Time for brokers to get their heads out of the sand when it comes to risk management

by Mackenzie McCarty03 Jun 2013

Earlier this month, the United Nations issued a warning to the world’s business community, saying that economic losses linked to disasters are ‘out of control’, having cost the global economy $2.5 trillion this century alone.

Furthermore, warns the UN, the risk posed to businesses by natural disasters will continue to escalate – unless risk management becomes a core part of most business strategies.

QED Risk Services director, Greg Ashe, says it’s crucial that mortgage and finance brokers get their heads out of the sand when it comes to risk management. He believes it’s not enough for brokers to comply with basic ASIC requirements, because ASIC is focused on protecting the consumer – not brokers’ businesses.

“The obligations of being a licensee are all just smart business management…One of the obligations of being a licensee is sadly overlooked by the entire industry, including the regulator - ASIC is only concerned with ‘harm minimisation to consumers’. But wider risk management looks at your whole business. What are the things that can upset your apple cart in the future?”

Even if you feel relatively safe when it comes to bush fires and floods, Ashe says many brokers forget – or don’t make the time – to put together a basic, more general, risk management strategy. In fact, he argues, natural disasters are just one of the dozens of potential risks brokers face when it comes to doing business.

Ashe recommends auditing your risk management strategy once, or even twice, a year, checking that you have systems in place to cope with everything from health and safety risks to potential negative social media comments.

“It never stops or starts. Prioritise. Identify all of the risks.”

A step-by-step workshop on creating your own risk management plan can be found in the upcoming print edition of Australian Broker.


  • by Stan Fournarakis Vic Broker. 3/06/2013 11:11:12 AM

    Greg Ashe from QED i totally agree with you. Our job is not a form filling exercise that requires no thought process. Unless you the broker is convinced that your applicant/s pass your pinch test how can you put it up to the banks? If you hope for the best and do put it up then you expose yourself and the client/s because of half truths through negligence. If audited, what will your files and risk records reveal ? What i do is at the time of face to face interview, i always do as MUCH OF THE GROUND WORK IN FRONT OF THEM. Filling out ALL COMPLIANCE forms virtually answering all required questions Why not add some more of your own while you are at it. Having gathered, signatures, ID, and yes diary notes read back to clients right then and there, you are safe, compliant, and satisfied that if the client fails for reasons unknown to you and starts pointing the finger (and a lot do if cornered) then your back up material was derived from smart, responsible behavior on your behalf. After the interview, back at the office, its only a matter of going online and typing up the application for the loan. When its time to risk rate your work either by getting someone else to do it every quarter (second pair of eyes on your work) at least once all compliance checks come up satisfactory, then all should be well. I say should because, ONUS SHIFTING is the new world order. Your job usually is to hopefully assist someone to make an informed financial decision which carries a lot of risk for all participating parties concerned. I would not risk my license for anyone, especially in an economic climate which has left and continues to leave many people financially crippled.