Big grants for top researchers
Centre for Financial Risk members have been successful in being awarded three important grants by the Centre for International Finance and Regulation (CIFR).
Early-Warning Systems and Managing Systemic Risks using Real-Time Financial and Business Conditions Indicators
Professor Jeffrey Sheen, Department of Economics, Faculty of Business and Economics, Professor Stefan Trueck, Co-Director, Centre for Financial Risk, and Dr Chi Truong, Postdoctoral Research Fellow, Department of Applied Finance and Actuarial Studies, Faculty of Economics and Business, have received a grant for their project: Early-Warning Systems and Managing Systemic Risks using Real-Time Financial and Business Conditions Indicators.
The project investigates systemic risk and will improve understanding of economic conditions. Banks, businesses, governments and universities use considerable resources to make accurate and timely estimates of the state of the economy and systemic risks.
These estimates are of central importance for business, financial, regulatory and macroeconomic policy decision-makers, who have to act in real time. However the data currently used is largely disparate, arriving at different time intervals, and is not always rigorously analysed for joint informational content with respect to the management of financial and systemic risks.
This project applies the rigour of dynamic factor models (DFMs) for Australia in an international financial and macroeconomic context to model potential systemic risks for the financial sector and the economy.
A key outcome is a new set of early warning indictors for systemic risk available over the internet. It will be developed through close communication between Australian academics and practitioners including the Australian Prudential Regulation Authority (APRA) and the Reserve Bank of Australia (RBA). Read more about Early Warning Systems and Managing Systemic Risks...
Elements of Risk Governance and Culture
Another grant, received by a cross disciplinary team headed by Associate Professor Elizabeth Sheedy, will investigate the often far-reaching effects of financial institutions' risk policies and practices, in light of recent financial market turmoil.
The team, which includes Dr Barbara Griffin, Senior Lecturer, Department of Psychology, Faculty of Human Science, Dr Shane Magee , Senior Lecturer, Applied Finance Centre, Faculty of Business and Economics, and Associate Professor Sue Wright, also from the Department of Applied Finance and Actuarial Studies, will explore the issue of risk management by financial institutions around the world, developing tools to enable improvements.
First, by linking risk governance regulations and risk governance practices by financial institutions in 20 countries, a model will be developed to guide the supervision of financial institutions using quantifiable measures of risk governance. Then, the concept of risk culture will be explored by assessing factors known to contribute to corporate risk culture, and by investigating the risk attitudes, perceptions and beliefs of key managers. The project, which has been developed in consultation with the Australian Prudential Regulation Authority (APRA) and other industry experts, will allow institutions to refine their own risk cultures using two survey based instruments. Read more about the project Elements of Risk Governance and Culture...
Regulation of Financial Plans and Allocated Pensions
In a third grant, Professor Geoffrey Kingston and Professor Lance Fisher, both from Department of Economics, Faculty of Business and Economics, will investigate regulatory gaps in the financial planning sector and whether existing and proposed measures adequately consider financial plans, allocated pensions and account-based pensions that carry less investment risk on the cusp of retirement - considered better suited to the spending plans of retirees.
Since the introduction in 1992 of compulsory superannuation, ordinary workers have borne sizeable investment risk. Following two reviews of the financial planning industry, regulatory legislation is now covered by Future of Financial Advice and MySuper.
However, the legislation does not seek to regulate asset allocations, including those for less-affluent workers on the cusp of retirement. This is in contrast to most OECD countries that have instituted compulsory prefunded superannuation with a defined-contributions emphasis. Nor does FoFA regulate for better disclosure of risks in financial plans.
This project will help identify measures needed to fill the gaps. Read more about the Regulation of Financial Plans and Allocated Pensions project...