But while these public pension managers have become quite adept at managing actuarial processes and employing sophisticated investment strategies, many still struggle with effectively administering benefits.Overpayment and benefit fraud remain material issues that, unless detected, can undermine even the best-managed pension fund. And fortunately, there are technologies available to help pension managers control the risks inherent in benefit administration.
The key here is knowing what to look for in the benefit payment data and choosing the right technology with which to do it. To improve fund benefit management, some administrators have turned to business intelligence (BI) technologies, while others are currently relying on the automated controls in their enterprise resource planning (ERP) systems. But are these the right solutions?
Business intelligence vs ERP
In the case of BI and ERP technology systems, the limitations are quite staggering.BI technologies inherently rely on data aggregations, and aren’t intended for detailed transactional use. While BI systems can provide a broad view of the landscape and might help find a haystack in a field of data, it won’t find the needles within the haystack.
ERP modules aren’t cross functional, as they only analyze data in an underlying database; improperly-set controls commonly lead to desired exceptions failures; don’t provide an independent check against transactional integrity; and unless an out-of-the-box module is actually configured correctly, its effectiveness is severely hampered.
Continuous Monitoring as a Solution
When it comes to seizing control over benefit administration, continuous monitoring of transactional data – which delivers sustainability, modernization and control – is a public pension plan assurance tool without an equal.By implementing such a continuous monitoring system, pension professionals can gain immediate insight into the transactional data underlying their business processes, moving from a reactive traditional model to one that’s immediate and proactive. Furthermore, administrators can more easily identify high-risk activities, flag weaknesses for further review, and address issues before they escalate into significant problems.
In practice, this approach guides administrators as they struggle to allocate their already scarce resources. Knowing which areas of potential concern show the strongest deviation, whether at the regional or business unit level, managers can target their attention where it’s needed most. Armed with this advanced knowledge, fraud, waste and abuse can be more quickly identified and addressed. And just as important, this continuous analysis approach provides a foundation to effectively prevent and mitigate future instances. By ensuring the right person is focused on the right data, a continuous monitoring system can help public pension managers achieve operational efficiency.
Implemented correctly, the benefits of a continuous monitoring system can also be leveraged to augment a plan’s financial reporting capabilities. With an added ability to drill down to the underlying data, cutting-edge visualization tools allow for the automatic generation of easy-to-read, complete and accurate reports.
Best Practices
To sustain these significant operational benefits over the long term, pension plan managers should consider adopting four key best practices when deploying a continuous monitoring system:1. Secure Executive Sponsorship. Key organizational leaders should make continuous monitoring a core process and participate in the initial discussions with prospective partners to clearly articulate the goals and objectives.
2. Prioritize Test Areas. Gather the key stakeholders from IT, compliance, finance, risk, and audit so that the organization’s resources are properly aligned.
3. Envision Sustainability. Establish a plan for ongoing growth and support of the continuous monitoring program for the long term.
4. Document Results. Set benchmarks so that the organization can demonstrate a return on its investment.
The data-driven, analytical proficiency required of modern pension professionals is quite exacting. Technologies intended to assist with the actuarial and investment processes have received a lot of attention over the decades, often at the expense of the seemingly forgotten benefits administration process. However, with the advent of continuous transaction monitoring, these operations professionals now have the technological tools necessary to deliver pension plan assurance as they evolve to become “data whisperers” within their organizations.
