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Investment Governance & financial resources over risk events

Friday 18 November 2022

This week the Australian Prudential Regulation Authority (APRA) released guidance on investment governance for superannuation trustees and a discussion paper on financial resources for risk events in superannuation.
Investment Governance

On the release of the
guidance on investment governance APRA Deputy Chair Margaret Cole, “In strengthening investment governance, APRA expects to see trustees having investment strategies that are in the best financial interests of their members, including robust oversight of valuations of assets and improved liquidity management.”

An official letter to industry highlighted some of the key areas SPG530:

In draft SPG 530, APRA has:
  • provided additional guidance to support new focus areas of draft SPS 530, including liquidity management, stress testing and valuations; and
  • integrated the remaining elements of SPG 531 that were not otherwise elevated to SPS 530;
  • outlined how APRA expects RSE licensees will consider material environmental, social and governance (ESG) risk factors as part of their overall investment risk management;
  • reflected industry requests for greater clarity in APRA’s investment governance guidance;
  • sought to maintain key relevant aspects of existing guidance.
Financial Resilience

The prudential regulator said that this discussion paper replaces SPS 114 Operational Risk  Financial Requirement.

APRA proposes that RSE Licensees should hold financial resources in a more 'flexible and efficient' way.

discussion paper reads:

There are heightened risks in the external operating environment, such as pandemics, cyber risk and third-party service provider risks, exacerbated by the small number of critical service providers across the superannuation industry. This is in addition to the increasing complexity of the business operations of RSE licensees, including size, scale and insourcing.