Analyzing Corporate Responsibility In Access To Finance: A Case Study Of MRCB

Australian Financial Regulation

Discuss About The Corporate Responsibility Access To Finance.

The main purpose of this assignment is to analyze the case study which is given in the assignment about the establishment of the Royal commission which will be investigating misconduct in banking, financing and other related sectors. The assignment is on the basis of Monash Retail Commercial Bank (MRCB) which has to submit a report of misconducts which the business might have been engaged in for a period of 10 years.

In the wake of unethical practices and misconducts which are taking place in banking and other finance related sectors, appropriate regulations have to be enforced in order to reduce such misconduct. The Australian government has taken necessary steps in this respect and established a commission which will be reviewing the banking and other finance-based companies or banks in order to ensure that there is no incident of misconduct in the business. For such a purpose the commission has asked every company to submit a report which discloses any misconduct activity which the business committed.

The assignment will be addressing the questions of the directors which is related to the policy of Royal Commission’s policies to prevent misconduct in business. The assignment will be analyzing the report which is submitted by MRCB to identify whether the issues are in breach of Australian regulation or ethics or Corporate Social Responsibility.

In recent times the level of frauds and unethical activities have increased in the business environment. The unethical activities which are taking place in the market have affected the business environment. Therefore, there is a need of regulatory bodies which can bring about some changes in the business environment. Such changes have to be implemented through government as unethical practices in business environment have affected the business environment. The best possible techniques which can keep in check the fraud and misconduct of any business is by formation of a commission which will be investigating the finance and banking companies in order to ensure that the frauds and misconduct in any business can be kept at a minimum level (Shaw & Barry, 2015). In addition to this, such commission can bring about regulations and also keep in check the misconducts by conducting investigation of the business activities and also of the financial statements of the company. In the case of MRCB, the company has been asked to submit its report on any misconduct which the business has engaged in either intentionally or unintentionally. The Royal Commission has been given the responsibility of investigating misconducts which are taking place in finance and banking companies in Australia. The role of such a regulatory authority is very important in creating an ethical working environment for businesses.

Ethics in Business

Independent inquiry which are conducted by any regulatory authority such as Royal Commission keeps the activities of the company in check. In addition to this, such independent examination also ensures that the financial statements are prepared effectively or not.

The major advantage of independent investigation is that it ensures that there is no incidence of frauds in the organization and such regular investigation also discourages individuals from committing any unethical activity. The frauds which are being committed are revealed by such independent investigation of a finance company. Thus, it can be said with the formation of regulatory committees and commissions, incidence of frauds and unethical scandals can be kept in check by the Government.

The regular investigation for misconduct also examines the financial statements of the business while looking for any instances of manipulation and misconduct with the financial data, thereby ensuring the accuracy and fairness of the data which is presented in the financial statements of the company. it reduces the workload of the auditors of the business as they can then rely on the investigation which was conducted by the regulatory authority.

The detailed investigation of the business activities of the business will be leaking important company results and policies to out side parties. This is not a favorable thing for the company as it does not want to reveal its secrets to any third party.

Another disadvantage of such an investigation is that the investigation which is conducted in some cases are not detailed enough and therefore might not help to reveal possible scams or fraudulent activities which are taking place in an organization. The detection of fraudulent activities and manipulations can only be revealed when the investigation is carried effectively and efficiently with wide scope of coverage than such can reveal the inherent unethical activities of the business.

The process of conducting regular investigation will be costly for the business. Such investigations will only be increasing the costs of the business and thereby impact the net profit of the company.

