ASIC Report Urges Companies to Place Greater Focus on Non-financial Risks

Published On October 14, 2019

14 October 2019: The Australian Securities and Investments Commission has published its Director and officer oversight of non-financial risk report, in which it urges firms to increase their sense of urgency around the management of non-financial risk.

The report, which is based on ASIC’s direct review of seven large financial institutions, suggests that firms’ handling of non-financial risk is “less mature than required”. In particular, it notes that management teams are often operating outside of the risk-appetite for non-financial risks as approved by the board. Moreover, firms’ reporting of risk is often insufficient or fails to effectively communicate the company’s risk position. Information provided about non-financial risk is sometimes buried in dense board packs, making relevant and key risk information difficult to find and identify.

Among other things, ASIC suggests that the effectiveness of board risk committees could be improved if they met more regularly, devoted a sufficient amount of time to their meetings and were more actively engaged. The report also suggests that boards should take more active steps to hold management accountable for operating within certain risk appetites and that they should take ownership of the form and content of the information they receive.

Launching the report, ASIC Chair, James Shipton, said “boards cannot afford to ignore the oversight of non-financial risks. As we have seen, all risk can have financial consequences. If not well managed, non-financial risks can carry very real financial implications for companies, their investors and customers.” He added that, “while there is no ‘one size fits all’ solution to these findings, boards need to proactively identify and assess their own characteristics and processes.”