ASIC has released a consultation paper and proposed regulatory guidance on risk management practices for responsible entities in the managed funds sector.
ASIC Commissioner Greg Tanzer said the need to standardise fundamental risk management practices was essential.
‘This sector has gone through a transformation in recent times, including consolidation, and the ability to identify and act upon risks before they emerge as an issue, is key for businesses and for promoting confident and informed investors,’ ASIC Commissioner Tanzer said.
‘One of the lessons for financial regulators since the global financial crisis is the need to become more proactive and respond to market trends. We think our draft guidance can help responsible entities better recognise and manage the risks they face before they eventuate, and we would like your views on our proposals.’
Consultation Paper 204 Risk management systems of responsible entities (CP 204) and the proposed guidance are based on many current practices of responsible entities, including:
- ensuring risk management systems comprise processes to identify, assess and treat risks
- ensuring these processes are suitable for individual business objectives and operations
- ensuring that risk management systems address all material risks, including strategic, governance, operational, investment and liquidity risks, and
- reviewing risk management systems regularly, and no less than annually, for appropriateness, effectiveness and relevance to individual businesses.
ASIC’s proposals also reflect international standards and developments in risk management.