The boards of the companies in the financial services industry must change their culture and look at the "big picture" if they want to avoid risk and achieve stable growth, Risk Board suggested.
Risk Board, an organisation created in 2011 to advise companies within the financial services industry, has identified the relations between the board and the management team as one of the challenges to overcome when managing risk efficiently.
"If the board doesn't drive activity, you often see management going out on its own and although management is growing the business, it may not be not doing it in the right direction," Risk Board principal Bruce Auty said.
Auty explained that there is often pressure on management to deliver positive results, sometimes without looking at risk.
However, after the global financial crisis, regulators are pressuring companies to make sure they don't operate in risky environments.
Recent regulatory changes by the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) have brought extra costs to superannuation funds, insurers, fund managers and banks, which now see the need to operate more efficiently and transparently.
Risk Board is a Sydney-based consultancy firm with eight members that advice companies on how to achieve a stable and risk-safe growth in the current regulatory environment.