Perspectives

SUPERANNUATION

The Head of APRA’s Superannuation Division, Helen Rowell recently reported in the Australian Financial Review that APRA’s key focus for 2014, would include:

    • Investment & Liquidity Risk: Superannuation funds need to match their investment risk profile to meet the liquidity and cash flows requirements of their ageing membership’s post retirement income needs.
    • Governance: APRA will scrutinise the quality of fund’s governance practices including the independence of directors and efficacy of Boards,  including attendance at board meetings. The Federal Government recently released a Discussion Paper*, calling for appropriate representation of independent directors on Trustee Board’s and for more transparent management of conflicts of interest, including documentation covering the scope, quality and management of conflicts of duties and interests.
    • Insurance: APRA is calling on superannuation funds to review product offerings, as well as the basis for tendering and selecting insurers.  APRA recommends that super funds should assess whether insurance products are sustainable for members and the industry, as well as the cost of insurance as the surge in claims in the past few years has triggered premium price increases for many funds. APRA also identified room for improvement in the quality of data that super funds provide to Insurers.

Proper planning will  ensure that the above risks are managed.  Ask Lancaster Partners how we can assist you to ensure that your Super Fund is governed consistent with APRA’s prudential focus and requirements.

*The Government Superannuation Discussion Paper dated 28 November 2013, titled: Better regulation and governance, enhanced transparency and improved competition in superannuation can be found at http://www.treasury.gov.au.

DATA RISK MANAGEMENT

Big Data is the term for a collection of data sets so large and complex that it becomes difficult to process using on-hand database management tools or traditional data processing applications.  Everyday, we create 2.5 quintillion bytes of data–so much that 90% of the data in the world today has been created in the last two years alone. This data comes from everywhere: from sensors used to gather climate information, posts to social media sites, digital pictures and videos posted online, transaction records of online purchases, and from cell phone GPS signals to name a few. This data is big data.

Big data has three dimensions:

 Variety: Big data extends beyond structured data, including unstructured data of all varieties: text, audio, video, click streams, log files and more.

 Velocity: Often time-sensitive, big data must be used as it is streaming in to the enterprise in order to maximise its value to the business.

 Volume: Big data comes in one size: large. Enterprises are awash with data, easily amassing terabytes and even petabytes of information.

Big data volumes are a constantly increasing target, highlighted by:

 Walmart handles more than 1 million customer transactions every hour, which is imported into databases, containing more than 2.5 petabytes (2560 terabytes) of data – the equivalent of 167 times the information contained in all the books in the US Library of Congress.

Facebook handles 50 billion photos from its user base.

There are risks and challenges associated with Big Data that must be managed.  The challenges typically include:

 Data capture, processing, sharing, retention, publication and disposal.

 Data privacy and fraud continues to be an important issue, and recent revelations of major data fraud (e.g. US retailer Target) have further heightened awareness.

 Business models based on past data may not necessarily predict the future. Good judgement will continue to be required to assess the validity of assumptions based in past data.

 Big Data or the technology deployed to implement it cannot alone bring about change; they merely indicate the possibility of change. The success for innovation lies in having the courage and judgement to trust the insight gained, and the will to implement it.

Big data is more than a challenge; it’s an opportunity to find insight in new and emerging types of data, to make your business more agile, and to answer questions that, in the past, were beyond reach. Until now, there was no practical way to harvest this opportunity.  As Lancaster Partners how can deliver real insights and value to improve your data risk management capability.   

 Internal Audit

The new recommendation by the Australian Security Exchange (ASX) Corporate Governance Committee for listed entities to disclose whether they have an internal audit function will deliver a long overdue boost to the governance standards of around 1,800 Australian small and medium-sized companies.  The recently released third edition of the ASX Corporate Governance Principles and Recommendations introduced Recommendation 7.3, which states that a listed entity should disclose if it has an internal audit function, how the function is structured and what role it performs. If it does not have an internal audit function, the entity needs to disclose that fact and the processes it employs for evaluating and continually improving the effectiveness of its risk management and internal control processes. The new recommendations apply to listed entities from 1 July 2014.  As a leading practice document, IIA-Australia believes the new ASX guidelines are likely to affect all entities across Australia, not just listed entities.  Government regulators are likely to take note of this inclusion as are not-for-profit organisations and private companies.

While establishing a dedicated internal audit function might not be cost-effective for many small companies, Lancaster Partners provide right sized internal audit services focused on your key risks to assist you to achieve sustainable business growthAsk us how we can support your future business growth.