7 September 2022 - APRA publishes Chair Wayne Byres’ speech on risk management

In “Risk management: made to measure”, Mr Byres discussed the challenges faced by the risk management profession at a time when many of the biggest risks faced by financial institutions are difficult to quantify or measure.

His comments included:

• “These days, the term ‘disruption’ is used as shorthand for the recent technological innovations that have suddenly up-ended long‑standing business models and practices. That’s a narrow perspective on the term. Certainly, my experience as Chair of APRA for eight years, and a prudential supervisor for 38, has taught me that disruption to the financial system in some shape or form is almost a permanent state of affairs.”
• “APRA has been spending some time lately examining the availability and quality of data at the largest institutions, including interrogating each institution’s own data from their governance, risk and compliance systems. What we have seen is that … the challenge is less about a lack of data, and more about how to draw together a wide array of data – often produced at a quite granular level – to ‘join the dots’ and produce information and insights that are useful for decision-makers.”
• “A changing climate provides both risks and opportunities for the financial sector. Key to managing those risks and grasping the opportunities is data. Therein lies the rub, because the weakest area in our survey was ‘metrics and targets’. Almost a quarter of respondents reported they had no metrics to measure and monitor climate risks.”
• “We also need risk managers with the requisite skills, knowledge and capability to make something of that data. If I could add to the list, they also need integrity to do what’s right, intuition to sense what’s wrong, and a heathy dose of courage to pursue both. That package of attributes doesn’t come easily. It is therefore essential that we continue to invest in and develop the risk management profession in Australia.”