As per the case study which is given in the question, MCRB has agreed to the submission of the report for the purpose of initial enquiry of the business activities of the bank. As per the report which is submitted by the company states that the activities which might have amounted to be recognized as misconduct are discussed below in points form:

• The credit card debt services which were provided by the banks last year revealed that the customers were not able to service their debts. Investigation revealed that the bank had increased the credit limit for customers who had a good repayment history without making any inquiries about the current income level or employment of the person.
• The bank had not credited fast track savings interest to the account holders which had accumulated for a period of 6 months. The reason for such a delay was later on identified as a glitch in the systems of the bank.
• There had been complaints about the financial planning department of the banks that they have misled an investor in investing in a retirement benefit plan which resulted in a loss for the customers for a significant amount of $ 1 million

The above mentioned ethical consideration took place last year for which the management of the company has decided to include such information in the initial inquiry report which is to be submitted to Royal Commission. The analysis of the activities of the business and which regulations have been breached are explained in details below:

Corporate Social Responsibility (CSR)

Australian Financial Regulation: The financial regulations refer to the various laws and rules which are set by the government or a body which is established by the company and such a body must also have the power to implement the financial regulations (Joshi et al., 2013). Financial regulation in Australia are divided into two parts which are Australian Securities and Investment Commission (ASIC) and Australian Prudential Regulatory authority (APRA). The ASIC is responsible for integrity of the market and consumer protection and also with the regulation of the investment banks and finance companies. On the other hand, APRA is responsible for the licensing and prudential supervision of Authorised Deposit-taking Institutions, life and general insurance companies as well. As per the case the company has not violated any principle which is related to the financial regulation which are there in Australia. The above mention misconduct which MRCB has committed is not in breach of provisions of Financial Regulations

Ethics: The ethics in business refers to the code of conduct which is to be followed by the organization in order to ensure that the approach which is adopted by the organization is correct from their perspective. Implementation of ethical standard at workplace is done from the top-level management of the organization (Davies, 2016). Such ethical standard are necessary as it ensures that there is fairness and honesty in the approach which are followed by the business and has not engaged in any such activities which will be resulting in misconduct or any frauds. It has been seen from various research that the company which follows ethical standards in an organization have been rewarded with high market valuation for its shares and such practices also promotes reputation of the business in the eyes of the customers (Hartman, DesJardins & MacDonald, 2014). The customers are able to see that the business is ethically correct and trades its business in all fairness. In the case of MRCB, the financial planning hand of the bank had misled a customer to invest in a retirement plan which caused a loss to the investor can be considered as a breach of ethical consideration. The investor in such a case has been misled to make an investment. The fact is whether it is done intentionally or unintentionally comes later but misleading a client is certainly considered to be unethical in nature. The bank has not credited a fast track saving’s interest to the account holders due to a glitch in the system and therefore such is not an intentional error and will not result in breach of ethical consideration (Slade & Prinsloo, 2013).

Strategies for Improving CSR policies

Corporate Social Responsibility (CSR): Corporate Social Responsibility refers to the obligation which the business has towards the stakeholders and society at large. In other words, businesses should engage in activities which can promote the society as a whole (Cheng, Ioannou & Serafeim, 2014). The concept of CSR states that an organization is responsible to the society at large in which the business is operating and must incur certain expenses which can lead to the overall development of the society at large. The CSR policies of the company needs to be formulated in such a way that certain expenses are allocated to the developmental expenditure of the society (Schwartz, 2017). In the case of MRCB, the activities which have reported by the bank in the initial enquiry report is not in breach of any CSR policy of the business. The activities are not affecting the CSR principles of the business.

As per the case study of MRCB, the initial inquiry report which is to be submitted to the Royal commission will be affecting the reputation of the company in the eyes of the customers and general public. The bank needs to formulate a plan in order to reverse this situation and improve the reputation of the company. The management of the bank needs to come up with strategies which can improve the business process as well as ensure that the policy will help in mending the reputation of the company. The policies which can be followed by the business are given below in details:

CSR policies: The bank needs to improve its CSR policies in order to build up an image of a responsible organization in the eyes of the customers. The CSR policies developed by the business should aim at development of the society and taking care of the needs of the society (Crane, Matten & Spence, 2013). It is to be noted that Corporate social responsibility is at the heart of an ethical organization and thus by simply following an effective policy and incurring certain expenditures on the development of the society businesses can prove that they are following ethical standards and working for the development of the society. Research has also demonstrated that with an effective CSR policy, organization are rewarded with high market valuation of shares and also improved reputation. The reason behind the improved reputation is that the society in case of effective CSR policy is able to see that the business is not solely working for profits but also looking after the needs of the society and therefore is acting in a responsible manner towards the society (Tai & Chuang, 2014). Thus, the management of the bank should focus on developing effective CSR strategies in order to improve the reputation of the business.

