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Thursday 21 July 2016

16-231MR ASIC consults on proposed guidance on risk management

ASIC today released a consultation paper and proposed regulatory guidance on risk management practices for responsible entities in the managed funds sector.

Consultation Paper 263 Risk management systems of responsible entities: Further proposals (CP 263) and the proposed guidance builds on the proposals in Consultation Paper 204 Risk management systems of responsible entities (CP 204).

The proposed guidance does not impose new obligations on responsible entities but gives more detailed guidance on how they may comply with their current obligations under s912(1)(h) of the Corporations Act to maintain adequate risk management systems.

It outlines our expectations for responsible entities to have:

  • overarching risk management systems in place;
  • processes for identifying and assessing risks; and
  • processes for managing risks.

The proposals are intended to provide flexibility for responsible entities to develop and maintain risk management systems that are appropriate for the nature, scale and complexity of their operations. They also reflect international standards and developments in risk management.

ASIC is seeking to ensure that the risk management systems of responsible entities, include minimum procedures and practices, are adaptable to changing market conditions and remain effective in identifying and managing risks on an ongoing basis.

Submissions in response to CP 263 are due by 1 September 2016.



Responsible entities, as Australian financial services (AFS) licence holders, have an ongoing obligation under s912A(1)(h) of the Corporations Actto have adequate risk management systems.

There is currently no detailed guidance on what is required for responsible entities to comply with this obligation, which this CP seeks to address.

Prior reviews of the risk management systems of responsible entities (see Report 298 Adequacy of risk management systems of responsible entities and 15-020MR ASIC enquires into risk management by responsible entities) identified inconsistencies in the arrangements between various responsible entities, particularly smaller responsible entities, and indicated improvements could be made to some responsible entities’ arrangements.

In 2013, ASIC consulted on proposed guidance in CP 204. However, the proposals were not implemented as we were awaiting the outcome of the 2014 Financial System Inquiry (FSI).

ASIC has decided to consult further on our proposed guidance, taking into account feedback we received in response to CP 204 and with the recommendations of the FSI now available.

Last updated: 21/07/2016 01:00