All organisations have an obligation to fix things when they make mistakes. It’s an obligation to customers, to staff but – equally – to shareholders.
"Community and regulator expectations for greater transparency are continuing to rise."
Kylie Rixon, Chief Risk Officer, ANZ Wealth Australia & ANZ Digital
What is often lost in the emotion of a debate around business missteps is that it is good business to put things right. That’s where sound remediation processes come in.
High-profile examples of remediation programs abound both in Australia (Commonwealth Financial Planning) and globally (payments protection insurance in the UK). ANZ has its own recent examples.
Community and regulator expectations for greater transparency are continuing to rise. Regulators globally are under more and more political pressure to both clean up industries and ensure redress happens when things go awry.
This is ultimately a positive step for our industry but it does present challenges for the financial institutions administering the remediation. Customer-focused remediation needs to be rigorous and structured. Above all, remediation needs to be business-led.
An organisation’s risk officers and lawyers will always be influential and part of the decision-making and oversight of the process but “putting things right” cannot be truly achieved without the business leading it.
There is no doubt getting things wrong is painful. Remediation is not easy. But there are also crucial, valuable business lessons to be learned.
Too often executives are so focused on the upside and growing the business they don’t take care with the how. Involvement in high scale remediation provides first-hand experience of what the customer impact of carelessness can be. It provides genuine customer insight.
What I tend to see in executives who have had a large stake in a remediation program with regulator intervention is the development of a very strong risk mindset which stays with them for the rest of their careers.
Remediation grows the risk mindset and capability in executives and provides a keener sense of what can happen to customers when the business gets things wrong.
OPERATING IN THE GREY
It’s imperative to set clear principles for compensation of customers and ensure there is appropriate oversight from executives with the right level of insight and experience. Indeed, there have been some high profile cases of organisations being criticised for being inconsistent with their remediation principles.
Executives don’t have to check every calculation but they do need to be across the detail of those decisions in the grey requiring particular judgement.
For those decisions where the answer isn’t immediately obvious I find it essential to direct attention back to the guiding principles of customer fairness; putting customers back in the position they otherwise would have been in but for the wrongdoing and giving customers the benefit of the doubt.
Every remediation program and case within a program may be different but setting clear principles allows the ambiguous situations to surface.
SPEED VS ACCURACY
When dealing with the myriad factors you have to find the balance between speed and accuracy. Often you have to make decisions where you don’t have the data or the data is sketchy, depending on how old it is and the systems from the time.
In large scale remediation, one approach is to say it’s important everyone gets exactly what they are entitled to, no more or no less. But it might take three years to achieve that.
Most customers owed their life savings would prefer to receive an entitlement within a small error (always with an opportunity to flag discrepancies) than to wait years for anything.
There are qualitative judgements which often must be made, choosing options which may not be ideal but provide the fairest and most expedient outcome in the circumstances.
HELPING CUSTOMERS HELP THEMSELVES
Remediation often requires a call to action for a customer to engage in some way (for example to confirm they are in an appropriate investment strategy).
Using behavioural insights to formulate our communications we have an opportunity to help customers understand what has happened and what they need to do if there is a call to action.
Across our Wealth business at ANZ we have seen positive improvements in the response rates for a number of initiatives piloting behavioural insights.
The essence of these insights is to provide outcomes which meet the spirit of the process rather than the letter of the law – the court of public opinion doesn’t care about the letter of the law, it cares about perceptions of fairness.
Ultimately, doing remediation well - and avoiding the need for it in the first place - comes back to the values of the organisation and remembering there is a customer at the other end of everything we do.
For customers, this means a sense they have been treated fairly – which can make them more loyal customers. For staff, it is the sense they work for an organisation which does what it says, which improves engagement.
For shareholders, a company which takes its obligations and social licence seriously is less likely to be a recidivist offender, less likely to have to pay the direct and indirect costs of poor operational risk management and more likely to deliver sustainable returns.
Kylie Rixon is Chief Risk Officer, ANZ Wealth Australia & ANZ Digital