ORFR and member equity
Some practical considerations
This article discusses some practical considerations in the area of equity for members arising from the introduction of the SPS 114 ORFR that we believe the industry will face over the next few years.
It is based on our work helping clients to establish their risk frameworks and ORFR reserves.
The Stronger Super changes introduced a number of Prudential Standards for the superannuation industry. One of those superannuation prudential standards (SPS 114) introduced an Operational Risk Financial Requirement (ORFR) for super funds to be established over a three year period from 1 July 2013. The ORFR is intended to be a reserve to meet the cost of potential future operational losses such as administration errors, fraud events or legal claims against the fund due to inadequate process.