4 minute read
A new year’s prediction: governance will be APRA’s 2026 focus area.
We spend a lot of time thinking about ‘proper’ Non-Financial Risk (NFR) management. What we mean by this is reducing the clutter to help management and boards really understand the levers they need to pull, and how, to better manage NFR. Central to the better management of NFR is good governance, which brings us back to APRA, my old employer. I’m confident in predicting their focus because of the public clues provided recently:
- The Chairman’s recent comment that in four out of every five cases that APRA takes enforcement action is due to governance failures
- The open consultation on reforms to governance standards CPS510 and CPS520
- 22 out of APRA’s 28 enforcement actions since the Royal Commission explicitly reference governance.
Where firms get stuck
The problem for firms responding to this governance focus is identifying where to start. You can pick any one from APRA’s definition of governance practices: “allocation of roles and responsibilities, reporting lines, role of risk management functions (incl. second- and third-line functions), the role of relevant committees, board, and accountable persons“. The term is so broad that my prediction feels even safer, but anyone looking to take practical steps to uplift governance can be overwhelmed. So, where to start?
If the outcome of effective governance is good decision making, then key to the process is having the right information provided to the right people at the right time. Following this logic, the starting point must be timely, accurate, and insightful reporting. The inputs to good reporting are a common understanding of underlying data, trusting that data, and contextualising it.
A cautionary example from APRA
Starting with context, I saw the counter example up close while working inside APRA. The. board of one fund received reports filled with data but lacking direction. The trustees were experienced, committed, and well-prepared. They asked for clarity, but received clutter, so the reports did not help them govern. Ultimately decisions stalled as the consequences of risks weren’t understood.
NFR data in a risk report without context is risk theatre at its finest. In this example a count of incidents, even with the trend over time split by business unit, was an act of pretending to perform risk management without substance. To enable good decision making the reader needs to know the context (so-what?) and the trade-offs inherent in the remedies (now-what?). Incident numbers that don’t talk to risk appetite or tolerances, control remedies, and investment trade-offs are clutter.
Trusting the data
Further, when presented with incident counts or other NFR data, the reader assumes the list is complete and accurate. But the reality is much more opaque. How trusted is the data? In this example how many incidents occur without being recorded? And how is a common understanding created? Does one person’s interpretation of an incident differ from their colleague?
This consideration of the reader extends from incidents to all NFR reporting: control assurance, risk horizon scanning, BCP testing, etc. and is especially true of technology reporting. Technology resilience reporting needs to be understandable for non-specialist audiences, capturing the so-what and now-what to enable better decision making.
How Battleground helps
Battleground can help your governance through better reporting. From monitoring common understanding of NFR data, to enforcing data quality, through to contextualising data in reporting. NFR reporting thereby becomes a source of insight, built on robust auditable data. Our work turns raw data into trusted information for decision makers. We align reporting with tolerances and risk appetite to ensure that every committee and accountable person receives the context they need to act. When the right information reaches the right people at the right time, governance is enabled, boards ask better questions and committees see the full picture. Decisions can then reflect reality.
Set up your new year right
Reporting that enables better governance can be the foundation on which broader governance improvements can be built. Battleground helps you build that foundation. Book at time with the Battleground team below and ensure your new year is set up for success.
