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MFAA Prosper : Mortgage and Finance Brief 11
Step 1: Communication and consultation There may be many stakeholders in your business; there may be only one. Have all stakeholders been included in discussions around your risks? Step 2: Establish the context This means ‘what is your risk appetite?’ Remember – no risk, no return. All the following steps depend on an understanding of your risk appetite. Step 3: Identify the risks ‘Risks’ can be ‘good’ or ‘bad’ and are simply events that, if they happened, would impact your business objectives. So what are all these possible events? List them all; work it through with your team; or bounce ideas off your peers. What are they? Step 4: Analyse the risks This means looking at the risks you identified in step 3 and deciding how ‘risky’ they are to you, based on the context you established at step 2. Step 5: Evaluate the risks Look at how risky the risks you have are and, based on your analysis from step 4, assess whether or not you have enough existing controls in your business around each of the identified risks to make you happy in terms of your risk appetite. If not ... Step 6: Treat the risks If, after careful evaluation in step 5, you don’t think you have enough control around the risks, look at your business and decide how else you might control the risks, to ensure that the risk falls inside your accepted risk appetite. Step 7: Monitor and review Look at the controls you identified in steps 5 and 6. Set up a program of testing those controls to ensure they continue to work, and keep those risks in check! What’s the value of all this? Think of risk management as your ‘roadmap to efficiency’. It is a management discipline just like marketing or HR. If you follow it, you will be ruthlessly efficient in spending your valuable resources where they are most needed. “Things which matter most must never be at the mercy of things which matter least.” German philosopher, Goethe • Greg Ashe has been a risk management and compliance professional in the credit industry for over 12 years, and is the Director of Australia-wide consultancy group QED Risk Services, offering a comprehensive range of services to the Credit Licensee community. www.qedrisk.com.au Weoften describe risk management as ‘compliance’s better-looking sister ’. On the surface of it, the base of how they work is very similar. But where compliance looks at your obligations now, risk management looks at the future in terms of ‘what are the things that haven’t yet hit me?’ When you sign off on your Annual Compliance Certificate – effectively your ACL renewal – you will be asked whether you have adequate risk management systems. Without referring back to the Regulatory Guides, what they are really asking is, “Do you have systems in place that comply with the accepted risk management process?” This is a simplified explanation of the process, the actual parts of which you signed off on in your ACL application and to which you are being asked to re-attest in the renewal. Mor tgage & Finance brief | 47
Mortgage and Finance Brief 10
Mortgage and Finance Brief 12