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She expressed concerns on a range of matters including: policies and processes relating to expenditure charged to members (fund level expenditure data is now being publicly released by APRA as part of its annual superannuation statistics publication); the robustness of valuation governance and liquidity risk management processes; the underdevelopment/required modernisation of operational systems; operational risk and risk culture; and the robustness of board governance processes including nomination and appointment of directors, board renewal and tenure.
She noted “As Chairs you set the tone from the top in your organisations. You oversee the creation of policy and processes around expenditure. You have oversight of how your businesses are run, including how the executive spend and invest members’ money. Decisions made here have direct implications for members. Your role is critical.”
Over 2024-25 APRA will be undertaking a review of the core governance prudential standards across banking, insurance and superannuation. It will be interesting to see what comes out of this. The comments re investment in operational systems were of note – APRA’s new CPS230 standard coming into effect this year has been driving a significant effort to review/uplift operational resilience across the sector.
No doubt there will be some observations that we can reflect on in the NZ context as our industry grows.
A more overt regulatory focus (beyond standard licencing conditions) on operational resilience will be coming – in the banking sector the DTA’s non-core standard for operational resilience is an example.
The RBNZ managed funds survey data for Sept 24 noted continued growth in the local Managed Funds sector +15% year-on-year to $307b. If we are to avoid some of the issues APRA is seeking to deal with, then as we continue to scale FUM locally (and potentially broaden the universe of investment options for New Zealanders) then firms’ governance and operating models must also evolve – this includes ensuring an appropriate level of investment in firms’ operating platforms and broader systems capabilities (bigger/more excel spreadsheets are not the answer).
