an appropriately resourced and skilled internal audit function • Trustee owns the strategic plan for Fund

  13. Governance (SPS 510) Trustee Practices/Observations Watch out for: • Risk not adequately covered by the audit committee (and no separate risk committee) • Adequacy of renewal policy • Board skill set • Not letting management manage

  14. Conflicts of Interest (SPS 521)Trustee Practices/Observations • Built on a robust Risk Management Framework (RMF) and risk culture • Tackle actual, potential and perceived conflicts • Disclose all types of relevant interests and duties • Identification and management of conflicts integrated within the broader Conflicts Management Framework and the RMF

  15. Conflicts of Interest (SPS 521) Trustee Practices/Observations • No conflicts identified as untenable • Vision tends to be narrow – little regard for perceptions • RSE licensee complexity not picked up in the Conflicts Management Framework • Registers outdated, incomplete and lacking coverage • High materiality thresholds Watch out for:

  16. Investment Governance (SPS 530)Trustee Practices/Observations • Strong due diligence attaching to the selection of investments • Diligent monitoring of investments/performance • Periodic review of investment objectives and investment strategy • A comprehensive stress testing programme and a liquidity management plan are in place and being given effect to

  17. Some reminders from APRA • APRA’s Guidance Material provides examples of better practice • APRA FAQs are a good reference to APRA’s interpretation of Prudential Standards • APRA speeches provide industry with messages of APRA’s expectations and examples of better governance

  18. Discussion

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