Get on top of non-financial risk: ASIC

A new ASIC report reveals company boards need to apply more focus and urgency to non-financial risk.

ASIC's Director and officer oversight of non-financial risk report shows company management operates outside of board-approved risk appetites for non-financial risk "all too often" and calls on boards to actively hold management to account for not operating within risk appetites.

However, the report - which examined 29,000 documents of financial services firms and conducted 60 interviews with selected executives - also found reporting of risk against appetite "did not effectively communicate the company's risk position."

"Boards need to take ownership of the form and content of information they are receiving sot that they can adequately oversee the management of material risks," ASIC said.

Additionally, the report noted material information about non-financial risk was difficult to find within "dense, voluminous" board packs, and called for improvements in the effectiveness of board risk committees (BRCs).

"BRCs should meet more regularly, devote enough time and be actively engaged to oversee material risks in a timely and effective manner," ASIC said.

"Boards cannot afford to ignore the oversight of non-financial risks," ASIC chair James Shipton said.

"As we have seen, all risk can have financial consequences. If not well managed, non-financial risks carry very real financial implications for companies, their investors and customers."

Shipton added that with the report offering no "one size fits all approach", it was up to boards to proactively identify and assess their own characteristics and processes.

"Our report concludes with a series of questions that all public companies might ask themselves. Not all will be relevant to every company, but many will be," Shipton said.

"We acknowledge that there are no 'easy fixes' to some of these issues. However effective oversight and management of non-financial risk is not novel or impossible.

"Companies have managed some of these risks well in the past and continue to do so today. We hope this review provides boards with a useful roadmap to achieve this."

Read more: ASICJames Shipton
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