Several weeks ago, we released our inaugural report into risk management practices in local government.

Whilst there were many opportunities for improvement, all major stakeholders in local government have been very supportive of our initiative and are very keen to promote good risk management practices in local government.  We'll keep you posted.

Enjoy this issue of InTouch.

Tony Harb

Director

Need a little motivation?  Here goes!

There are three kinds of people: Those who make things happen, those who watch things happen, and those who ask, "What happened?" Casey Stengel

The best way to predict the future is to create it. Peter Drucker

We cannot solve our problems with the same thinking we used when we created them. Albert Einstein

Risk, Governance & Compliance

> At the Ri$k Capital 2006 conference in Paris, a SAS  global survey of 339 financial services executives confirmed the benefits of ERM which included improved performance management, better risk-based pricing, and reduced capital allocation and credit loss. 

> The revised Exposure Draft Anti-Money Laundering and Counter-Terrorist Financing Bill has been released and it addresses a number of problems previously identified.  However, there are still concerns about how to interpret some parts of the Bill and its impact on the financial sector in Australia. 

> How long does it take to recover from a bad reputation? Executives around the world believe it takes companies 3.2 years to recover from a crisis that damages their reputation, according to research by Burson-Marsteller.

> A study has found that 69% of CEOs and CFOs are now signing off statements required under ASX corporate governance guidelines.  The majority are also signing off on non-financial issues such as workplace safety, greenhouse gas emissions and staffing issues.

Audit 

> The AUASB has released AGS 1070 "Special considerations in the audit of risk management requirements for registrable superannuation entities and licencees". The guidance statement identifies certain responsibilities of the auditor, and provides guidance in the planning, conducting and reporting on Risk Management Strategies (RMS) and Risk Management Plans (RMP).

> A Sarbaes-Oxley study found that whilst overall compliance costs fell 16 percent last year, audit fees rose by 16 percent. Audit fees were "the single-biggest category of costs."

> The American Institute of Certified Public Accountants has approved eight new "Risk Assessment Standards" for the audits of private companies and non-profit organizations. The new standards, which the AICPA will make available in March 2007, will require auditors to use a "rifle" approach to detecting problems in the financial statements of non-public-issuers, rather than a "scattergun" approach.

Information Technology

> A computer error recently crippled trading in Japan's government bond market for more than two hours, just months after the Tokyo Stock Exchange suffered a run of similar flaws. Analysts estimate that Japan Bond Trading handles about 60 per cent of all trading in Japan's treasury market, the world's largest. The error raises new concerns about the ability of Japan to handle its role as East Asia's largest and most sophisticated financial market. It also highlights, once again, the failure of Japanese financial companies and exchanges to make timely upgrades of many of their outdated and complex computer systems.

> According to News Ltd reports, the banking details of thousands of Australians have been exposed following a blunder by Australia's peak internet crime-fighting agency. The account details of 3,500 customers from 18 banks were lost when a classified computer dossier on Russian mafia internet scams was misplaced by the Australian High Tech Crime Centre (AHTCC).

Insurance, Banking and Finance

> APRA's recent Quarterly General Insurance Performance publication indicates insurance profitability declined for the March 2006 quarter. The industry's annualised ROE is now 11.7%, compared to 13.6% for the same period last year.

> The US assistant treasurers and corporate risk managers are hooking up with the insurance industry to try to get Congress to strip the current insurance regulatory system of red tape. If it succeeds, could offer companies the chance to buy coverage from a federally regulated insurer rather than one ruled by as many as 50 state commissioners.

> According to Moody's, worldwide, credit quality improved last quarter driven by rating actions in the Asia-Pacific and Latin American regions. But North American firms appear poised for more downgrades than upgrades. .

> According to PWC, too much regulation is the greatest risk facing the financial sector today.  A global survey of investment bankers has found 'regulatory overkill', along with government interference in world markets, is the source of greatest risk to banks and other financial institutions.

Local Government

> Our recent survey of local government authorities in New South Wales has revealed that many councils are undertaking risk management initiatives, but overlooking many business and operational risks due to a focus on insurance and liability risk issues.  InTouch readers can contact InConsult for a free copy of the report.

> A Local Government Financial Sustainability Task Force has been established involving key stakeholders to review shortfalls in funding infrastructure. An inquiry had found that more than a quarter of NSW councils were unsustainable under existing funding arrangements. It also found NSW councils faced a $5.3 billion backlog in infrastructure works, and a recurrent shortfall of $500 million annually.

Australian Update

> WorkCover now has 27 specialist full-time staff devoted to combating fraud and ensuring premium compliance.  Recently, a man was arrested in connection with a number of alleged fraudulent workers compensation claims made between 2003 and 2006 totalled $360,000.

> A Hunter Valley company has been fined a total of $449,000 following an explosion at a Rutherford plant where three workers were killed. A WorkCover investigation found that the company was aware that cottonseed meal dust was at risk of spontaneously combusting and igniting.

> Following the release of ASIC’s service charter, ASIC has launched a guide on how it works, its activities, how it is organised and consults and its accountability to stakeholders. The better regulation guide explains how ASIC conducts its responsibilities and key functions and sets out how it approaches its role as a regulator.

