You’ve likely heard (a lot) about the Financial Services Royal Commission (FSRC). I know, it’s likely your eyes are glazing over already, but stay with me; there are some key learnings that can be applied in any organisation, across any industry.
As part of the FSRC’s interim report (Volume 1) into the misconduct of Banking, Superannuation and Financial Services industries; some key questions were raised. If you care enough about preventing issues and mitigating risk overall in your own workplace, then you should seriously consider them.
Lots! You can read the full report HERE. Despite it only being the interim report, It’s a long read. It isn’t so much about the actual misconduct, but rather the events that led up to it. In summary:
- The alleged misconduct was in relation to customers and the community,
- In some instances, misconduct was acknowledged, and in others misconduct could not be evidenced,
- Falling short of community standards; doing things that many would agree is inappropriate,
- Charging for services not rendered, and
- Dealings with accounts with distressed loans (and customers).
The list goes on…
Why did it happen?
It’s simpler than you think. The Governance and Risk Management practices employed by these entities did not prevent such misconduct. Yes; it’s that simple. Think about how information is collated in organisations, and how it’s modified (often significantly) as it flows up the line to the CEO / Board. Additionally, this information is often coming from several sources, many of whom alter it from the truth before producing it in its final version. You quickly see there’s a lot of room for the alteration before it reaches its destination.
What can be done to avoid it happening again?
Preventative maintenance. Preventative maintenance is undertaken in most industries. For Aviation or Construction, it could well prevent death and serious injury. Now, just because the chances of serious injury or death are highly unlikely in other industries such as financial services, this does not mean that preventative maintenance isn’t required.
We need to rethink our approach to governance and look at ways to embed delivery governance, operational governance and organisational governance, seeing them as all in one.
“Good culture and proper governance cannot be implemented by passing a law. Culture and governance are affected by rules, systems and practices but in the end, they depend upon people applying the right standards and doing their jobs properly.”
We should really look at how governance is inter-connected across the organisation. When we think about governance, many people often forget that governance is a big umbrella with lots and lots of smaller sections of other governance, where these sections depend on the industry. Considering poor governance and risk management was one of the main reasons this occurred, perhaps we could start there.
- Identifying all aspects of governance and how they are interrelated across an organisation
- How governance oversight takes place from department to department as the flow of information extends further
- Traceability of lessons and knowledge share of these lessons
- Streamlining risk and issues management so it’s consistent regardless of whether it’s in delivery or non-delivery functions
- Hold teams accountable to proactively prevent issues from arising by speaking openly and candidly about issues that may have arisen
- Stop the done my bit, toss it over the fence behaviour when it comes to governance
- Ensure governance is understood and respected
There are various mechanisms for organisations to manage governance, but we believe one of the most important is to ensure that governance is consistent across an organisation and integrated in a well-coordinated, consistent and collaborative way.