There are many lessons to learn, arising from the Banking Royal Commission, particularly as it pertains to transparency, efficiency and a focus on culture.
How can we be sure that we are pursuing best practices and responsible conduct with our own customers, staff, colleagues and other stakeholders?
Some of the outcomes anticipated, that should be considered and planned for by all organisations include:
- A review of service standards, consumer redress mechanisms, and internal systems of financial institutions, as well as industry codes of conduct, self-regulating systems, etc.
- The potential for millions of dollars in bonuses to be clawed back if revelations of misconduct are upheld (e.g. AMP, Commonwealth Bank) and the processes required to manage this.
- Consideration of the competency/capacity/composition of boards, limit on the number of directorships, tenure limits of NEDs, a limit on max terms without re-election.
- The possibility of class orders, changes to ASX expectations on Corporate Governance, an extension to already sizeable financial penalties, civil cases and the implications thereof.
Key steps to consider, and areas for management focus to ensure the lessons learned become practical realities include:
- Transparency: product and service transparency in the relationship with customers requires development and training to explain clearly what customers can expect from different products, as well as making sure that they understand the terms, obligations and risks they are taking on.
- Prompt Response: rectify errors promptly and take due care in effecting any changes in servicing arrangements with customers in ways that explain causes and reasons simply, professionally and clearly.
- Manage Culture: develop and deliver the right culture for staff with customers and stakeholders – this includes transparency of communications and intervention to correct prolonged systemic issues.
- Performance Systems: ensure incentive systems motivate staff to pursue an appropriate and ethical sales culture and manage relationships with customers, rather than focusing on incremental sales as a proportion of total potential remuneration.
- Manage Risk: ensure that there are appropriate risk management and quality assurance functions at all levels of operations, that all stakeholders operate within the law as well as within the requirements of regulators and respond efficiently to customer experiences.
And lastly, there needs to be a greater focus on measuring culture, especially around risk and behaviour – what you don’t measure is what you don’t manage!
- Do your staff feel confident enough in your management to raise issues of concern, and are they confident those issues will be addressed?
- What type of behaviour is being rewarded, what is driving the behaviour, including goals and pressure from middle managers?
- Is risk management considered to be a “box-ticking” process, or is there ownership of outcomes?
For further information, contact your local RSM adviser.
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