Remuneration clawbacks a risk issue
Australian financial services companies are yet to fully embrace using "clawback" provisions as a risk management tool within the compensation packages of senior management but they are increasingly being applied to the packages of executives, according to new research released by Deloitte.
The research, part of a global survey, found that progress in linking risk management with compensation had changed only incrementally since the previous survey conducted in 2010, and that currently 55 per cent of institutions incorporated risk management into performance goals and compensation for senior management.
However it said that the use of the "clawback" provisions in executive compensation had increased from 26 per cent of institutions in 2010 to 41 per cent in Deloitte's latest survey.
Deloitte financial services risk leader Peter Matruglio said the survey findings aligned with observations in Australia given the regulatory changes and standards introduced in 2010 regarding board remuneration, and the requirements to have adopted a remuneration policy.
"Clawback provisions in compensation are also becoming common in Australia," he said.
The Deloitte research also indicated the degree to which many Australian institutions focused on meeting regulatory demands.
It found that 80 per cent of global institutions surveyed stated that stress-testing helped with a forward-looking assessment of risk, and 70 per cent said it informed the setting of their risk tolerances, with 66 per cent using the testing for capital and liquidity planning procedures. However the most common uses of stress tests were for regulatory compliance — assessing the adequacy of regulatory capital (86 per cent) and responding to inquiries from regulators (84 per cent).
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