ASIC commissioner Cathie Armour has outlined five major issues that the regulator believes should be on the radar and agenda of chief financial officers operating in Australia.
Speaking at the Financial Review CFO Live summit earlier this week, Ms Armour called out climate change as a “systemic risk” for Australia’s financial system.
“As a result, we have all observed that investors require listed companies to disclose meaningful and useful information to enable the physical and transitional risks of climate change to be priced so that capital can be allocated efficiently,” she said.
Even amid the broader rise in demand for environmental, social and governance (ESG) financial products and information, Ms Armour said that the climate change-related risks and opportunities were of particular interest to regulators like ASIC.
She said that ASIC would be focusing on ensuring that climate-related disclosures remain decision-useful for investors and support the fair and efficient functioning of local markets, adding that the regulator would consider enforcement action in certain circumstances.
The second issue that ASIC saw as an imperative for modern CFOs was cyber resilience.
Pointing to the regulator’s recently released 2021 report on the matter, Ms Armour said that the unexpected challenges of the pandemic had disrupted existing plans to grow cyber resilience.
“While there has been a small, but steady improvement in the management of cyber security risk across Australia’s financial market firms, the increase of 1.38 per cent falls far short of the almost 15 per cent improvement targeted for the period,” she said.
With the discovery of the Omicron variant suggesting that continuous disruption may be a new reality, Ms Armour said that ASIC expects CFOS to step up.
“ASIC expects to see a substantial improvement in the management of cyber security risk across Australia’s financial market firms when we begin to undertake our next cyber resilience review, most likely in late 2022,” she said.
Another issue on the list was the continuity of trading operations.
Warning of future incidents akin to the November 2020 ASX outage, Ms Armour urged market participants to implement the measures recommended by the regulator late last month.
“ASIC will be actively evaluating and monitoring the implementation of actions taken in response to the report to ensure that market operators and participants are taking appropriate steps,” she said.
Ms Armour also invited CFOs to consider the opportunities of crafting better digital financial reports.
“Providing digital reports has the potential to reduce the cost of capital, make it easier for investors to navigate reports and provide investors with timely, high quality and consistent financial data in a structured electronic form for analysis,” she said.
The final issue that ASIC would like to see on the agenda of Australia’s CFOs was the LIBOR transition.
The regulator was firm in its expectation that firms cease offering new LIBOR products at the end of 2021, encouraging them to educate staff to ensure that new LIBOR contracts are not offered to clients.
Ms Armour suggested that this issue should also be a focus for any businesses that participate in international capital markets.
“At the very least, you should have engaged with your financial institutions about changing your documentation whether it be for derivatives or your syndicated loan facilities,” she said.
