Document ID: chunk:federal_register_of_legislation:F2019L01578:body:0:p2
Version: federal_register_of_legislation:F2019L01578
Segment Type: other
Provision Reference: 
Character Range: 2960–6233

Prudential Standard applies to all registrable superannuation entity (RSE) licensees (RSE licensees) under the SIS Act.[1]

    3.             All RSE licensees must comply with this Prudential Standard in its entirety, unless otherwise expressly indicated.

    4.             This Prudential Standard commences on 1 January 2020.

The role of the Board and senior management
    5.             An RSE licensee must at all times have a risk management framework to appropriately manage the risks to its business operations.[2]

    6.             For the purposes of this Prudential Standard, the risk management framework is the totality of systems, structures, policies, processes and people within an RSE licensee's business operations that identify, assess, manage, mitigate and monitor all internal and external sources of inherent risk that could have a material impact on the RSE licensee's business operations or the interests of beneficiaries (material risks).[3]

    7.             The Board of the RSE licensee (the Board) is ultimately responsible for the risk management framework.[4]

    8.             The Board is ultimately responsible for maintaining the solvency of the RSE licensee and ensuring that the RSE licensee's business operations have adequate resources to undertake the activities for which it holds an RSE licence.

RSE licensees that are part of a group[5]
    9.             Where an RSE licensee is part of a corporate group, and the RSE licensee utilises group policies or functions, the Board must approve the use of group policies and functions and must ensure that these policies and functions give appropriate regard to the RSE licensee's business operations and its specific requirements.

Material risks
    10.         An RSE licensee must, at a minimum, ensure that its risk management framework covers all material risks, both financial and non-financial, to the RSE licensee's business operations, having regard to the size, business mix and complexity of those operations.

    11.         An RSE licensee must assess the materiality of each risk with reference to its business operations as a whole, each RSE within those operations and the impact of the risk on the obligations of the RSE licensee to its beneficiaries.

    12.         An RSE licensee's risk management framework must, at a minimum, cover:

       (a)          governance risk[6];

       (b)          investment governance risk[7];

       (c)          liquidity risk, including the liquidity characteristics of investment options offered or proposed to be offered[8];

       (d)          operational risk[9];

       (e)          insurance risk[10];

       (f)           strategic and tactical risks that arise out of the RSE licensee's strategic and business plans; and

       (g)          other risks that may have a material impact on the RSE licensee's business operations.

    13.         Where an RSE licensee conducts business that has a purpose other than superannuation[11], its risk management framework must cover all material contagion risks that any non-superannuation business conducted by the RSE licensee might have on the superannuation business.

Risk management framework
    14.         An RSE licensee's risk