26 Sep 2018
The Australian Securities and Investment Commission (ASIC) defines conduct risk as “the risk of inappropriate, unethical or unlawful behaviour on the part of an organisation’s management or employees”.
At its heart, the definition recognises conduct risk is a product of ethical blindness: a failure to see important aspects of the ethical landscape of banking.
"You would hope the interests of consumers, the integrity of financial markets and the expectations of the community would all be points of focus.”
To consider something, it must first be noticed or brought to mind. As a rule, our core values structure the way we view the world. We notice things connected to our values and ignore all else.
You would hope the interests of consumers, the integrity of financial markets and the expectations of the community would all be points of focus – not least because they link so clearly to the purpose, values and Code of Conduct of organisations like ANZ.
Unfortunately, our best intentions are often thwarted by the effects of unthinking custom and practice - otherwise known as our habits. Too often, the answer to the question, “why do we do this?” is “that’s just the way we do things around here”. There is often no real connection between what is done and the organisation’s espoused purpose, values and principles.
It is unthinking custom and practice that often leads otherwise good people to do bad things.
In such situations, there is no intention to do something wrong. Indeed, those involved are sincerely surprised and shocked when their conduct is revealed to have been dangerous or deficient. This is because, at the time they make their flawed decisions, those involved truly do not see what they do in its true light. That is, they do not consider what they do, they just act.
It is the job of ethics – as a form of reflective practice – to purposefully help prevent this form of conduct risk.
Ethical practice is about unthinking custom and practice; about purposefully linking our choices (including our design of structures, systems and conduct) to our purpose, values and principles. It is about having the moral courage to question practices the majority accept without question. Sometimes, it involves telling the emperor he has no clothes!
This led The Ethics Centre to create the Banking + Finance Oath (BFO) as a mechanism for articulating the ethical ‘heart’ of banking and finance in a way that can be embraced by every individual – irrespective of the company for which they work. It is also intended to provide support for individuals who would otherwise stand alone in challenging the habits of the majority.
None of this replaces formal systems of compliance. Rather, the BFO complements such systems by creating a community of reflective practitioners who hold each other accountable for applying the tenets of the BFO in the course of daily practice.
Such people see the world through an ethical lens. They appropriately consider what should be done – rather than what just happens to be done, as a matter of routine.
That is the foundation for managing conduct risk.
Dr Simon Longstaff AO is Executive Director of The Ethics Centre. He serves as a member of ANZ’s Ethics and Responsible Business Committee.
For more information on the BFO and how you can sign up, click here.
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
26 Sep 2018
18 Oct 2016