Superannuation mergers: developing an integrated merger risk assurance strategy and plan

The pace of consolidation in the super industry has increased in the last 12 months, as funds become increasingly challenged by the lack of scale and exploring their options to improve the outcomes of their members.

Trustee directors and fund executives need to actively manage the risks associated with fund mergers. Good governance activities must be conducted at all stages of the merger.

It is critical to ensure trustees have a robust governance and oversight model.

There are four key aspects to consider.

  1. Governance & Oversight:
    Do you have appropriate governance and oversight to support the delivery of the merger? For example, has the Trustee setup a Merger Steering Committee to oversee the overall program of work, supported by individual workstreams for specific business units such as Operations, Product, Investments and Risk, Compliance and Legal.
  2. Trustee Stakeholder representation:
    Is there appropriate representation across the key Trustee stakeholders? Do you have Line 1 and Line 2 risk representatives, as well as Internal Audit and External Audit support? For example, has the Merger programme of work included appropriate Line 1 and 2 risk specialists to support in the identification and monitoring of the risks associated with the merger? As well as how both Internal Audit and External Audit can help compliment any planned assurance activities from Line 1 and Line 2.
  3. Risk Assessment:
    Has a risk assessment been undertaken to highlight the risks associated with the merger at a program level and at a business unit level? Based on this risk assessment, are the risks associated with the merger material enough to merit a standalone Material Risk assessment as part of the Trustee’s Risk Management Framework?
  4. Assurance across the Merger Lifecyle:
    Has an exercise been undertaken to consider the various types of assurance activities required across the lifecycle of the merger? Pre, during and post-merger, making an informed decision on assurance activities on a risk-based approach.

The merger process requires robust and clear governance arrangements to ensure gaps in activities are identified, as well as flag any duplication of effort.

We recommend Trustees undertake an integrated merger risk assurance strategy and plan. This will allow informed decisions and awareness of the types of assurance the merger will obtain during various stages of the project, from real-time assurance through to go / no-go live assurance.

Benefits of an integrated merger risk assurance strategy and plan

This plan allows for timely, informed, independent constructive challenge and insight embedded into the program’s cadence whilst identifying risks and practical mitigations. It will also help to support clear actionable recommendations for Executive and Board level consideration so risk is reduced and member outcomes optimised.

It should be designed to support reducing ‘assurance fatigue’ and fewer assurance providers undertaking activities. Further, it should reduce costs, both from the use of internal staffs’ time and external service providers.

Types of Merger Risk Assurance Activities:

It is important to conduct assurance activities over merger activities to ensure benefits are realised, errors/impacts to member accounts are minimised and new processes are running effectively. Outlined below is just a few of the activities to consider:

Pre-Merger: Review the governance program to support a successful merger. Key areas include the committee structures and working groups, stakeholder management, change management, adequacy of resourcing, risk, issue management processes are in place, and well defined contingency plans.

Post-Merger: Review the business rules configuration and ensure transactions are processed appropriately and in accordance with the agreed business rules. Ensure BAU activities and staff are clear on any changes in governance, processes and their respective roles and responsibilities.

Developing a merger risk assurance strategy and plan as part of the merger process will help minimise duplication of effort, flag any possible gaps in activities and maximise savings through the merger process.

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3 thoughts on “Superannuation mergers: developing an integrated merger risk assurance strategy and plan

  1. Great article Ian and Andrew and helpful given the amount of activity in the market. Looking forward to working with you both on various merger assurance activity opportunities and providing a level of comfort and value-add to our clients.

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