Risk and Regulatory Policy

Improving the Governance of Risk

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We expect governments to protect citizens from the adverse consequences of hazardous events. At the same time it is not possible or necessarily in the best interest of citizens for all risks to be removed. A risk-based approach to the design and implementation of regulation can help to ensure that regulatory approaches are efficient, effective and account for risk/risk tradeoffs across policy objectives. Risk-based approaches to the design of regulation and compliance strategies can improve the welfare of citizens by providing better protection, more efficient government services and reduced costs for business. Across the OECD there is great potential to improve the operation of risk policy as few governments have taken steps to develop a coherent risk governance policy for managing regulation.  

This publication presents recent OECD research and analysis on risk and regulatory policy.  The chapters discuss core challenges today. They offer measures for developing, or improving, coherent risk governance policies. Topics include: challenges in designing regulatory policy frameworks to manage risks; different cultural and legal dimensions of risk regulatory concepts across OECD; analytical models and principles for decision making in uncertain situations; key elements of risk regulation and governance institutions; the use of management-based regulation to help firms make risk-related behavioural changes; an analysis of the risk-based frameworks of regulators in five OECD countries (Australia, Ireland, Netherlands, Portugal, United Kingdom) and across four sectors: environment, food safety, financial markets and health and safety; and the elements for designing formal guidelines for risk prioritisation, assessment, management and communication.




Annex 6.A3

Outline of the Different Risk-based Inspection Systems Included in the Research

APRA was formed in 1998. It is responsible for the prudential regulation of deposit taking institutions, general and life insurers, and much of the superannuation (pension) industry, and is responsible for their financial soundness (prudential regulation). Its counterpart, the Australian Securities and Investments Commission, regulates securities business, superannuation funds and insurance, and is responsible largely for regulating the manner in which those firms conduct their business. APRA introduced a risk-based approach to supervision in 1999. A new framework was introduced in 2003-04, the Probability and Impact Rating System (PAIRS) and the Supervisory and Oversight Response System (SOARS). PAIRS has been subsequently refined, the latest refinements being introduced in 2008.


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