'Joining the dots' needed to harness risk data: APRA

The level of data available is often less of an issue in improving risk management than the ability to make connections from the volume of information, Australian Prudential Regulation Authority (APRA) Chairman Wayne Byres says.

“The challenge is less about a lack of data, and more about how to draw together a wide array of data – often produced at a quite granular level – to ‘join the dots’ and produce information and insights that are useful for decision-makers,” he told the Risk Management Association of Australia event in Sydney.

“In promoting a stronger focus on data, metrics, limits and tolerances, we do not want to see executives and boards flooded with numbers. That would not be helpful. Rather, we need risk managers to use that information to provide meaningful insights.”

Mr Byres says “if what gets measured gets managed”, it’s not surprising that difficult-to-quantify risks such as behaviour and reputation, or those where good data is scarce, such as climate and cyber, have less well-developed risk management frameworks.

“Behaviour and culture, and data and metrics, have not traditionally gone hand-in-hand,” he said. “APRA is trying to do its bit to change that.”

Mr Byres says data is also key to responding to climate change risks and opportunities, but almost a quarter self-assessment survey respondents reported they had no metrics to measure and monitor the risks.

APRA is in the final stages of a climate vulnerability assessment conducted with the five largest banks.

Mr Byres says the results, likely to be ready for release in a month or two, provide insights into how loan books will be impacted and how banks envisage responding.

“They also highlight the extent to which issues like the availability of insurance – something that increasingly cannot be taken for granted – can influence the provision of finance,” he said.

Mr Byres will step down as chairman at the end of next month after serving in the role since 2014.