This article examines the emergence of risk management as the governance tool of choice for Australia’s regulators and the key challenges facing the Community Housing Sector in implementing risk management systems effectively.

Peter Bernstein in his 1997 book “Against the Gods: The Remarkable History of Risk”, traces the origins of modern concepts of risk back to the 1200 & 1300’s. It is a simple fact that we all practice risk management every day, both as private individuals and as business managers, whether it be insuring an asset, or simply weighing future options against a set of events we believe may occur. So if we are all practicing risk management, what’s all the fuss about?

To understand what all the fuss is about, you need to understand the evolution of risk management within the corporate world and how expectations and obligations with respect to risk management have changed markedly over the past 5 to 10 years.

The “big end of town” has, for a long time, known the considerable benefits that can be gained from implementing risk management programs. Whilst they initially focused on finance based risks and insurable hazards, over the years other sub-disciplines of risk began to be recognised, leading to the emergence, in the late 1990’s, of what is now referred to as Enterprise Risk Management (ERM). As the name suggests, ERM involves consideration of risk on an enterprise-wide level, extending well beyond the traditional risk categories to encompass every facet of an organization’s operations from the board room to the front desk.

With other management processes such as total quality management (TQM) and process re-engineering being written off as fads, experienced managers may well have had some justification for arguing that risk management generally, and ERM in particular, would meet a similar fate. Then a strange thing happened. Law makers and regulators started to create obligations for organisations to implement risk management programs.

Workplace Health and Safety laws across Australia have long required employers to implement formal risk management programs within their workplaces and in the early to mid-2000’s, new laws and regulations were introduced that compelled financial services licensees, ASX listed entities and reporting entities under anti-money laundering legislation to follow suit.

Continuing the regulatory trend the Evidence Guidelines published by the NSW Registrar of Community Housing, through Performance Areas 4.4 (Sound Governance) and 6.3 (Protection of Government Investment) require Class 1 & 2 providers to implement a risk management framework which is consistent with the International Risk Management Standard ISO AS/NZ 31000: 2009.

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