Risk Assessment

The issue of risk, who bears it and how it is shared, is one of the key determinants of widespread industry support for electronic conveyancing. The necessary changes in industry business practices and the inclusion of electronic settlement alter existing risks and risk allocations. Therefore, appropriate and effective risk management is critical to the success of NECS.

In 2006, the National Office – on behalf of the NECS National Steering Committee – engaged the law firm Clayton Utz to prepare an independent risk assessment of the NECS initiative. The purpose was to identify and assess all risks associated with NECS and develop cost effective and equitable means of liability management.

The Risk Assessment of NECS included:

• a thorough assessment of all identifiable risks of an operational, financial or technical nature in the National Business Model, including identification of who bears each liability, rating of their significance and development of appropriate management proposals

• scoping the nature and content of a single set of system rules to be applied to all NECS users as one means of containing and allocating some of the liabilities.

Completed in February 2007, the Risk Assessment recommended a risk management regime consisting of:

• Risk Mitigation Measures: minimising risk exposures through adequate and well documented practices and procedures

• Risk Transfers: a comprehensive set of participation rules implemented as bilateral contracts between NECS and its subscribers, as well as back-to-back indemnity arrangements with service providers to NECS.

• Liability Insurances: adequate professional indemnity cover by NECS subscribers and some certifiers, as well as market insurance cover by NECS for its residual risk in any transaction.  In the event that NECS is unable to obtain market insurance, there should be a compensation fund separate from each of the jurisdiction's existing Torrens Assurance Funds.

This risk management regime is currently being applied in the development and implementation of NECS.

For more information view the full The Risk Assessment of NECS Report.

Additional Risk Advice

In April 2008, the National Office – on behalf of the National Steering Committee – received additional risk advice from Clayton Utz on the relationship between NECS Ltd and each State and Territory.

The advice confirmed that with appropriate arrangements in place, there need not be any additional liability for participating governments from the operation of NECS.

For more information view the Additional NECS Risk Advice.
           
Contact
Mark Sneddon
Clayton Utz
Email:  msneddon@claytonutz.com

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