Westpac’s chief executive announced today a program to address shortcomings around its risk management capability and risk culture. The intent is to promote a “proactive risk culture”.
Some of the actions include simplified risk management frameworks, increased resources and training, and steps to provide for greater accountability and empowerment.
This follows revelations of millions of alleged breaches of money laundering and terrorism rules, and a failure to properly monitor transactions including some with the risk of child exploitation.
So today’s announcement is positive, as is the CEO’s statement that he is accountable for the success of these initiatives. Creating and maintaining the ethical and cultural framework is core work for the CEO and their team.
Past experience says it would also be smart to reassess some of the systems around its people as well – how they are recognised, paid, rewarded, and promoted.
The Wells Fargo scandal of 2016 is a good illustration that poorly-designed performance systems can drive disastrous behaviour in the business. Wells Fargo, the 4th largest bank in the US, was fined US$185m after it was revealed staff opened almost 2 million accounts for customers (without their knowledge and consent) in order to meet sales targets. Those people systems, whatever their intent, promoted a culture totally at odds with what the bank was trying to do.
Workplace Systems (especially those around recognition / reward, and selection / promotion) will drive behaviour. If employees see the operation of those systems as being misaligned with the culture the CEO team is trying to create, you will get a culture – just not the one you want! The way those systems operate sends everyone a very clear message every day about what the organisation values.
It would be interesting if those systems in any way enabled or supported or encouraged the situation Westpac finds itself in.
Reviewing and fixing those systems so they drive the right sort of behaviour is complex work, but critical for the health and success of any business.