Compliance Culture, Regulation & Conduct Risk

Recently, Leading Edge Global’s CEO, Lauren Ryder, moderated a Compliance Culture, Regulation & Conduct Risk panel discussion at the IBR Compliance Culture, Regulation and Conduct Risk event in Sydney.

The event focused on the Financial services, brought together senior risk executives, who shared their experiences and perspectives on how they manage conduct and culture within their organisations. These themes proved very topical, being held just months after the Royal Commission into the Financial Services Industry report was released.

In light of recommendations from APRA, ASIC and the Royal Commission, the regulatory landscape calls for change, said Ryder.

“Compliance is no longer just a ‘tick the box’ exercise, it is now an organisational imperative that must be addressed at all levels for your organisation to be successful.”

The expert panel discussed what Directors should be doing if they want to be effective; which actions Boards can take to demonstrate they understand these new accountabilities; and how Boards and senior management can better identify their organisation’s risk culture.

The panel featured four experienced risk executives from the financial sector, with over ten years in the risk and compliance space:

·       Steven Münchenberg– Managing Partner at Blackhall & Peal

·       Vasyl Nair – Chief Risk Officer at Mine Super

·       Catherine Maxwell – General Manager, Policy & Advocacy at The Governance Institute of Australia

·       Gavin Pearce – Chief Risk Officer at iCare

The panel members discussed how to establish roles and expectations of the board and executive management in organisations. Specifically, the panel were highly engaged in giving their perspectives on how executives can better incentivise their people to be more compliant in their daily operational tasks.

Individual vs Collective Incentives

According to Steven Münchenberg, financial incentives can send signal about what the company truly values.

“People in socially complex situations, like inside larger companies look for evidence of what is really seen as important. Management may say that certain cultural values are important, but if people only see financial incentives, it is noted those will shape behaviour.”

“There should be an examination of what organisations value and set their incentive scheme to reflect those values.”

In contrast, Gavin Pearce, had an alternative outlook on the topic of incentives. Pearce believed that incentives shouldn’t solely sit with the individual’s remit but should encompass the organisation’s objectives and principles.

“More weighting should be placed on the organisation’s objectives rather than the individuals, said Pearce.

The discussion highlighted two key schools of thought and the need to address incentive schemes within complex organisational structures.

Effective Accountability

Another question that sparked an intense discussion was ‘What should directors or executive managers do going forward if they want to be more effective?’

Catherine Maxwell observed that a number of her members are looking at the flow of accountability throughout their organisations.

“Moving forward, understanding the flow and interrelatedness of accountability is vitally important to be an effective executive,” stated Maxwell.

Culture Determines Compliance

Vasyl Nair highlighted how the choice of Director is beyond employees but the Board’s influence on culture and the Executive leadership team is tangible.

“Organisational culture is a strong determinant of how risk aware your people are when they are operating on a daily basis,” added Nair.

Catherine shared another piece of research highlighted in a UK Financial Conduct Authority publication on culture in financial services which referred to the fact the biggest influence on how compliant front-line call centre staff were, was their immediate managers. Catherine emphasised that a better understanding of the operation of social networks in the workplace might give directors more in

There is an urgent need for change

All panel members emphasised to the audience that the financial services industry is in urgent need of change

Directors need a more comprehensive understanding of risk culture their organisations. Actively listening and being less defensive about complaints that are raised with the Board are key to alleviating the strain around compliance within organisations.

The panel brought great depth and practicality to this discussion, said Ryder.

“The key takeaway is that ultimately, Boards must be prepared to set the risk appetite and conduct of their companies. Directors must be more actively engaged within their respective organisations, which extends outside the boardroom.”