Managing Risk and Resilience

Managing Risk and Resilience

 

What is Resilience?

In it’s generic form, resilience is the ability to recover quickly from a particular kind of stress caused by setbacks and adversity. Resilience is the ability to be successful both personally and professionally, in the midst of a high-pressured, fast-paced and continuously changing environment.

Resilience in the Australian Financial Services sector

After a decade of regulatory scrutiny of business models, management oversight, capital resiliency and loss absorption capabilities, many of the risks that precipitated the financial crisis are now being better managed.

Yet, in order to even better understand, regulate and manage the Financial Services industry post Royal Commission into Misconduct into the Banking, Superannuation and Financial Services industry, the Australian Government established a Capability Review. There were 24 recommendations put forward in the Review, 19 of which were directed at APRA, with resilience on the agenda.

When APRA released its Corporate Plan in August (2019), it identified 4 x strategic areas to improve. Maintaining financial system resilience was at the top of this list. Cyber-resilience across the financial system also featured.

Can resilience be measured?

As above, Regulators are increasingly looking at whether financial institutions have the right data and analytical capabilities to properly identify, measure and manage potential risks and resilience. They are taking a closer look at whether decision-makers have the infrastructure – including the right systems, processes and people – to help ensure a high degree of management attention on managing risks.  So what does a resilient organisation look like?

What are the attributes of a resilient organisation?

Managing risk and building resilience can be best achieved by considering the following 5 key attributes of a resilient organisation: Prepare, Prevent, Protect, Practice and Pivot.  In addition to this APRA identifies a three dimensional approach to resilience which takes into account Financial resilience, Operational Resilience and Cultural/Organisational Resilience.

Challenges

The financial services industry continues to face some very challenging internal and external risks and therefore needs to remain ahead of the game to be resilient. Good data, technology, people and culture will go a long way to ensuring that even though the risk profile has continued to change, those in risk management will be able to forge ahead.

 References

 https://www.sheffield.ac.uk

 https://home.kpmg/au/en/home/insights/2019/03/resilient-enough-fs.html

https://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinion-files/7552.pdf

https://www.rba.gov.au/speeches/2018/sp-ag-2018-10-30.html

https://www.apra.gov.au/media-centre/speeches/building-resilience-three-dimensions

https://advisory.kpmg.us/articles/2019/from-managing-risk-to-building-resilience.html

https://corrs.com.au/insights/did-the-banking-royal-commission-awaken-the-sleeping-giants-asic-and-apra-publish-corporate-plans-2019-23

https://www.apra.gov.au/apras-response-capability-review-report

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