ASX partially fulfils ASIC’s reporting requirements amid CHESS debacle

An audit of the ASX’s project management competence in the wake of the CHESS replacement debacle found it had only partially addressed matters raised by regulators.

ASX Limited CEO Helen Lofthouse. Picture: John Feder

An audit of the ASX’s project and program management competence, conducted in the wake of the CHESS replacement debacle, found that the ASX had only partially addressed a number of “specified matters” raised by regulators.

The audit of a report on the bourse’s project management frameworks, conducted by Ernst & Young Australia, said that the ASX report had acknowledged “a material gap in the program ­management framework, which does not exist”.

In the report, published on Monday alongside the EY audit, the ASX, whose CEO is Helen Lofthouse, acknowledged it did not have a “formal program management framework” to integrate multiple projects. But it said it was developing it and would be completed by the end of the year.

In the meantime, it was leveraging its “project management framework and external consultants” it said.

EY’s audit said that while this was a “reasonable approach to ­address this material gap … without a program management framework, ASX may not have adequate capabilities to make changes of a scale warranting a program approach without either a) the support of an external third-party or b) breaking the change into a series of projects leading to extra cost, time, and potential delivery risks”.

EY found that the report, which was required by ASIC to ­assess whether the company’s processes were robust enough to confidently resume and deliver the botched CHESS replacement project, adequately addressed only 15 of the 18 specified matters.

The other three, were “partially addressed”, including an ­assessment of how the ASX’s frameworks were aligned and ­integrated into the company’s corporate governance and risk management frameworks and its accountability maps.

‘ASIC will closely monitor what regulatory actions may be needed to ensure that ASX’s project delivery meets the highest standards required in the replacement of this critical national infrastructure,’ ASIC chair Joe Longo said.

The project management competence review was performed by Sydney-based consultant PM Partners, and did not identify any “gross defects” of ASX’s frameworks. But it pinpointed several areas for improvement.

This is the final of three special reports mandated by the regulator after ASX’s decision in late 2022 to abandon the CHESS replacement project, resulting in a $250m write-off after numerous delays.

The review identified several gaps in the way projects are delivered, including quality management planning and “project gating”, which is a series of checkpoints in a project to make sure it’s on track and worth continuing.

The review made 32 prioritised recommendations and recognised some were under way.

The regulator said it was considering the reports to “determine if further regulatory action is required”. “The reports highlight some areas in which ASX’s portfolio, program and project management capabilities are well developed, and other areas where improvement is required,” ASIC chairman Joe Longo said.

The reports come days after the ASX said it had selected Indian tech giant TATA Consultancy Services to design and rebuild its CHESS replacement project, committing to delivering a clearing service in 2026.

The audit findings mean the ASX has fulfilled most but not all the reporting required by the regulator earlier this year after it halted the replacement of its ageing clearing and settlement systems, which are considered critical infrastructure.

EY said the project management capabilities report identified areas of improvement and developed a remediation road map, but also highlighted that it addressed only 8 out of 10 “additional matters” agreed by the ASX in August.

“We have observed deficiencies in the Delivery Uplift Roadmap planning and delivery approach, including effort estimations that are not at the appropriate level of detail,” the audit says. “This poses the risk, among other things, that the current Delivery Uplift Roadmap timeline may be materially inaccurate (too long or too short), and may not be managed or staffed appropriately resulting in poor outcomes and/or rework.”

Furthermore, EY’s review identified deficiencies relating to the ASX’s project accountability maps, progress management, and change control and base management. “This poses the risk that ASX is not addressing all relevant PPPM Framework deficiencies required,” the report says.

In the report, the ASX says the capability assessment by PM Partners highlighted it had “strong foundations, capable people and has applied dedicated resources of the last two years to uplift processes, frameworks, people and capabilities”.

It noted that 12 or over a third of the recommendations were either underway or the company planned to start them as part of its “uplift road map”.

Originally published as ASX partially fulfils ASIC’s reporting requirements amid CHESS debacle