Document ID: chunk:federal_register_of_legislation:F2019L01578:body:0:p4
Version: federal_register_of_legislation:F2019L01578
Segment Type: other
Provision Reference: 
Character Range: 9002–12174

19.         An RSE licensee must maintain an up-to-date risk appetite statement that covers the RSE licensee's business operations and each category of material risk. The risk appetite statement must be approved by the Board.

    20.         An RSE licensee's risk appetite statement must, at a minimum, articulate:

       (a)          the degree of risk that the RSE licensee is prepared to accept in pursuit of its strategic objectives and business plan, giving consideration to the interests of beneficiaries (risk appetite);

       (b)          for each material risk, the maximum level of risk that the RSE licensee is willing to operate within expressed as a risk limit that, where possible, is based on a measurable limit of the risk remaining, after taking into account the mitigants for the risk where appropriate (risk tolerance);

       (c)          the process for ensuring that risk tolerances are set at an appropriate level, based on an estimation of the impact on the interests of beneficiaries in the event that a risk tolerance is breached and the likelihood that each material risk is realised;

       (d)          the process for monitoring compliance with each risk tolerance and taking appropriate action in the event of a breach of the RSE licensee's risk tolerance; and

       (e)          the timing and process for review of the risk appetite and risk tolerances.

Risk management strategy
    21.         An RSE licensee must maintain an up–to-date RMS for its business operations that covers each material risk identified under paragraphs 10 to 13 inclusive. The RMS must be approved by the Board.

    22.         An RMS is a strategic document that describes the RSE licensee's strategy for managing risk and the key elements of the risk management framework that give effect to this strategy. At a minimum, an RSE licensee's RMS must describe:

       (a)          each material risk identified under paragraphs 10 to 13 inclusive and the RSE licensee's approach to managing these risks;

       (b)          the policies and procedures dealing with the following risk management matters, including the date when each policy or procedure was last revised, the date that it is next due for review and who is responsible for the review:

           (i)            the processes for identifying and assessing material risks and controls;

           (ii)         the process for establishing, implementing and testing mitigation strategies and control mechanisms for material risks;

           (iii)       the process for monitoring, communicating and reporting risk issues, including escalation procedures for the reporting of material events and incidents;

           (iv)        the mechanisms in place for monitoring and ensuring ongoing compliance with all prudential requirements[13]; and

           (v)          the process for ensuring continued alignment between the risk management framework and the business plan;

       (c)          the role and responsibilities of the risk management function;

       (d)          the relationships between the Board, board committees and senior management with respect