On 31 January 2014, the Australian Prudential Regulation Authority (APRA) announced amendments to its risk management guidance for prudentially regulated entities. The new prudential standard seeks to harmonise and enhance cross-industry risk management requirements for authorised deposit-taking institutions (ADIs), general insurers, life insurers and single industry groups (Level 2 groups). The prudential standard will also apply to conglomerate groups (Level 3 groups). The objective of the new standard is to: ensure that similar risks are treated in a consistent manner across different institutions; reflect recent improvements in local and global risk management practices; and reduce complexity by simplifying and consolidating existing standards, particularly for those groups that operate across more than one regulated industry. The proposed requirements for the designation of a Chief Risk Officer and creation of a Board Risk Committee are expected to enhance the stature and authority of risk management functions within corporations and strengthen risk-based decision-making within regulated entities. The proposal was assessed by the Office of Best Practice Regulation (OBPR) as likely to have a medium impact on the broader economy, primarily due to the expectation that the new requirements will not be onerous and simply confirm accepted industry good practice. The OBPR has therefore given this a D rating (on a scale of A to D) reflecting that the issue is of relatively minor significance in the broader economy with modest regulatory impacts. Average annual ongoing compliance costs are expected to be around $5.8 million, reflecting the incremental cost of designating a Chief Risk Officer. The OBPR notes that as no decision has been previously announced, an options-stage RIS was not required and a single-stage RIS has been prepared. The RIS was prepared and certified by APRA and assessed as adequate by the OBPR. More details are provided in the OBPR’s assessment advice (link below) to APRA.
- Risk management - Details-stage RIS - [ 573KB ]
- Risk management - Details-stage RIS- [ 399KB ]
- Risk management - OBPR Assessment Advice – Details-stage RIS - [ 150KB]
- Risk management - OBPR Assessment Advice – Details-stage RIS [ 130KB]
- Risk management - Deputy Secretary Certification Letter- [ 226]
- Risk management - Deputy Secretary Certification Letter - [ 2.9MB ]