Enhancing capability and accountability in your organisation

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Topics: AFSL Responsible Manager CPD

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Financial Accountability Regime (FAR)

Pardon the pun, but FAR is near! Each firm will have their own implementation plan for FAR. We provide some tips to consider as you finalise your FAR implementation strategy.

Admittedly, BEAR and FAR affect specific individuals who need to be across the current regime and looming changes. However, there are other categories of financial services firms for whom it would be a good idea to be knowledgeable about BEAR and FAR – and capability and accountability generally – for the purpose of organisational succession planning and personal career progression.

Being capable and accountable requires not just being in charge of fulfilling one’s role but also being accountable to those ‘in your charge’. This extends to collaborating with leaders, assisting and nurturing colleagues, and delighting clients.

During a public hearing for the inquiry into Australia’s four major banks and other financial institutions: smaller banks, on 29 November 2019 House of Representatives Standing Committee on Economics Chair, Tim Wilson, posed the following:

What are these systems that are in place within an organisation so that problems that are identified are actually reported and go up the tree to make sure that there is full accountability that goes backwards? One of the big issues with large organisations…is that you can easily hide problems or shift people around rather than holding people explicitly, directly accountable for their conduct. My question is: do you think there need to be more people explicitly and directly held accountable for their conduct to get cultural change?

When discussing capability, it is important for responsible managers and accountable persons to not only be across their own role but also be satisfied with and mentor operating levels below. FAR and the general focus on corporate governance presents an opportunity for your organisation to evaluate how effectively capability building is being conducted across the whole business not just among levels where standards of capability is legislated for (directors and accountable people).

While not every sector is impacted by FAR, the issues it seeks to address can espouse good practices that all financial services workplaces should aspire to.

Overall, FAR implementation may motivate your organisation to re-examine its approach to facilitating the high levels of capability and accountability that staff, customers and regulators demand.

So, how might you go about doing that?

Preparing ‘up’ and ’down’

When gearing up your organisation for accountability-related reforms – whether prompted by FAR or internal capability planning – you’ll ideally involve everyone. Directly affected leaders (preparing up) will have different support requirements than the rest of your organisation (preparing down), but make sure your plans cover the whole organisation.

Obviously, company directors and other accountable persons will need to be appropriately informed of their new responsibilities and accountabilities under FAR. Assist them with additional education about the regime and its requirements.

Instill effective debate and information-sharing within your organisation to ensure your accountability map and accountability statements are correct, up to date, and all functions are captured. Crisis scenario testing will assist with this obligation.

Align fulfilment of capability and accountability with compliance, company values, and organisational policies. These should be aligned but your firm’s timetable for reviewing its strategy, compliance, and risk plans holistically might not be as frequent as you’d prefer. FAR provides the impetus to review these plans, because to be FAR compliant requires this alignment.

For guidance, look to the feedback and suggestions APRA gave to large banks when it reviewed their BEAR systems.

Preparing accountability and capability maps provides an opportunity for your organisation to review how it operates not just for compliance reporting purposes, but also for business efficiency and succession planning.

Considerations include:

• Is the business as effective as it can be?
• Are all risks being managed appropriately?
• Are there better ways the business can be structured?
• Is there appropriate support provided to each executive?
• Are succession plans up to date?
• How well are people being prepared for their next role? The requirement to continuously account for each function requires planning for those events when people change roles.

FAR provides the opportunity to critically ask these questions.

Getting your capability and accountability strategy working

Now that you’ve established your capability and accountability framework, it’s time to measure and maintain its success. Your organisation may already be undertaking these initiatives for other purposes, and they’ll work equally well here. Many firms struggle with how to evaluate certain performance measures, such as capability, compliance culture and ethical decision making. They may not realise that they already have rich sources of data at hand; they just never thought about analysing it in the context of non-financial matters such as capability and accountability.

Generally, best practice entails doing some or all of the following:

• Design and roll out initial and ongoing learning programs and training
• Communicate any new regulatory obligations and industry or company developments across the business
• Review and update your code of conduct regularly
• Conduct discussion forums with representation from across the company to ensure ‘all bases’ are being covered. Some of these can be team or leader-level specific as well. Some company representatives might prefer other feedback-gathering avenues, such as an empathy interview so accommodate these too
• Mine performance metrics. Review your customer and staff satisfaction data. Consider how you might achieve higher customer and staff satisfaction, which will lead to longer tenures, reduced absenteeism, lower staff turnover and the associated cost savings, increased (unprompted) compliance (lower breaches count), reduced complaints and the associated increase in profitability. Improvements in performance metrics might also lead to positive media/social sentiment, increased staff advocacy, and high rankings on workplace satisfaction lists, leading to more referrals
• Company representatives in senior roles should demonstrate effective leadership in current focus areas, such as cyber resilience and information security, AML/CTF Programs, and environmental, social and governance (ESG) considerations. We cover these areas in dedicated topics in our Responsible Manager and Financial Services CPD offerings.

Over to you to help make capability building and business success happen!

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Related Learning

Our AFSL Responsible Manager CPD is an essential annual update for responsible managers and governance, risk and compliance leaders.