What follows is a brief summary of the key points from the ‘Stay Ahead of Risk Curve’ presentation given by APRA.
Risk management and capital management fundamental in the management of an institution. Risk management helps institutions avoid financial difficulties – Capital management provides the buffer once a problem has occurred. It has been a part of the prudential standards for a number of years.
Risk Governance is the way in which risk is managed at a holistic and day to day level across an organisation.
Other developments in the field of risk (specifically relating to financial service organisations)
– Remuneration policy (encourage long term focus)
– Risk Appetite statement (clearly articulated & embedded in operations)
– Assessment of Risk Management Framework (RMF)
– LAGIC (more risk-sensitive capital requirements)
– ICAAP Statement (discloses arrangements in place to monitor & manage risks and the capital held against them, including stress testing & scenario analyis)