The Australian Prudential Regulation Authority (APRA) recently released prudential practice guides (PPGs) for superannuation trustees in the areas of risk management, capital, adequacy of resources and fitness and propriety.

The guides are intended to assist superannuation trustees in satisfying licence conditions and operating standards under the Superannuation Industry (Supervision) Act 1993 and relevant SIS regulations.

Under the Superannuation Prudential Practice Guide – SPG 200 – Risk Management, APRA states that trustees are responsible for risk management frameworks, including methodology and governance, and for instilling a strong culture of risk identification and management throughout a fund.

As part of a trustee’s risk management framework, APRA recommended establishing various control mechanisms, including: top-level reviews of the trustee’s progress towards risk management objectives; a system of clearly defined management responsibilities and accountabilities; as well as activity and procedural controls, including performance standards and business metrics for each business arm and for the interactions between each outsourced service provider.

Segregation of duties is also an important component of an effective internal control system, APRA noted.

“Assigning conflicting duties to individuals or a team may lead to the concealment of losses, errors or inappropriate actions,” the risk management guide said.

“APRA envisages that any areas of potential conflicts of interest would be identified, minimised and subject to careful independent monitoring and review.”

However, in limited circumstances, such as small, simple, low risk activities, adequate segregation may not be achievable, APRA noted.

“In these circumstances, the frequency of oversight from the Board and senior management would typically be increased.”