Designing Effective Remediation Programs that Meet Community Expectations
All financial services organisations should be setting up remediation projects to investigate their past and present practices, to identify examples of misconduct and ‘conduct not meeting community expectations’.
Many organisations across financial services – not just those put under the spotlight by the Financial Services Royal Commission – are undertaking major programs of remediation work. Many of these entities are super funds. While industry funds generally fared better than their retail fund rivals, the Royal Commission nonetheless identified problems across both sectors.
In the wake of the Royal Commission, the regulators now have a renewed interest in addressing failures in service delivery by super funds and other institutions.
While (for example) ASIC has had a ‘fee for no service’ project since 2015, they may be taking a harder look at problems and a harder stance on the penalties that should be pursued. It may be found that both APRA and ASIC should have scrutinised grandfathered arrangements more than they did.
Both regulators are going to be more likely to pursue public enforcement instead of enforcement ‘behind closed doors’, and APRA is likely to be rigorous in pursuing the member outcomes assessment.
The Royal Commission has revealed a diverse range of problems across nearly all types of financial services organisations, and past compliance reviews are not a guarantee of a clean slate.
This is especially the case where organisations have ‘sailed closed to the wind’ in meeting regulatory change requirements. It’s not just a matter of checking that specific regulatory requirements were met. Super funds also have the responsibility to ensure that the best interests fund members are prioritised. These responsibilities cannot be conveniently ignored in the case of grandfathered members, as seems to have happened in some cases.
What should be done?
Issue Identification:
Remediation projects start with identifying issue where processes have failed and gaps may need to be uncovered. As organisations preparing for the Royal Commission sometimes discovered, the act of investigation can unearth problems that were previously unknown.
In a previous career, there was a saying that “if you don’t think you have a unit-pricing problem, it’s only because you don’t know about it.” In today’s world, there should be no excuse for not hunting down errors that cost members money.
Prioritisation:
The prioritisation of issues for remediation will have regard to the size and complexity of the problem, the level of resourcing and timetabling needed, whether it is isolated or system and whether it relates to any existing remediation activities. However, all of these factors need to be looked from the perspective of members’ best interests, and the processes for advising and keeping members and the regulators informed.
It has been striking how long it took for the regulators to be advised in some of the cases before the Royal Commission, with it often taking much longer for members to be told. Financial institutions hold vast amounts of data but the level, quality and timeliness of data analysis in these cases – and reporting on it – was often found wanting.
Process Improvement & Governance:
The remediation process must also lead to process improvement and a focus on continuous improvement. Unnecessary hand-offs, delays and wastage, tasks that don’t add value, and inadequate performance management are sometimes found during the review process.
This is not just an operational exercise. Appropriate governance structures need to be put in place to ensure that remediation is not just about ticking off a list of fixes. Acting in members best interest needs to be assessed, as does ensuring the most efficient and cost-effective approach is taken, and that related and systemic issues have also been addressed.
Taking a Holistic Approach
The IQ Group has been undertaking analysis into compliance adherence, process and data analysis, project and change management, training delivery and team management, and are pleased that many of our clients are undertaking remediation management extremely seriously.
Written by David Haynes
If you would like to find out more or have any question, please send them through to us at info@iqgroup.com.au.
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