Commonwealth to focus on risk management

by |

At the end of last month, the Australian Senate passed the Public Governance, Performance and Accountability Bill 2013. “The PGPA Bill will provide strong foundations for a modern, streamlined and adaptable Commonwealth Public Sector that is able to meet Australia’s changing needs,” Grant Whitehorn, CEO of the Risk Management Institution of Australasia, said in a press release.

The PGPA Bill is intended to replace the Financial Management and Accountability Act 1997 (FMA Act) and the Commonwealth Authorities and Companies Act 1997 (CAC Act) that currently govern the financial management of the Commonwealth. “It will consolidate under one piece of legislation the governance, performance and accountability requirements for the Commonwealth and relevant entities,” according to Whitehorn

“Rather than prescribing detailed requirements, the PGPA Bill creates a financial framework where entities have the flexibility and incentives to adopt appropriate systems and processes that help them to achieve diverse policy and statutory objectives efficiently and effectively,” he added

The new legislation is part of a wider programme of reforms under the Commonwealth Financial Accountability Review, the objective of which is to improve performance, accountability, risk management and service delivery across the government.

The key risk management features of the legislation include the following acknowledgements by the Federal Government, according to Whitehorn:

 

  • “An appetite for prudent risk-taking is crucial for improving productivity and innovation in the public sector.”
  • While public sector managers deal with risk on a daily basis, there is no explicit reference to risk management in the current legislative framework. “The Commonwealth does not have an overarching risk management framework” – and lags behind other sectors in this respect.
  • The Bill will intensify the Commonwealth’s focus on risk management. “First, there is an express duty on an accountable authority to ensure that the entity for which it is responsible has appropriate systems of risk oversight and management.”
  • “Second, the Bill puts in place the underpinnings for a system of earned autonomy which can be applied to Commonwealth entities.”
  • The broad principles for the earned autonomy model include:
  • Streamlining reporting requirements
  • Risk-based monitoring and enforcement
  • A graduated response to regulatory and compliance breaches and performance deficiencies
  • Clear and timely communication
  • Eventually, this system will produce regulatory approaches that are based on clear risk metrics and are tailored to individual entities.

Corporate Risk & Insurance forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Name (required)
Comment (required)
By submitting, I agree to the Terms & Conditions