Rahoul Chowdry, MinterEllison Partner and Financial Services Industry leader welcomed the Royal Commission’s final report and characterised it as offering a vital opportunity to banks and other institutions to rebuild trust and reconnect with customers.
The Hayne Report has been more than 12 months in the making and has been greatly anticipated. MinterEllison welcomes the Report and the wide-ranging reforms it introduces across all sectors of the financial services industry.
"The Royal Commission has shone a piercing light on some unacceptable behaviour that has existed in the industry for a long time, including calling to account conflicts of interest – some of which have become institutionalised," said Mr Chowdry.
Mark Standen, Corporate Governance Partner from MinterEllison believes the Hayne Royal Commission Report has identified a ‘cultural drift’ away from what is sound, reasonable and fair for communities and customers.
“Commissioner Hayne emphasises the vital point that primary responsibility for misconduct into the financial services industry lies with the entities concerned and those who managed and controlled those entities – thus rightly directing the attention back to the management and governance of financial services organisations,” said Mr Standen.
Mr Chowdry added: “The recommendations are thoughtful, balanced and provide an opportunity for our financial institutions to not only address the symptoms, but also the root causes. In many cases, this will involve robust attention to acting in the best interests of customers and our communities whilst balancing commercial outcomes.”
He said the recommendations also provide an opportunity to accelerate much needed investment in systems, processes, and controls so that boards and management have the benefit of meaningful, reliable and timely customer related data to help keep their organisations on the right course.
“Going forward, enhancing the effectiveness of operational risk and taking a more strategic approach to data will need to be some of the key priorities,” Mr Chowdry said.
Restoring community trust
Rahoul Chowdry said the Report of the Hayne Royal Commission was essentially a ‘once in a lifetime’ opportunity to drive future success for the Australian financial services sector through a renewed focus on the areas of trust and governance.
“As a first step, the industry must reset its sights on developing and delivering a more positive, open, and transparent customer-centric culture,” said Mr Chowdry.
Mark Standen also suggested Banks and other financial entities across the market seize the opportunity to drive conversations that deal with the hard issues of process and outcomes.
“Boards understand that great results are achieved when a positive culture is encouraged – one that allows individual workers to follow through on that data and processes to the benefit, not the detriment of customers,” said Mr Standen.
MinterEllison believes the following strategies will help financial institutions restore community trust.
- Embed accountability and transparency – taking individual and collective ownership of outcomes, ensuring lessons are learnt and those responsible are held to account. Consider applying the BEAR principles even if not currently mandated.
- Follow the blueprint – the Hayne road map is here and it clearly outlines expectations. Thus the hard decisions to change for the better must be made - and made quickly.
- Deliver an end-to-end approach where an organisation clearly connects profit with purpose - a key aspect of this approach is to ensure there is ‘conduct becoming’. That is not only about setting the right tone at the top, it is also about ensuring it flows through the organisation.
- Invest in enhanced support structures – ensure that systems, processes and controls are fit for purpose and enable effective risk and compliance management.
- Leverage advances in the regtech and fintech sectors – to enhance quality and consistency of data to provide informed strategic decisions, better customer outcomes and support proactive risk management, especially non-financial risk. This will mean ensuring that customer related data is as robust as financial related data.
- Respond and remediate - in a timely and compassionate manner to customers.
- Listen to and advocate for customers – across all levels in the organisation, including those in the community who are most disadvantaged.
Overall, Australian financial institutions are well-managed, supervised, safe and stable. The results and ratings of banks in particular, have been the envy of the world. Mr Chowdry also made the point that Hayne could be used to deliver wider benefits to business and the market.
“The overarching message from Hayne is that we must embrace change: commit to changing the way we do business in Australia generally. The Hayne lessons extend beyond the financial services sector,” Mr Chowdry concluded.
