The turnout at the 2005 Enterprise-wide Risk Management Conference we recently sponsored in Sydney was excellent.  It was good to see a cross section of industries and companies present.

This shows that organisations now see the benefits ERM can deliver and are investing in their people to help put into place an effective and efficient ERM framework.

A special thank you goes to all the delegates who took time to speak with us and to find out more about InConsult.  We look forward to catching up with you again and supporting your risk management needs in the future.

Enjoy this issue of InTouch.

Tony Harb

Director, InConsult

• The Australian Stock Exchange is planning to pull back some of its regulatory responsibility to cut costs in areas of supervision that are duplicated by other regulators like ACCC and ASIC.

• ASIC has  warned Australian companies they they must provide "numbers" and not just "narratives" on the financial impact of new international accounting standards from this financial year.

• The ACCC has increased the scope of its investigations from  cartel allegations in the cardboard-box sector to potentially collusive behaviour in the $3 billion pulp and paper sector.

• The big 4 accounting firms are exiting the Sarbanes-Oxley software market creating major issue for companies over the next 12months as end users are forced to convert to new systems or deal with new suppliers.  KPMG and PWC have sold their products, Deloitte has no plans for further work on its software, while E&Y has stuck to the original strategy of using third-party software providers.

• The Wall Street Journal says the FBI has launched a probe (involving 50-75 agents) into accounting practices in the insurance industry which could extend to other financial services.

• Middle managers, consultants and contractors could be liable for corporate misconduct if proposals to close gaps in the law are adopted.  The proposals by the federal Treasurer's Corporations and Markets Advisory Committee (initially identified by the HIH Royal Commission) would allow regulators to prosecute a wider range of corporate managers for abusing their position, acting carelessly or providing false information.

• The ACCC is investigating whether senior executives of Australia's 3 key racing bodies (including gaming and wagering groups) have breached the Trade Practices Act preventing Betfair from securing a betting licence from state governments.

• As new corporate governance regulations take effect, around 75 US companies with market capitalizations of more than US$100 million have notified the SEC they would need more time to finish their quarterly reports because they were still working on their internal control reviews for 2004 or they were fixing problems found during those reviews

• Small businesses are welcoming the government's workplace reforms.  Various small business groups and industry associations viewed the exemption from unfair-dismissal laws for businesses with less than 100 employees as a trigger for employment growth.

• The Franchise Council of Australia is putting the finishing touches to a member code of conduct that includes best practice guidelines.

• Australia has been flooded with more new laws in the 4 years up to 2003 than in the entire period between 1900 and 1969.  The Business Council of Australia and Access Economics found that regulations at the federal, state and local levels have doubled since the 1980's with regulations growing at the rate of 10% a year.  They estimate that compliance costs may be as high as 8% of gross domestic product.

• A survey by Australia's computer emergency response team AusCert reported that the level of harmful electronic attacks in the last year has reduced 28% but online identity theft rose significantly.  The total annual losses reported from electronic crime was only marginally higher at $16.9million, compared with $15.9 million the previous year.

• APRA has issued new prudential standards (some in draft) applying to authorised deposit-taking institutions (ADIs) and general insurers.  The standards cover business continuity management, outsourcing, governance, liability valuation, reinsurance and risk management.  

Read our summary here: APRA stage 2 update

• The Chairman of the Basel Committee on Banking Supervision has admitted that implementing the Basel II rules governing international banks’ capital will be difficult.   Market practices, legal systems and business conditions continue to operate against
  harmonization. Institutions.  Most impacted by this are the major International Banks, those with a USA , Western European and Japanese domicile which continue to suffer from the tensions between home country regulator and host country regulator.

• NAB has re-opened its foreign exchange trading desk after the $360 million FX scandal that resulted in departure of senior staff including the CEO.

• In an attempt to reduce IT operating costs and capitalise on the latest technologies, Suncorp is planning a significant upgrade to its office systems that include internet protocol telephones, video and audio conferencing equipment and around 8,500 new desktop computers.

• In a move expected to trigger further back office cost sharing agreements among local banks, St George has won a deal to administer Suncorp's margin lending operation.

• AIG has uncovered at least another $US1 billion more in accounting problems.  What could be worse? The number is 'fluid', and could grow as investigations continue. Some reports suggest the company may have to write-down as much as $US8 billion.

• AIG will restate its 2000 financial results and has acknowledged that its accounting for a transaction with General Re was improper.  It will also delay filing its 2004 annual report for the third time in six weeks.  AIG will lower its net worth by about $US2.7 billion ($3.46 billion), $US1 billion more than an earlier estimate.

• After producing a 7% increase in the first quarter of the new financial year, Promina is on track to meeting full year growth targets.

• An executive reshuffle at QBE has promoted Vince McLenaghan to head the insurer's Australian operations as well as the Pacific Asia and Central Europe division. QBE said the management reshuffle and the acquisition of ING's 50% interest in QBE Mercantile Mutual would deliver total synergies of at least $50million by the end of 2006.

• Doctors' payments towards Australia's biggest medical indemnity insurer, United Medical Protection, will be cut by $1000 a year after the federal government found a $260 million taxpayer-funded rescue had given it an unfair advantage and UMP has returned to financial health much more quickly than expected.

• Zurich Australia has accepted a string of enforceable undertakings from APRA to overhaul its corporate governance, and for two years will have to notify APRA before taking out more financial reinsurance contracts after APRA found it had deliberately overstated its profits by $61 million using financial reinsurance, and staff knowingly misled the regulator.  Zurich must also maintain higher minimum capital requirements than the rest of the industry until the end of 2006.

Brings together Corporate Governance,

Compliance, Risk Management

and Internal Audit.

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