Bryan’s Blog: The Current Financial Crisis and the Role of Risk Management

The US regulators have failed to do their job and the US tax payer is to foot the bill. In Australia it is a different story. Should we give APRA a pat on the back?

At RMP we believe APRA should be commended for their adoption of the principles of risk management within their policy initiatives. APRA’s requirements forced banks and insurers to look closely at sub-prime collateralised debt obligations (CDOs) and see through much of the hype coming from Wall Street.

The result? Australian banks have had very little exposure to CDOs and have not been left swathes of bad debt.

Our feeling at RMP is that it is not just APRA that has the edge on our international peers when it comes to managing risk. Enterprise risk management has taken sound hold in corporate Australia and in the Federal public sector. Consequently our private and public sector leaders are making more informed risk-based decisions resulting in risk treatments such as the Future Fund and the Infrastructure Fund and the current focus on innovation. As a result we are less exposed than others and we should continue to make better decisions based on risk as the current crisis works through global markets.

If you would like to hear more about RMP’s thoughts on risk based decision making in the current environment, please contact us. Alternatively you might like to try our RMP Healthcheck to assess the maturity of your risk management framework and hence your preparedness to weather the looming financial storm.