Whenever accidents, disasters and natural events interrupt data processing activities, one thing is certain, staff are unproductive, customers are disrupted and businesses lose money.

In today's high tech world, data and IT infrastructure are critical.  APRA is introducing a new standard to ensure financial service organisations have effective business continuity plans in place.  Sarbanes-Oxley legislation in the US puts pressure on organisations to ensure effective IT related internal controls exist if they are critical to accurate reporting.

More than ever, managing risk in the IT function will be integral to organisational success. 

Enjoy this issue of InTouch.

Tony Harb

Director, InConsult

• To ensure that Australia's major regulators are held accountable for their actions and powers, the federal government will impose new rules on the 170 or so authorities including APRA, ACCC, ASIC and the  ATO.

• The proposed merger between ARIMA and AIRM has now been ratified.  The new single non-profit body will facilitate expanded member services, more professional development, more education opportunities and better conferences.

• The administrator appointed by the Italian government to restructure dairy giant Parmalat has filed a lawsuit against Citigroup, alleging that the bank actively helped Parmalat's managers to engage in fraud involving at least $US8billion.  The administrator claims that a Citigroup financing vehicle, named "black hole" in Italian, was intended to hide the true level of Parmalat's debt..

• Subject to last-minute veto in federal parliament, international accounting standards will have the force of law for all Australian companies on or after January 1 2005.  The Australian Accounting Standards Board voted to make the entire suite of international standards into Australian accounting standards.

• Some of Australia's biggest listed companies are considering the introduction of individual agreements with directors to avoid the need to obtain shareholder approval to sack them.  

• The role of Internal Audit has grown in significance due to increasing focus on risk management.  Internal auditors believe that ASX Corporate Governance Council guidelines, Sarbanes-Oxley and APRA regulations are encouraging companies to look beyond financial risks leading to more proactive risk management.

• However, a survey by Ernst & Young and the Institute of Internal Auditors, targeted ASX top 200 companies, NZSX top 100 companies and federal, state and local govt entities to better understand how the internal audit functions were evolving.  The survey found 46% of internal audit functions did not have a formal strategy and 11% did not have an audit methodology in place.

• APRA has announced that it will be introducing two new statistical publications on the general insurance industry over the coming year following the introduction of new reporting requirements.

• It appears as though insurers are aiming to maintain their underwriting discipline by acquiring better information on risks.  Insurer Chubb, is developing a central repository of business intelligence, which underwriters can use to make better risk decisions.

• Tom Brown was appointed CEO of Zurich Financial Services Australia.  In his first public appearance, Mr Brown commented on a range of topics, from the increasing costs of corporate governance to the threat of offshore players, which he believes has been overstated by local insurers.

• The adoption of IFRS means that APRA will need to revise its prudential standards and statistical requirements to avoid unnecessary disruption.  APRA  will be releasing a series of discussion papers on the main implications of IFRS for the prudential framework in Australia. 

• Following the venture with Comprehensive Travel in New Zealand, Promina has acquired New Zealand motor vehicle insurance business AutoSure Holdings, a move which further enhances the companies geographic diversification strategy and adds around 1.5% to its premium base.

• Insurance Australia Group has restructured its management team via a 'management reshuffle' to position the company for "its next phase of growth". It is reported that IAG is 'busy researching' potential targets in Asia.   Over the last 18 months, IAG was in strategy risk management mode, focusing on bedding down the integration of its $1.9 billion CGU acquisition to deliver $160 million in annual synergy benefits.

• According to Commonwealth Bank's CEO, Australia is suffering from a frenzy of regulation.  Boards find it difficult to spend time on developing the organisation given all the other governance requirements.

• General insurers, life insurers and banks will have to prove to APRA that they have an adequate business continuity plan in place to cope with a range of events that threaten business continuity.  Submissions on the draft must be in by 30 September and the final prudential standard is expected in November.

• The risk of softening premiums for insurers is now a reality.  According to research by Citigroup Smith Barney, some offshore insurers are cutting prices by up to 30% on the same time last year for large property risks.  Industry analysts were predicting falls of about 10% but a survey by JP Morgan and Deloitte, following the June policy-renewal period, showed that rates for personal lines increased 3% and rates for commercial business decreased 5%.

Risk Management Magazine Feature

Taming the Beast: Regulation

Regulation is a double-edged sword     

– at once a help and hindrance to financial services firms.  But, according to InConsult,  understanding risk management can help tame the regulatory beast.

>> read our feature article

Risk management, APRA compliance and meeting Sarbanes-Oxley requirements just got easier for one of the world's leading insurers!

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