It’s not investment if you are not moving forward. It’s just spend.
A survey conducted by Australian management consultancy Bridge Business Consulting, recently found that the vast majority of superannuation funds in Australia are failing to reuse their APRA reporting data internally. Some 63 per cent of those surveyed are treating their APRA reporting requirements as “mostly tactical” and almost 90 per cent stated that they were not using the data for any purpose other than to comply with the APRA submission requirements.
“Mostly tactical”? APRA compliance is entirely tactical. As is often the case, the regulatory compliance dollar is both the easiest to approve and the most painful to spend as it rarely results in any forward momentum for the business.
However, what is initially seen as an onerous data collection, collation and checking activity, actually presents a myriad of genuine strategic business opportunities. The key is how to leverage the data for maximum benefit.
The traditional approach is to throw bodies at the issue. Manually extracting data to spreadsheets, reconciling and submitting forms followed by the high likelihood of APRA rejection and rework. This is manually intensive, disruptive to BAU and high risk. A tactical approach does not move the business forward and those firms going down this route are essentially standing still on the race track. APRA reporting is a complex and ongoing obligation so firms should consider automating it and taking people out of the process to reduce risk.
Firms in pole position are those taking a strategic, data-driven approach to their investment operations, as they understand that an automated reporting solution can deliver more value than simply meeting APRA’s reporting standards. They are automating and managing data from multiple sources, validating it and creating APRA forms in a cost-effective manner, without error and in accordance with APRA’s deadlines. Besides the obvious operational efficiencies that automation brings, they are using this data to not only increase transparency to meet regulatory demands, but to expand product offerings as they have complete visibility of their investments for quicker and better decision making. The ROI analysis for an automated data management solution can be staggering, purely on APRA reporting alone.
Firms that recognise the value of the data they already have are gaining a competitive advantage and are better placed to return additional benefits to members and stakeholders. By having an accurate, granular and holistic view of investment-related data, firms can slice, dice and analyse it to answer challenging questions from senior management, regulators and importantly, customers. They have the ability to produce sophisticated reports, fund fact sheets and dashboards for both internal and external consumption.
Additional look-through capabilities inherent in investment data systems show the underlying exposure to a security, classification, sector or region by offering access to the most granular level of holdings. By understanding this exposure, it allows trustees to better understand their member holdings and make more informed investment decisions. This is especially beneficial where a firm has hierarchical fund or portfolio structures and needs the ability to drill down into multiple layers or look at indirect holdings as well as direct holdings.
While the majority of superannuation funds may be slow in their uptake to leverage investment data beyond meeting regulatory requirements, there are certainly compelling advantages to do so. If firms need the data to report to APRA, the questions firms should be asking themselves is how can we extract the best data and what more can we be doing with this data? Those firms who are leveraging the gold mine of data they are sitting on are certainly racing ahead of their peers.