The Australian Prudential Regulation Authority has issued Prudential Standard CPS 220 Risk Management (CPS 220) and Prudential Standard CPS 510 Governance (CPS 510) in final form and is calling for submissions on a proposed risk management prudential practice guide.

The most important of APRA’s proposed risk management enhancements are:
• the requirement that APRA-regulated institutions designate a Chief Risk Officer (CRO) responsible for the risk management function and profile; and
• the requirement that institutions have a Board Risk Committee that provides the Board with objective non-executive oversight of the implementation and on-going operation of the institution’s risk management framework.

APRA has revised CPS 220 to clarify that the CRO can fulfil other roles and responsibilities. Further, CPS 220 has been revised to allow APRA, where appropriate, to consider alternative arrangements for institutions that can demonstrate they meet, in substance, the principles underlying the CRO requirements; such arrangements would be expected to apply to smaller and less complex institutions. APRA has not changed its proposal to require a separate Board Risk Committee and Board Audit Committee.

CPS 220 and the revised CPS 510 will become effective from 1 January 2015.