FSRC Final Report: technology and data implications

4 mins  11.02.2019 Anthony Borgese, Kate Hilder

Our team discusses how technology can assist in implementing the Financial Services Royal Commission's recommendations.


Key questions to consider


1. Are our systems negatively impacting the customer experience?


2. How confident am I that we are delivering the products we sell in accordance with our legal requirements?


3. How confident am I our organisation is able to identify risks (including conduct risks) quickly?


 

4. How confident am I in our risk management processes, reporting and monitoring processes?


5. Is our organisation in a position to provide peer organisations, customers and/or regulators with information safely, securely and in a timely manner?


 

6. Have I reviewed outsourcing and other third party arrangements to ensure our organisation is in a position to cooperate and share information (both internally, with peer institutions and with other suppliers)? For banks, are we in a position to take full advantage of the opportunities the proposed Open Banking developments may afford us?


 

Data and technology: Having the right systems in place is an imperative

How can organisations act in accordance with the law, let alone in accordance with community expectations in the absence of the appropriate systems? We expect that the strategic use of systems and technology will play a pivotal role in enabling organisations to operationalise many of the report recommendations. 

Having the right systems in place to enable legal compliance is not optional, it's a necessity

The Royal Commission has shone a piercing light on some unacceptable behaviour which Commissioner Hayne attributes directly in his report, not only to greed but to the failure of entities to have appropriate systems in place to enable compliance with the law, for example in relation to the widespread fee for no service issue. Commissioner Hayne makes clear that this is unacceptable.

Moreover, he makes clear that he considers the failure of some leaders, and indeed APRA to appreciate this, as an indicator of the extent to which they have missed the point.

Though the report includes no recommendations mandating increased investment in, or use of technology per se, he infers it. For banks (covered by BEAR) implementing recommendation 1.17 (the introduction of BEAR product responsibility to ensure that a senior executive within the bank is accountable) will require it.

Where to start? How technology can assist in implementing the Commission's recommendations

Improved systems and access to data holds the key to better accountability, better management and more effective governance. It can also support positive transformation in organisational culture — another theme of the Report.

  1. Enable a customer centric approach: Organisations should prioritise the importance of their customers including their customer data. More particularly, organisations need to ensure that customer data is properly collected, structured, accurate, permissioned, robust and secure and is used both lawfully and in accordance with customer expectations.
  2. Empower customers: Customer education and informed choice is another necessary step towards regulatory compliance. Selling customers products that they don’t need or don’t understand will no longer be tolerated. Clever use of systems that inform and empower customers, and give them rights of redress, will go a long way to addressing the underlying principles set out in the report including to: provide services that are fit for purpose; not mislead or deceive; and to act fairly.
  3. Making it easy to 'do the right thing': Increased transparency and simplification of processes on the frontline may also discourage employees taking 'shortcuts'.
  4. Facilitate cooperation and data sharing: Consolidation of data sets and interoperability of systems will facilitate access to data and ease of information sharing between departments and with regulators.
  5. Capability to deliver enhanced transparency: The Report makes clear that Boards are expected to ensure that they are equipped with the 'right' information to enable them to effectively challenge management and should be willing to do so. Use of appropriate technology will greatly enhance boards' ability to do this, as well as assist them in more effectively recording (and if necessary reporting on) this process.
  6. Ready to engage with regulators: Regulators are now expected to take a far more active supervisory approach, and organisations should be prepared to provide more information, more quickly than has previously been the case. Technology can assist in this through: enabling quality and consistency in decision making; real time data analysis; monitoring of behaviour; and encouraging better customer outcomes. Technology will also assist in reducing the regulatory burden by implementing system and process efficiencies.

Upside for business?

We expect to see more nimble fintechs — given their inbuilt customer focus and lack of legacy systems — to play a greater role in the financial services sector. For existing financial organisations, new systems have the very real potential of improving the customer experience and so providing a competitive advantage, in addition to reducing the regulatory burden. 

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https://www.minterellison.com/articles/financial-services-royal-commission-final-report-technology-and-data-implications

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