Risk Management Framework
NAIF’s approach to risk management is designed to support NAIF in the achievement of its vision and strategic objectives.
A key role of the Board and Board Audit and Risk Committee (BARC) is to set a culture that embraces risk management as an essential part of NAIF’s business operations. The four key elements of NAIF’s risk culture are:
- Setting the tone from the top through the Board and BARC’s active involvement in the risk management process;
- Risk awareness entrenched throughout the organisation so that it becomes a core function that is considered in the course of day-to-day business processes. This is achieved through, amongst other things, recruitment and development of personnel knowledgeable in project financing risks, key performance measures and on-going communication of risks;
- Appropriate risk-taking behaviours are rewarded and inappropriate behaviours challenged and sanctioned via feedback and performance reviews; and
- Adequate disclosure of incidents through ‘no-fault’ incident reporting.
The Three Lines of Defence (3LOD) risk management and assurance model supports NAIF’s risk culture through clear ownership of risks by business Management, ongoing monitoring and review of risks and controls via the quarterly Enterprise Risk Management Forum, and periodic testing of risk awareness and adherence to the RMF by internal and external audit functions.
Risk Management Approach
NAIF’s approach to risk management is consistent with the International Standard for Risk Management, (ISO31000), the requirements of the Act and Commonwealth Risk Management Policy. This approach to risk management is designed to support NAIF in the achievement of its strategic objectives.
While NAIF is not bound by the Australian Prudential Regulation Authority (APRA), its Risk Management Standard (CPS220) and associated Prudential Practice Guide (CPG220) provide a good framework for corporate governance and risk management. APRA regulations and guidance have been incorporated where appropriate to support NAIF in achieving better practice. The 3LOD model is recommended by APRA and is embedded within NAIF’s RMF.