Shining a spotlight on risky business

If you are selling chocolate bars, the need for controls on food safety is obvious. If you are flying planes, safety checks are critical. But when it comes to financial services, the case for risk controls hasn’t always been so well understood.

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The global financial crisis exposed the weaknesses in the banking industry’s approach to risk. Moreover, the crisis and its aftermath have exposed a swathe of conduct problems which have cost banks hundreds of billions of dollars in fines and forced risk to also be viewed through the lens of culture and behaviour.

" The crisis and its aftermath have exposed a swathe of conduct problems which have cost banks hundreds of billions of dollars."
Mark Evans, Managing Director, Transaction Banking, Institutional, ANZ
Banks hold a privileged position in society. They are charged with keeping the financial system safe and the wheels of the economy turning, critical roles. Governments around the world were willing to step in to support banks at the peak of the financial crisis because of that role.

Now the industry has to prove it understands those roles and responsibilities, especially when there is growing scepticism about the ethics of banks by the general public.

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Regulators are increasingly looking at risk and culture. In ANZ’s home market of Australia there have been calls for a royal commission to investigate misconduct in the banking and financial services industries.

Greg Medcraft, chairman of the Australian Securities and Investments Commission (ASIC) has publicly spoken on the importance of corporate culture in improving governance and compliance.

The industry is paying attention. Culture is one of four key streams to feature at Sibos, a leading annual event for the banking industry hosted by SWIFT – the international payments network. One session features the learnings from the Dutch central bank, De Nederlandsche Bank, which has identified and assessed risks in relation to culture and behaviour and how to mitigate them.

Mitigation is one thing but issues can still make front-page news even when they don’t represent the culture of the organisation as a whole. Most people go to work every day wanting to do the right thing and no matter how hard you work on it, a bank’s brand can still suffer because of the bad behaviour of a handful – out of thousands – of people.

Most bank employees want to play a role in supporting a strong financial system built on ethical behaviour and fair outcomes for customers but there will always be exceptions.

Our industry has become tarnished by the handful, the tiny minority, and if we continue to allow our industry to be marked down we won’t be able to attract talent to work in banks. Nor will we alleviate concerns conduct issues are not just a minority of individuals but represent a more pervasive industry culture.

However, addressing culture is easier said than done. Even when it comes to doing the right thing, for international banks there are challenges in taking a single view of what that actually means. The right thing for someone in Australia might not be the right thing for someone elsewhere.

Take a market in the Pacific as an example, where it is a cultural norm to tip a teller for good service, something not acceptable in Australia. It is challenging to get a clear message out to all the countries in a way that takes account of these cultural differences and does so respectfully.

Also, the lines are often blurred between culture and risk culture. Risk culture is a subset of the bank’s overarching culture and conduct risk is a subset of that – they are not mutually exclusive, and each builds on the other.

For example, we can have a culture of innovation but how do we innovate and be quick to market in a risk averse way? It’s not just about being innovative and the first to market, we also need to respect our customers at the same time. From a conduct perspective we need to be innovative with solutions while still ensuring obligations designed to protect customers are met.


• Supports transparency and well managed controls

• Encourages awareness of risks and responsibilities

• Delivers timely action to address events/issues outside appetite

• Rewards staff for appropriate risk management behaviours

• Supports the delivery of fair and ethical outcomes and financial market integrity.


At a high level, CEOs own and set the tone of an organisation’s culture but a few levels down the message can get lost in translation. There needs to be a concerted effort at targeting the middle layers of an organisation and also giving them a mechanism by which to raise their concerns.

The most successful leaders in this respect are the ones who have an open-door policy and don’t shoot the messenger when a junior staff member brings something to their attention.

One leader who comes to mind used to say if there is an issue, it’s likely to be seen on a day to day basis by a junior person. If that person has the guts to approach their senior leader and tell them bad news, they should be respected.

A sound and desirable culture is one where ideas and behaviours can be safely challenged. Those junior people have to be given an opportunity to speak – and be heard – and when they can’t approach their leader, a peer or cultural champion within the organisation they should be able to use a whistleblower service.

Unfortunately merely doing the right thing isn’t enough. Regulators and auditors want proof points and artefacts that demonstrate you did the right thing. And it can be difficult to prove you have done just that. When regulators, or an external party, undertake a review, they have the benefit of hindsight and context.

We will be judged on what we do now at a future date but in the moment it is hard to know how this could be viewed in three years’ time. When looking back, if I had the information three years ago I have now, would I have been as harsh as I am being today? It is hard to tell.

These are just some of the challenges but it is undeniable behaviour and culture will increasingly play a role in how to assess an organisation’s riskiness.



• Clearly defining what constitutes a good culture and the conduct that reflects it.

• Determining a current position and the requirements for change, noting research shows people, and consequently culture, change slowly and humans can only handle a couple of changes at a time.

• Integrating risk culture into business as usual operations rather than seeking to ‘add it on’.

• Delivering a clear and consistent message recognising the ways different cohorts of people respond depending on their cultural, ethnic or generational background, management level or personality.

• Measuring culture and change impacts, getting the right balance between elements that reflect a good culture and those that reflect a bad one.


• Help junior/mid-level management be open (it goes beyond tone from the top and needs to focus on what the G30 refers to as ‘the bottom echoing the middle’).

• No one likes delivering / receiving bad news – need to create a psychologically safe environment for challenging ideas and behaviours.

• Challenge in ensuring not judging in hindsight.

• Translating high level statements into practical reality.

• Traditionally easier to hit bad behaviour than to reward good behaviour (it’s your job).

Mark Evans is Managing Director, Transaction Banking, Institutional at ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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