Statewide Super using AI to help identify risk

Thursday 23rd July 2020 Justin Cleveland

The Royal Commission into banking and finance put a fine point on what had been a growing point of concern for institutional investors and superannuation trustees: operational risk.

“The definition of risk has evolved,” says Statewide Super chief risk officer Jason Muir.

Muir has been in finance and superannuation, focusing on risk, for the better part of 15 years, holding audit roles at KPMG, R&C management at BT, and the director of risk advisory at Deloitte. He joined Statewide Super earlier this year as chief risk officer.

“Back when I started my career, risk wasn’t part of the discussion. Now, post-Royal Commission, it is part of every conversation and it happened almost overnight.”

“Because we’re dealing with members’ funds in every transaction. Considering risk has to be part of everything we do.”

Having strong operational risk controls in place is essential, says Muir, especially when you have an important change in legislation that allows members to access a portion of their super balance early. Statewide alone processed more than 25,000 requests.

Controls only matter if the structures that are put in place are followed. “It doesn’t matter how good your controls are, if you have a bad culture it can almost be wiped out,” says Muir.

The future of risk

Without a doubt, there will be changes to the risks in the coming years. “The volume of regulatory changes will pose a challenge for us,” says Muir. “We’ve seen, over a short period of time, big changes that need us to respond quickly.

Risk management has traditionally been about anticipating everything that could go wrong and putting a place in it, Muir thinks there are smarter ways. That’s why he and Statewide Super have begun using artificial intelligence to draw out trend analysis and identify anomalies.

He says they’ve been using it with the high volume of ERS requests the fund has – and continues – to receive, alongside manual controls. “The AI runs tests across the ERS requests to look for problems.

“It’s never going to solve the problem entirely but it’s simply about limiting them.”

Muir says the next step is to move into predictive analytics where they’re anticipating risks rather than merely reacting.

“However, this will never be a purely automated process,” says Muir. “It will be a balance of manual processing and automation.”

Training your team

Muir says that one of his first actions upon joining Statewide was to change the way the organisation approached risk training. His goal was to make it more accessible and seem like less of a chore.

“Training is all about finding out the things that could potentially go wrong in your role.

“It’s about getting people to engage with the risk process.”

Great systems can be undermined by individual behaviour. As soon as remote working was on the table, Muir says they began reviewing processes to look for potential problems. “If anything doesn’t feel right, we needed to find a way to quickly identify and solve it.

“The risk culture we’d put in place before the pandemic paid off with a workforce that was able to adapt quickly and respond to a new operating environment.”

Limiting risk while decentralising

Like most organisations, Statewide Super was forced to go remote when the pandemic concerns first flared up. “We’ve been able to be nimble in responding to the coronavirus because we’re a smaller organisation,” says Muir. “And, because SA has handled the pandemic well, we’ve been able to resume face-to-face communications.”

The fund does offer remote consultations for those members that prefer to keep their distance, but the resumption of in-person advice has been welcomed by those that have partaken.

“I think there’s value in having a central hub because it allows us to service our members in person, but we have a variety of ways that people can contact us. I think COVID-19 has forced people to engage with the technology that already existed.”

Muir says they had to adeptly roll out an online identity verification system that, while challenging, has been good for its members. “I’ve learned to embrace technology; the more we embrace it in the future the more we can achieve for our members. It’s all about efficiency.”

Will Statewide Super continue to operate remotely in the future or are they planning to return to the status quo as quickly as possible? Muir says the Fund is open to all possibilities. “We’re open to flexibility in the future. It’s about being an employer of choice.

“As long as we can deliver the best outcomes for our members, we’re open to flexibility,” says Muir.

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