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Mercer Super pulled up over risk and compliance management deficiencies

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By Rhea Nath
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3 minute read

APRA has imposed additional licence conditions on the $70 billion fund.

The Australian Prudential Regulation Authority (APRA) has imposed additional licence conditions on Mercer Super after its ongoing prudential supervision identified risk management and compliance management deficiencies at the fund.

Mercer Super, which has more than $70 billion in funds under management and approximately 850,000 members, has subsequently acknowledged significant breaches of prudential standards SPS 220 Risk Management (SPS 220), SPS 231 Outsourcing (SPS 231), and SPS 232 Business Continuity Management (SPS 232).

Under the terms of the new licence conditions, Mercer Super must:

  • Develop and implement a remediation plan in conjunction with an independent expert that addresses the deficiencies identified by APRA.
  • Appoint an independent third party to complete an operational effectiveness review of Mercer Super’s risk management and compliance frameworks, following the completion of the remediation plan.
  • Develop a plan to remedy any deficiencies identified in the operational effectiveness review.

According to APRA deputy chair Margaret Cole, the conditions aim to “drive substantial governance and risk management improvements at Mercer Super and protect the interests of its members”.

“Mercer Super has experienced significant growth in recent years, in terms of membership size and assets. It is important that, when preparing to scale up operations, the trustee has the appropriate level of controls in place to ensure frameworks and systems continue to serve the needs of current and future fund members,” she said.

In April 2023, Mercer Super merged with BT Super to become one of the 15 largest funds in Australia.

Cole continued: “APRA expects trustees to have robust risk management frameworks and to proactively manage systems and processes, including in the critical areas of business continuity management and the oversight of service providers.

“APRA is prepared to take strong steps, including taking enforcement action, where a trustee’s operational resilience management is substandard.”

Upon completion of the operational effectiveness review, Mercer Super is required to provide APRA with an attestation from the trustee chair, that the remediation actions are complete and effective, and that the entity is compliant with prudential standard SPS 220, SPS 231, and SPS 232.

The new licence conditions came into force from 27 May 2024.

In a statement, Mercer said it acknowledges the findings of APRA’s review and is “fully committed to taking action on the issues raised”.

“We believe our fund will be stronger and more resilient as a result,” it said.

“We had a program of work underway to accelerate the transformation of our risk management culture and practices, our business continuity planning and management of service providers.

“We will continue to work closely with APRA to finalise and deliver to an agreed plan.”