Within the financial services sector, being financially confident means, you trust your financial institutions and in order to earn that trust, transparency is non-negotiable. To this end, an interesting question was posed at the recent Sanlam Umbrella Fund media-training session:
“The Fund receives clean audit reports every year but reports alone do not always reflect true governance practices. How can a fund ensure that the governance framework of the fund is actually robust and transparent, rather than just “paper-perfect?”
Recognising the significance of this, the Sanlam Umbrella Fund’s Governance and Risk Committee believe that the Fund is underpinned by its foundational ‘rocks’ – overarching principles that guide every decision to ensure sustainability, accountability, and strong performance.
Rock-Solid Governance Foundation
Firstly, the Fund is rooted on a foundation which is underpinned by rock-solid governance. This includes its comprehensive governance framework comprising the registered rules, policies, protocols and other governance instruments. Secondly, the Fund is also underpinned by the ‘Treating Customers Fairly’ principles, and is embedded in everything that the Fund does, with members being at the heart of its processes and procedures.
In addition to the governance framework and the treating customers fairly principles, the Fund also has a Board of Trustees which consists of industry experts who agree to be bound by the Fund’s governance instruments and code of conduct. The skill sets on the Board are diverse, including experience in finance, investments, legislation and regulation. Ongoing training and development for the board members is something that is prioritised by the Fund, as well as the independent Principal Officer, independent Deputy Principal Officer and Fund Secretariat who ensures that Board decisions are carried out efficiently. In addition, half of Board members are independent which reduces conflicts of interest. To ensure that the Fund benefits from continuous expertise, strategic succession planning is included in the governance framework. Fresh perspectives, innovative ideas and diverse skills reduces the risk of governance-stagnation.
Clear and transparent reporting and disclosure
An indication of good governance is transparent reporting and disclosure. Clear reporting to members is done on a regular basis, including the disclosure of investment performance and fees, governance practices and risks. An example of this is the detailed Annual Trustee Report where each of the 11 committees report on their respective focus-areas of oversight, what challenges were faced and how they were addressed and monitored thereafter. An annual Symposium or General Meeting is also hosted by the Fund to engage with stakeholders. These sessions provide open communication about Fund activities, statistics and any changes or decisions relevant to the preceding year of operation. Stakeholders are encouraged to engage directly with the Board on any topic that they seek further information or clarity on. The Fund’s financials are audited by an independent auditing firm, where the Fund discloses its financial status and transactions and the Board and Principal Officer attests to the Fund’s compliance with laws and regulations. The Fund adheres to its fiduciary reporting responsibilities and submits all relevant reports to the appropriate authority.
Strong accountability mechanisms
The Fund has strong accountability mechanisms in place, further enhancing good governance at a Board level. Apart from annual appraisals conducted of Board members, these mechanisms include a Board charter, conflicts of interest register and a Code of Conduct. The Fund Rules together with FSCA directives, conduct standards and individual contracts, bind Board members to conduct themselves with the highest standard of ethics. If they should at any time, fall short of the standard required, then there are measures in place, to be taken against such a Board member. In collaboration with Sanlam Life Insurance (the Sponsor), a confidential whistleblowing mechanism is in place that allows employees of the administrator, Board members, or members of the Fund to report governance failures, misconduct, or unethical behaviour. Feedback from members, beneficiaries, and other stakeholders helps to ensure that the governance framework is operating in their best interest. Regular surveys and communications with members provide insight into how the Fund is perceived and whether the governance structures in place are viewed as transparent and effective.
Fostering a culture of continuous improvement and member protection
Through Fund initiatives and industry seminars, workshops, webinars and conferences, Board members receive ongoing training on issues related to governance best practice, regulatory requirements, and the specific duties of trustees. The annual appraisal process is a tool used by the Board to evaluate their contributions to governance and Fund performance as well as the effectiveness of the 11 committees, the Principal Officers of the Fund and its service providers.
The Fund’s communication strategy ensures that information is shared with members so that they can understand how a Fund operates and what their rights, benefits and obligations are.
In a Fund this size, complaints are inevitable, and the Fund has a Complaints Committee which not only assists with resolving these but also uses these as an opportunity to improve the Fund for its members. This is either through improvements in processes or additional communication and education for members. To enhance member protection through its Investment committee, the Fund exercises oversight in respect of the assets invested and held in the relevant portfolio(s) managed by the relevant asset manager.
Effective risk management and internal controls
The Fund has a comprehensive and stringent risk management framework and process in place. Risks are identified and appropriately scored, and if necessary, interventions to mitigate and / or manage the specific risk are put in place so that it diminishes the overall risk to the Fund. Recently, a risk management and compliance inspection were conducted by the FSCA, the outcome of which confirmed that the Fund is not only compliant, but well managed, and that its risk management practices are sound, concluding that “The Fund is a well-oiled machine.”
Board meetings are well-run by the Chairman, with clearly documented discussions and decisions. Non-board stakeholders, including members, are informed of key decisions affecting the Fund, especially those related to investments, benefit and rule changes. The ongoing robust and transparent process bears testament to the fact that governance and compliance in the Fund is not merely a “tick-box” exercise, but rather a process that is constantly evolving as it may become necessary. The Fund aligns its governance framework and policies against that of FSCA circular PF130 and King codes of good governance principles and practices.
Conclusion
The Fund has established clear and transparent reporting, it fosters an ethical culture of continuous improvement, strengthening accountability mechanisms, and focuses on member protection. This is a lived culture and not merely something to look good on paper or be “paper perfect”. The Fund truly has an effective and robust governance structure that serves the best interests of its members.