The future health of Australia's financial services industry will therefore be dependent upon improvements in ERM.
The survey was conducted amongst delegates at the Actuaries Institute Enterprise Risk Management Seminar yesterday. Global economic weakness and Australia's longevity crisis were cited as the top two risks for the Australian financial services industry.
Two out of five respondents believed Australia's financial industry performed above average by international ERM standards however only 6 per cent saw Australia as a leader in the field.
"Europe and the United States are more advanced with implementing ERM compared to Australia, so there is more work to be done in extending the reach and depth of ERM in Australian business," Actuaries Institute chief executive Melinda Howes said.
The Institute defined ERM as the process by which organisations assess, control, exploit, finance and monitor risks from all sources for the purpose of increasing the organisation's short and long-term value to its stakeholders.
The survey also revealed that 34 per cent of risk professionals believed the biggest opportunity for improvement by Australia's financial services organisations was in ensuring risk considerations influenced strategy and business planning.
In addition, another 19 per cent believed appropriate governance, review and adjustment of the risk model was needed.
"Australian financial services organisations need to ensure ERM practices are part of their company DNA," Ms Howes said.
"ERM means responding to your environment and optimising opportunities, not just downside protection. Risk considerations should be part of every business decision made by an organisation and should be fundamental to business strategy - this includes upside risk."
Over one third, 38 per cent, said retail banks had the most robust ERM practices, followed by general insurance companies at 22 per cent and life insurance companies at 19 per cent.
Conversely, 26 per cent of respondents highlighted superannuation funds as the area that needed the most improvement and another 26 per cent said the same for investment banks.
In June, Ms Howes told InvestorDaily that superannuation funds were taking a more holistic approach to ERM, as recent developments in regulation required them to make ERM a key priority.
"We've got the new prudential standards for super funds where they've got to have a risk management framework and the board has to sign off on it so there's a real focus on that," she said at the time.
"Operation risk is an issue that APRA are now looking at - making super funds hold reserves for operational risk so that's quite new and actuaries are working with funds to see how much to hold there."
