Banks must tackle risk culture, BTS says
Initiatives such as reviewing remuneration within banks will not be enough to eliminate unethical behaviour, with more focus on risk culture required, says global professional services firm, BTS.
In a white paper, the firm said regulators, the Australian Banker’s Association and individual banks are underestimating what it takes to ensure banks are transparent, accountable and customer-centric.
BTS argues banks must address their risk culture head-on if they want to see change.
“A bank’s risk culture depends on how employees perceive the relative importance of risk management and ethical behaviour. While leaders advocate a commitment to risk management, the priority that employees see is profit maximisation,” BTS said.
“This gap between what is adopted by leaders and what is practiced daily, shapes the risk culture. Australian banks tend to have a culture of avoidance, which results in lack of action when employees choose not to pass on bad news to management or turn a blind eye to bad behaviour.
“Strong risk governance doesn’t guarantee that risk management will be effective if the risk culture is unfavourable.”
BTS suggests banks define and shape their risk cultures by making employees both the “first and last lines of defence”.
"Risk management must be the responsibility of every employee and this requires significant mindset and behavioural shifts within Australian banks,” said BTS Australia managing director Mark Jackson.
“This can only be achieved by banks taking proactive steps to directly shape their risk cultures and create a deep understanding of the critical importance of the right behaviours.
“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.”
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