On 6 September 2023, APRA released findings from its review on how entities are approaching the implementation of Prudential Standard CPS 511 Remuneration (CPS 511).

APRA’s findings demonstrate entities’ efforts to align remuneration and risk management in their remuneration frameworks.

Common gaps observed during the review were:

• Limited progress implementing controls to manage potential conflicts arising from compensation arrangements of third-party service providers;
• Inadequate understanding of how selected non-financial measures (NFMs) will drive desired behaviour, risk outcomes and performance; and
• Insufficient rigour in the proposed processes to ensure remuneration consequences result from poor risk management outcomes.

These may be surprising, given the sample were the larger and more sophisticated Significant Financial Institutions (SFIs).

Learnings from the review are to be considered by APRA for inclusion in CPG 511 in due course, subject to consultation with industry.

The APRA review can be found HERE.

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