Automation of Risk Management in The Social Security Sector in Tanzania

Abstract

The paper proposes an automated model of the Risk-based Supervision (RBS) framework for social security sector in Tanzania. The regulator of the Social security sector strives to ensure that social security schemes are sustainable and will not collapse because inherent and residual risks in the sector. The  biggest risk in the risk that the social security scheme will become insolvent. The paper opens with a discussion on the wider concept of RBS with particular reference to more traditional supervisory approaches.

Based on this understanding of RBS, a case is then made for the use of automatic alerts and risk indicators to facilitate early intervention by supervisors. It is anticipated that with automated RBS risk management becomes more proactive and futuristic. Within the proposed model, a descriptive rule table is used which is easily extensible to cover both risks already identified and those that will be identified in future. The rule table includes the risk description, risk parameters, baseline and thresholds. The model is a neutral one with regards to the regulated entity and is therefore applicable to schemes, fund managers, custodians or administrators. The model further proposes a series of alerts that are derived from electronic offsite monitoring.

To drive the model, the necessary data for the regulator and for the regulated entities is proposed together with a modality for collection of such data. The entire model design is also presented both as a graphical depiction and as pseudo code and matched to the current regulators’s infrastructure. The paper concludes with an additional set of recommendations to facilitate the journey to implementing RBS and adopting a forward-looking approach to regulation of social security sector.