APRA has published an article discussing the results of its survey of 18 authorised deposit-taking institutions (ADIs) between October and December 2021, which invited all employees in these ADIs to share their views on their organisation’s risk management practices.
The five largest banks took part in the risk culture survey, along with 13 entities consisting of a mix of regional banks, foreign bank subsidiaries/branches, mutual banks, credit unions and building societies.
APRA says that having a strong risk culture is recognised as critical for effective risk management, and broader organisational success and reputation. It is for this reason that APRA has focused on transforming governance, risk culture, remuneration and accountability (GCRA) in recent years.
APRA says the survey results indicate that employees think some of the tell-tale markers that contributed to the mismanagement of non-financial risks, identified by the Final Report of the Prudential Inquiry into the Commonwealth Bank of Australia (CBA) in 2018, are still prevalent today. These include instances of lack of clarity regarding risk management roles and responsibilities, and less-than-effective risk management frameworks and practices. Background.
APRA says there was a clear correlation between the risk culture survey results and APRA’s supervision experience of that entity. That is, areas where employees had lower levels of agreement, for example, in a particular risk culture dimension, or a specific business unit/functional area, were often areas for improvement that had been previously identified through APRA’s ongoing supervision activities.
APRA summarised the key risk culture survey insights as follows:
1. Executives are overconfident regarding their entity’s risk management capabilities;
2. Risk management practices vary widely;
3. Executives are prone to blind spots;
4. Risk management roles and responsibilities require further clarity;
5. Executives and individual contributors experience decision-making and constructive challenge differently.
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Author: David Jacobson
Principal, Bright Corporate Law
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The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.
