A reminder to regularly health check: governance, compliance and operations - JHK Legal Commercial Lawyers

29 May 2019

A reminder to regularly health check: governance, compliance and operations

On 22 May the Australian Prudential Regulation Authority (“APRA”) released an information paper on self-assessments of governance, accountability and culture performed by 36 financial institutions to whom APRA wrote and who provided those assessments back to APRA. The self-assessments were requested in response to the May 2018 Final Report of the Prudential Inquiry into the Commonwealth Bank of Australia (CBA). That report found there was not a strong drive for improvement of internal governance, compliance and operations during periods of financial success.

The purpose of yesterday’s paper was to provide institutions with a self-assessment process as an opportunity to strive for improvement and to report on the results. The outcome was somewhat “disappointing” according to APRA.

In short, the culture of a “light touch” approach to operations, compliance and governance is well and truly alive, the weaknesses associated are known and those weak processes are still continuing. Specifically, the self-assessments highlight:

  • non-financial risk management requires improvement;
  • accountabilities are not always clear, cascaded and effectively enforced;
  • acknowledged weaknesses are well-known and some have been long-standing; and
  • risk culture is not well understood, and therefore may not be reinforcing the desired behaviours.

What do you need to ensure?

Overall, complacency must be avoided to avoid penalties, financial loss because of poor risk assessment and to avoid a culture of blaming legal requirements as the reason for slowed financial gain. Such a culture can lead to rushed processes, overlooking of critical legislative requirements and dissatisfied customers.

We have formulated some points for you to consider/check off here: Governance checklist

What does APRA’s reminder mean for you?

If you are a financial service provider, lender, insurer, superannuation provider – it means you will likely come under greater scrutiny as APRA continues their regulatory practices. You should take the time to consider the APRA’s comments and to consider if you are compliant. A copy of the paper can be found Here.

For any person or entity who does not fall under APRA’s regulatory reach, the report is nevertheless a reminder that regulators are cracking down and you might be required to satisfy more conditions to obtain funding.

Greater regulatory measures are not necessarily more onerous, but they can be if you are not prepared with the relevant documents or policies in place.

What can JHK Legal do?

We can:

  1. review your current policies/processes and provide you advice on what needs to be amended/updated or considered;
  2. provide pinpointed advice on a specific issue which might be one of the points in our checklist in the above link;
  3. draft relevant documents at a fixed fee price;
  4. provide you with some comfort to ensure you are taking steps to improve, and help you along the way.

If you would like assistance getting prepared or if you have any questions, please contact JHK Legal on (02) 8239 9600.

Written by Lawyer, Shannon McCarthy