Implementation of Ethical Standards: The management of the bank should look to implement ethical standards and norms which every employee need to follow. If appropriate ethical standard is followed than misconducts in the organization can be reduced (Herlihy & Corey, 2014). This will not only benefit the shareholders but also the organization as a whole. It is also a fact that an ethical organization always attracts the attention of the customers and promotes the reputation of the business. Thus, from the above analysis it can be said that the management of MCRB needs to introduce and implement ethical norms which can keep the fraudulent activities of the business in check.

Internal Investigation and issuing reports: The management of the MCRB in order to reduce and keep in check any misconduct or fraudulent activities of the business need to conduct internal investigation which aims at revealing any frauds or misconducts or manipulation which might be there in the financial reports of the company. For the purpose of this, the management of the company needs to appoint an independent external organization for the purpose of conducting an investigation of the bank (Zawislak et al., 2013). The reports which are generated by such an investigation will be published in order to inform the general public that the bank is following ethical standards and free from any misconducts. The continuous examination of the financial accounts of the business also ensures for the business that any threats of frauds are eliminated.

Adhering to all Rules and Regulations: The management of the company should adhere to all the principles which are issued by the Royal Commission and also the regulations which are in force in Australia. The regulation which are placed in the country if followed appropriately will be helping the management of the bank to maintain ethical norms in the business (Goodhart et al., 2013). This will also ensure that the reputation of the business is improved as the bank is following all the ethical requirement. The management should also develop strong internal control which can implement such ethical standards in the business.

Conclusion

Thus, from the above discussion it is clear that the role of Royal Commission in investigating the frauds and misconduct in finance related business is very crucial as it keeps in check the misconducts and unethical practices in a business. The above discussion also makes it clear that the business needs to implement strategies which can improve the reputation which has been damaged by the misconduct which the company has engaged in either intentionally or unintentionally during last year. In addition to this, it can be clearly stated that if a business management follows financial regulations which are in force in Australia, ethical standard which can improve the effectiveness and CSR policies, then the business will be able to conducts its business in an ethical manner and also improve the reputation of the bank.

Reference

Cheng, B., Ioannou, I., & Serafeim, G. (2014). Corporate social responsibility and access to finance. Strategic Management Journal, 35(1), 1-23.

Crane, A., Matten, D., & Spence, L. (2013). Corporate social responsibility in a global context.

Davies, P. W. (2016). Current issues in business ethics. Routledge.

Goodhart, C., Hartmann, P., Llewellyn, D. T., Rojas-Suarez, L., & Weisbrod, S. (2013). Financial regulation: Why, how and where now?. Routledge.

Hartman, L. P., DesJardins, J. R., & MacDonald, C. (2014). Business ethics: Decision making for personal integrity and social responsibility. New York: McGraw-Hill.

Herlihy, B., & Corey, G. (2014). ACA ethical standards casebook. John Wiley & Sons.

Joshi, M., Cahill, D., Sidhu, J., & Kansal, M. (2013). Intellectual capital and financial performance: an evaluation of the Australian financial sector. Journal of intellectual capital, 14(2), 264-285.

Schwartz, M. S. (2017). Corporate social responsibility. Routledge.

Shaw, W. H., & Barry, V. (2015). Moral issues in business. Cengage Learning.

Slade, S., & Prinsloo, P. (2013). Learning analytics: Ethical issues and dilemmas. American Behavioral Scientist, 57(10), 1510-1529.

Tai, F. M., & Chuang, S. H. (2014). Corporate social responsibility. Ibusiness, 6(03), 117.

Zawislak, P. A., Alves, A. C., Tello-Gamarra, J., Barbieux, D., & Reichert, F. M. (2013). Influences of the internal capabilities of firms on their innovation performance: a case study investigation in Brazil. International Journal of Management, 30(1), 329.