Super funds need to address risk spectrum

Rewarded risk also requires consideration

By Darin Tyson-Chan
Wed 26 May 2010

The whole risk spectrum needs to be properly assessed by super funds.

Superannuation funds cannot properly address the risks they face without acknowledging every type of risk they are exposed to, according to the partner of a leading accounting firm.

"Traditionally, risk has just been looked at in isolation. It's not just about compliance and legislation, it's about strategy, continuity, environmental risks and things such as that," Deloitte partner superannuation and advisory services Tony Brain said.

"You need to look at the different risks and how they interact with each other and the impacts they might have on each other," he said.

In Brain's experience, he said superannuation funds have been getting better at identifying the strategic risks and challenges, but said they still weren't necessarily linking those factors with other risk exposures like their outsourcing arrangements.

In addition to examining risk as a whole, Brain said super funds needed to focus on more than just risk avoidance measures.

"The risk management philosophy you have needs to very much focus not only on the avoidance of risk ... but also on risk taking and the assessment of that risk taking in a value creation sense," he said.

According to Brain, super funds could see some tangible benefits if they did address their risk exposure properly.

"[It will] reduce burdens on the operations of the business because it becomes a much more efficient and effective exercise - everyone knows where they stand, everyone shares in it, and everyone gets involved," he said.

"This can potentially reduce costs to the organisation both in terms of the cost of running it and also missing risks and the consequences of those."

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