A question of risk
A speech by John Price, Commissioner, Australian Securities and Investments Commission, RMA Australia and PricewaterhouseCoopers (Sydney, Australia), 22 November 2016
Thank you for the opportunity to speak here this afternoon.
It is probably a common misconception that regulators hate risk. Not so – risk is a part of all business activity. Earlier this year I wrote noting the importance of markets where capital is employed at some risk in order to achieve a return. There’s nothing wrong with that. As long as investors are able to gain a sufficient sense of that risk–reward balance, the market should be allowed to run its course. That’s what it does best.
Similarly, for people we authorise to carry out important roles in the financial sector (e.g. by licensing or registration), the focus is very much on how risk is managed rather than its elimination.
I just wanted to be very clear about this upfront, to provide some context for my thoughts today. I’d like to speak to you about three key items relating to risk, and I’d welcome your comments on each.
First, I’d like to talk about ‘conduct risk’ in the areas we regulate – what it means, its relationship to culture and, most importantly, what we are doing about it.
Second, I’d like to talk about some guidance that ASIC is working on regarding risk management and next steps in that area.
Finally, I want to talk about digital disruption and what that means for risk and compliance. As part of this I want to set out my views on the potential that data analytics and technology has for both regulators and the private sector alike.