1. AIST Governance Group APRA Prudential Standards –
Industry Scorecard 12 months on
15 October 2014
Stephen Glenfield, General Manager South-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
Watch out for:
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

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