News eDaily15 Sep 2017

Australia:APRA to sit in at board meetings of financial entities

15 Sep 2017

Five companies in the banking, insurance and superannuation industries are in a pilot programme run by the prudential regulator that would try to assess the risk culture within an organisation.

Under the programme, officials from the Australian Prudential Regulation Authority (APRA) will sit in on board meetings and executive committees to form a view of the culture of the company and see whether it aligns with the board’s own view of their company. They will also spend about three weeks on site at an organisation interviewing staff  “down to the most junior levels”, conducting focus groups with different workers, reported The Australian. The entire review process will take around three months.

Mr Fahmi Hosain, Head of Governance, Culture & Remuneration at APRA, said: “What we’re really trying to answer is: does the institution demonstrate a sound risk culture?”

The pilot programme is based on a similar project run by the Dutch central bank.

Mr Hosain said: “We think the board and executive committee is absolutely critical. They themselves — as a construct of cultural influence — are huge. What are their behaviours? How do they interact with one another? And what sort of signals are they inadvertently, or rather subconsciously, providing down the line, which are affecting culture down the organisation?

“Our on-site footprint will be much bigger when it comes to risk culture,” he said.

Culture at financial organisations has grown to be a key focus for APRA which has warned that rampant risk-taking and the ensuing brand damage can risk the stability of an organisation. Mr Hosain said where APRA had found weak policies in regards to risk frameworks, it would offer “band aid” solutions as it would uncover “another permeation of bad culture in another area of the organisation”.

APRA plans to incorporate its pilot programme into its business-as-usual supervisory work by September next year.

Mr Hosain said APRA’s skill set is mainly economists, lawyers and actuaries, and the regulator would bring in behavioural psychologists, who would complement APRA’s traditional area of expertise.






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