Supervision The seven deadly sins

Supervision – the seven deadly sins

•!Structure!•!Staff!•!Style !•!Statistics!•!Scope!•!Significance!•!Staying the distance 2

The first deadly sin–Structure

The first deadly sin–Structure

•!Lack of independence!

•!Opaque appointments !

•!Poor governance!

•!Inadequate powers!

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The second deadly sin–Staff

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The second deadly sin–Staff

•!Insufficient numbers!•!Poorly paid!•!Poorly trained!•!Little guidance material !

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The third deadly sin–Style

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The third deadly sin Risk based or compliance

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Rules based!•!Objective !•!Inflexible!•!Lags behind market!•!Duplicates audits!•!Labor intensive!•!Does not prioritize!•!Easy to do!•!Little training!!•!Boring !

Risk based!•!Subjective!•!Flexible!•!Reflects current market!•!Not wasteful!•!Prioritizes activities!•!Difficult to do!•!Ongoing training!•!Fun !

The fourth deadly sin Statistics

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The fourth deadly sin Statistics

Off-site reviews!•!A separate unit?!

•!How much information is enough?!•!What to analyze!

•!Analyze not summarize!

•!Trends!

•!Finding a relevant peer group!

•!And it means what ………..! 10

The fifth deadly sin Scope

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Governance

Investments

The fifth deadly sin On-site scope

•!What determines inspection cycle?!

•!How is it determined?!

•!Are inspections full or partial?!•!Who sets the scope?!

•!Is the auditor consulted? !

•!What are the inputs into the scope?!!!Offsite analysis!!!Previous reviews!!!Industry gossip!!!Media coverage! 12

The fifth deadly sin On-site scope

Areas to be covered!•!Corporate governance!

•!Investments!•!Liquidity!

•!Outsourcing!

•!Solvency and Insurance!

•!Administration and record keeping!

•!Risk Management!13

The sixth deadly sin Significance

This ! ! !or ! ! !This?!

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The sixth deadly sin Significance

Reporting to fund management and Supervisor!•!Report significant matters!

•!Don’t provide a list of minor transgressions!

•!If you can’t answer “which means …....” it probably should not be included!

•!Require reports to be discussed at Board level!•!Require a response and plan of action !

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The seventh deadly sin Staying the distance

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The seventh deadly sin Staying the distance

If it is significant enough to report, it is worth pursuing!•!Allow reasonable time for response!

•!Written response from the Board not the management!•!If action plans have time lines in them, follow up on the date the activity is meant to be completed !

•!Arrange for follow inspection not wait till the next routine inspection!

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