Speech: APRA’s Definition of Risk Culture

APRA published a speech on Thursday 27 May given by Executive Director, Superannuation Division, Suzanne Smith to the ASFA Spotlight on Risk & Compliance event.

In the speech she gives detail on APRA’s definition of risk culture and an explanation of some of the dimensions.

A snapshot:

• APRA’s chief concern when it comes to misconduct, is what it says about an institution’s culture, and whether that culture potentially enables or even encourages damaging behaviour.
• While general organisational culture is of interest, APRA’s primary focus is risk culture, which refers, to an entity’s attitude to risk management.
• This stronger emphasis on risk culture has seen APRA take enforcement action against several of the country’s biggest banks and insurers, including capital and liquidity penalties and enforceable undertakings.

APRA’s Risk Culture 10 Dimensions

1. Leadership – words and actions of board and senior executive. Poor examples do not ‘walk the talk’.
2. Risk appetite and strategy
3. Decision-making and challenge – willingness to give and receive constructive challenge
4. Communication and escalation
5. Risk capabilities
6. Risk governance and controls
7. Responsibility and accountability – clearly understood and discharged across the organisations 3 lines of defence
8. Performance management and incentives – ensuring good risk management behaviour is rewarded and poor risk behaviour faces proportionate consequences
9. Shared values
10. Risk culture assessment

Read the full speech

ASFARisk & ComplianceRisk Culture