'Frightened to speak up': APRA raises concerns after risk culture surveys

Risk culture surveys over the past 18 months have revealed differing views on perceived risk behaviours and effectiveness of management processes, according to the Australian Prudential Regulation Authority (APRA).

In one of the surveys, executives believed leaders were appropriately challenging decisions and that constructive challenge was encouraged.

But individual contributors – meaning employees with no people management responsibility – see it differently, indicating more could be done to facilitate an environment that supports constructive challenge and diverse viewpoints within and across all levels of the organisation.

Three-quarters of executives in the same survey believed that sufficient resources had been committed to improving risk management, while legal, risk and compliance employees were far less positive.

“This observation serves as a reminder that the critical ‘voice of risk’ needs to be heard and acted upon, particularly regarding the need for sustainable investment in risk management capability and architecture,” APRA GM of Governance, Culture, Remuneration and Accountability Stuart Bingham said.

He says the findings highlight potential blind spots by executives and a missed opportunity for ensuring that people continue to feel safe to speak up.

“More junior employees might be frightened to speak up, while executives can have an overly optimistic view of how well risks are being identified and managed,” he said.

Mr Bingham, who was speaking at the Financial Services Assurance Forum last week, says for APRA supervisors it is about getting to the root cause of an issue.

“While APRA has the ability to compel answers from the banks, insurers and superannuation trustees we regulate when things go wrong, we expect to see questions being asked and answered internally by these entities well before a problem arises and APRA comes calling,” he said.

“Our observation, however, is this type of inquisitive culture doesn’t always flourish within our regulated population to the extent that it should.”

He says too often analysis of problems doesn’t penetrate to the heart of the issue because of a failure to really ask “why?”.

The risk culture surveys covered 61 regulated entities in banking, superannuation, and insurance.