by Wietske Blees*
Super funds should ensure they have solid data management strategies in place before applying more advanced data applications, such as analytics and member-facing digital solutions, according to Jonathan Steffanoni, principal consultant of legal and risk at QMV Solutions.
He said at a lunch hosted by QMV in Sydney last week that data errors could affect all organisations and they could be costly and complex to fix. In the superannuation sector, common errors often included inaccurate dates of birth or salary details, which could have significant implications for premiums, insurance coverage and eligibility to withdraw funds. While some organisations were better prepared than others, no institution was immune from data risk, he said.
“Every organisation will have some sort of data quality issue. It could be a supplier issue. There is an expectation that [data coming from employers is accurate]but a dummy date of birth is often used by employers who have a transient work force. They might cut corners.”
If the control environment isn’t strong enough to ensure data is of high quality, data could quickly become a risky and expensive liability instead of a valuable asset, QMV said. What is more, if not identified in a timely fashion, these types of errors could filter into monthly or even annual processes. That could impact investors who have left or transferred products, such as those who have moved from a super phase to a pension phase, but it could also impact Australian Tax Office (ATO) and Australian Prudential Regulation Authority (APRA) reporting, for which breaches are very expensive to fix.
Steffanoni said many funds are increasingly embarking on advanced analytics and member facing digital solutions, driven in part by competitive peer pressure. Without a solid data base to feed quality data into these applications, however, the quality of output will be substantially reduced.
“When we talk about data strategy, it is absolutely essential that you have your defences in order. You need to be able rely on a single source of truth […] If you don’t have the confidence in the data that you are starting with, you know for sure that you won’t [get accurate results],” Steffanoni said.
QMV said that, particularly as the Royal Commission enters the superannuation phase, the integrity of data held by funds will be under increased scrutiny.
Similarly, as part of the recently announced postimplementation review of the superannuation prudential framework, APRA may well look to tighten its requirements around data risk management.
“I think that [consultation]might be the [point]where we take something which is soft law at the moment, take it up a level and define some principles-based regulation on how operational risk is managed, including data risk as a key component,” Steffanoni said.
Data management in superannuation and asset management firms will be front and centre at the upcoming Investment Data & Technology Summit in Sydney on August 14. See agenda
*Wietske Blees is the editor at Fund Business, an investment conference company and producer of the Investment Data & Technology Summit.