> Two former company directors have become the first in Australia to be banned for life from managing a corporation or dealing in financial products and according to ASIC it should send a very strong message to those involved in the management of companies.

> A study by a group of urban transport planners says that PPPs cannot shift substantive risk from a government to the private sector. No matter who owns the hospital, school, road or railway network or station, if the infrastructure fails to perform, the community probably holds the government responsible, rather than the private franchisee.

  InConsult Service Update

APRA Assist - Supporting smaller, niche insurers in meeting APRA's prudential standards.

ERM QuickStart - Thinking about introducing ERM into your organisation?  Save time and money with our QuickStart service.  It is especially designed to get your risk management program of in the right direction.

ERM HealthCheck - How effective and efficient is your risk management framework?  ERM HealthCheck is an independent review of your entire risk management framework conducted by InConsult's risk specialists.

Guardian ERM - Our fully integrated risk management, compliance, audit and incident management system helps to integrate all risk management processes and makes managing enterprise-wide risks even easier.

OH&S - InConsult offers a range of OH&S training and consulting services.

InConsult Recruitment - A niche recruitment service covering senior risk, compliance, audit and insurance roles.

All enquiries, contact InConsult on 02 9241 1344.

 Positions Vacant

Risk and Compliance Manager - General Insurance, Sydney

Package to $140k plus bonus

- Providing guidance and direction to Strategic Business Units in risk management practices and processes
- Ensuring ongoing adherence to the Risk Management Strategy
- Overseeing compliance with regulatory and company compliance requirements
- Providing advice to Strategic Business Units in relation to their compliance obligations and addressing significant instances of non-compliance (regulatory/ company) as they arise
- Participating on ad-hoc projects as they arise eg Code of Practice, Tax Compliance
- Monitoring effectiveness of risk controls and facilitating improvements where required
- Developing education material and communication strategies that raise and maintain the profile of Risk Management & Compliance.

Ref no: 295100038

Risk Manager – Specialist Insurer

Sydney – Package to $150k plus bonus

- Provide strategic and operational input to senior management to improve systems and controls
through the review of business operations.
- Provide independent reports to the Board Audit, Risk & Compliance Committee (BARCC) on risk
with and recommended enhancements to procedures or company policy.
- Implement and monitor effective risk management programs.
- Manage statistical support to the business operations

Ref no: 295100003

Fast track to Partnership in Global Chartered firm - Assistant Manager Risk Management & Internal Audit Services

Sydney - $90k package

Our client is seeking to rapidly expand their client base in Risk Management Services and looking for a person who is dedicated to assist in the development of the following:
- ERM & Internal Audit products;
- train staff on internal audit skills;
- aid in the promotion of Risk Management Services to Australasian & Asia Pacific member firms; and
- prepare base tender documentation and system templates.

Ref no: 295100007

All enquiries, contact Stephen on 02 9241 1344.

International Update

> Foreign companies listed on the U.S. exchanges must now start complying with Sarbanes-Oxley beginning with fiscal years ending after July 15, if their market capitalization exceeds $75 million.

> According to estimates by the Association of Chartered Certified Accountants, UK companies will together spend a total of about $350M on compliance.  Otherwise, they could face multi-million-pound fines if they cannot demonstrate compliance, as well as brand damage sustained by inevitable bad publicity. 

> The SEC will change to the rules requiring disclosure of executive and director compensation, related person transactions, director independence and other corporate governance matters, and security ownership of officers and directors. These changes will affect disclosure in proxy statements, annual reports and registration statements, as well as the current reporting of compensation arrangements. The rules would require disclosure to be provided in plain English.

> According to Fitch Ratings, Malaysia's banking system remained generally healthy over 2005 and 1Q06, pockets of weakness exist in the consumer loan segment. It said that this has been compounded by the rapid growth in consumer lending in recent years as well as the high level of Non Performing Loans in the residential mortgage segment, the largest loan segment at 27% of system loans.

> A Singapore retail bank is currently being investigated by US authorities for money laundering following evidence that the small operation might have been processing North Korean transactions.

> Research has concluded that although SOX compliance is creating ‘controls consciousness’,  over a third (44%) of respondents view their Section 404 compliance efforts as an entirely discrete piece of work, unconnected to other compliance activities and processes happening within the business.

> The UK FSA has fined a major international investment bank £150,000 for failing to accurately report certain transactions to the FSA that were critical to the FSA's ability to maintain confidence in the financial markets and reduce financial crime.

Tell it to the judge

> A former HealthSouth chief financial officer has agreed to pay at least $6.9 million for his role in the health care company's $2.7 billion accounting fraud.

> Australian Pharmaceutical Industries has admitted that more than $17 million has disappeared from its books and a month-long search by forensic accountants has failed to find a trace. The CEO has resigned after the company wrote off almost half its annual profit.

About InTouch

InTouch is designed to be a brief digest of a range of matters that risk, compliance, audit, insurance, IT and finance professionals may find interesting and relevant to them.  If you would like more information about a specific item, please do not hesitate to contact us.

InConsult Pty Ltd

L12, 35 Pitt Street · Sydney NSW 2000
Tel: (+612) 9241 1344  · Fax: (+612) 9253 3001
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