The Australian Prudential Regulation Authority (APRA) will intensify efforts to curb excessive corporate risk-taking that could endanger the financial sector’s stability.

Actions include pilot on-site culture reviews of APRA-regulated businesses, discussions with senior management on areas of concern and providing suggestions on improving risk culture.

“Although APRA already considers risk culture as part of its ongoing supervisory activities, it intends to refine and sharpen its approach to assessing risk culture,” the prudential regulator says in an information paper on risk culture.

“APRA expects this more intensive review will enable it to better anticipate potential risk issues, and strengthen its forward-looking supervisory approach.

“In doing so, the potential for loss from unbalanced and ill-considered risk decisions is reduced, potentially adverse outcomes for depositors, policyholders and superannuation fund members can be avoided, and threats to financial stability are eliminated.”

The 26-page information paper, released last week, provides a snapshot of practices regarding risk culture in insurers, banks and superannuation funds.

The paper says the understanding and management of risk culture is still in its early stages and several companies are grappling with how best to identify and manage weaknesses.

“Each individual institution has its own risk culture, and each risk culture should ideally reflect the fact that each institution has its own business objectives and values,” it says.

“APRA therefore has no intent to try to impose a common risk culture across prudentially regulated entities, or prescribe the specific characteristics of a ‘good’ risk culture.

“However, it is likely… APRA will over time identify practices and approaches that are associated with a sound risk culture, and will share these observations with regulated institutions and other relevant stakeholders.”