Australian banks have a deep-rooted problem with risk culture, which has led to a lack of trust in the sector, warns a new report released by BTS, a global professional services firm.
Drawing on research from the firm’s extensive work with financial institutions globally and its own joint research with the Economist Intelligence Unit, the research uncovered “deep problems” with a culture of ‘avoidance’. Bank management and staff choose not to pass on bad news to relevant people or turn a blind eye to bad behaviour.
The research found that this culture of ‘avoidance’ or the covering up of bad news was a strong predictor of bad behaviour and conduct within the banks.
According to the report, a bank’s risk culture depends on how employees perceive the relative importance of risk management and ethical behaviour.
The study also indicates that banks struggle to gain buy in to critical initiatives like risk management below the highest levels of management. The research highlights that the most successful companies work systematically with employees to ensure they’re convinced that critical initiatives will have a personal benefit, ensure a better environment, and lead to overall success.
Mark Jackson, managing director of BTS Australia said Australian banks need to act quickly to address this.
“Australia’s financial institutions are in a period of turmoil, after years of growing discontent by the public with their conduct. With a crackdown by APRA and ASIC and a potential Royal Commission into banking conduct looming as we wait to see the outcomes of the upcoming election, banks need to act quickly.
“They need to address their risk culture, making sure it’s high on the agenda. It is crucial that there is a well-defined culture in place that will ensure risks are easy to identify, reported on and escalated. And more importantly, not covered up.”
This article is from our sister site, Australian Broker by Julia Corderoy.