The Australian Securities and Investments Commission has released guidelines on how financial services licensees can maintain adequate risk systems.

Licensees are legally obliged to have such systems in place, to mitigate exposure to relevant risks and inform business decision-making.

“The guidance promotes the early identification and management of risks by responsible entities to help avoid the adverse consequences that may affect investors,” the regulator says.

“There have been a number of collapses of responsible entities that resulted in significant losses to investors and where we consider inadequate risk management systems to have played a role.”

The regulatory guide – RG 259 – provides guidance on establishing and maintaining suitable risk systems, identifying and assessing risks, and managing these risks.

“We consider that the development of adequate risk management systems is not a ‘set and forget’ or one-off process,” the guide says. “The systems should adapt and evolve to take into account internal changes within the responsible entity and the schemes it operates, as well as changes in the external environment.

“To ensure risk management systems are always current, relevant, effective and complied with, they should be monitored and reviewed as frequently as appropriate, given the nature, scale and complexity of the business and the schemes operated.

“This should be at least annually.”

To see the guide, click here.