Risk management failures uncovered in a big bank by the Australian Prudential Regulation Authority (APRA) are equally alive and well in the Australian Public Service (APS) according to the Auditor-General of Australia, Grant Hehir (pictured).
Addressing a meeting of internal auditors in Canberra on the subject of Strategic governance of risk: Lessons learnt from public sector audit, Mr Hehir analysed the findings of past audits conducted by the Australian National Audit Office (ANAO) as well as APRA’s prudential inquiry into the Commonwealth Bank in April this year which was described by the ABC as ‘scathing”.
“The analysis in this paper shows examples of the issues with respect to poor risk management identified by the APRA Prudential Review of the Commonwealth Bank that can be seen in the public sector,” Mr Hehir said.
“While the ANAO has also identified areas of good practice in public sector risk management, there is still much to be done to ensure that the public sector has embedded, effective risk management.”
He said that an effective risk culture in an Agency required risk management that fitted the entity and a risk function that informed business activity across the entity.
“While most of the public service has the guidance and procedures in place, these entities will not realise the benefits if there is inconsistent application of their risk framework,” Mr Hehir said.
He said that lessons learned from past reviews and audit reports suggested that an effective risk culture in an organisation would include key indicators such as clear responsibilities and accountabilities for risk; an effective performance framework linked to risk outcomes; monitoring of implementation of risk treatments, changes in risk ratings and emerging risks; proactivity, not just reactive; learning from their own and others’ mistakes; fit-for-purpose management arrangements that are consistently communicated; and adequate resourcing with a focus on building staff capability.
“An entity’s leadership making comments that compliance is not essential will result in the message being amplified throughout the organisation,” he said.
Mr Hehir’s address to the meeting can be accessed on the ANAO website at this PS News link.
