It has been observed that the Inquiry had recognized a number of shortcomings in CBA’s governance, culture and the accountability frameworks especially while dealing with the non-financial risks that had made a set of recommendations, which were designed to strengthen these particular frameworks. Such a statement was established and announced by the Prudential Inquiry on August 28, 2017. The purpose of its establishment was to examine the practices and frameworks that are related to the culture, governance and accountability within the CBA group that consists of a few incidents that had hampered the reputation of the bank.
The Final report, therefore, included a wide range of the findings and recommendations. Along with this, the report also researched a few prominent cultural themes including a widespread sense of contentment. There can be a reactive stance while handling with all he risks and the collaborative working environment (McIlroy, 2017). This resulted in a proper outcome and a process of decision-making. This Report further discussed the matters of the prudential concern. The concerns of the Australian Prudential Regulation Authority (APRA) were acknowledged by the CBA. It had therefore offered a remedial action in response to this specific report that can be observed. The findings over the report were observed in the last six months where the panel had examined the various reasons as per the series of incidents at CBA, which have hampered the reputation. Any kind of complicated work of the organization and the cultural factors associated had a common theme from the analysis of the panel itself (Conley, 2018). The risk profile of the institution kept deteriorating once the signals were sent out. The risks however, dealt with the compliance, conduct risks and operational risks.
The inquiries that were identified or recognized by the Panel included unclear accountabilities that usually starts with the lack of ownership of all the risks at the Executive level. Secondly, there have been inadequate oversight and proper challenges that have been suffered by the Board due to the emergence of the non-financial risks. Thirdly, an operational risk management framework existed that helped in supporting it. It was however, done by an immature and under-resourced compliance function (Godwin, Guo & Ramsay, 2016). Fourthly, the process of decision-making was considered to be complicated and it was in favor of the effective results that helped in decreasing the level of risk failings. Lastly, a framework based on the remuneration had a connection with the senior managers regarding the provided incentives to the staff (Dixon & Finnane, 2018).
The Commonwealth bank in Australia did not take active participation in the risk sharing of the Securities Exchange. This is why the relations of corporate organizations with the Commonwealth Bank in case of handling liabilities have been poor. However, the banks have the largest investment framework in the Asia-Oceania belt (Donald & Vrisakis, 2014). Hence, they can effectively reduce the securities’ and liabilities risk of the corporate organizations through active Customer relationship management. The recommendations were also discovered after the inquiries were made thereafter. The organizations that have their projects hypothecated to the Commonwealth Bank should provide a detiled stakeholder map of the business projects with the Bank. Thus Commonwealth Bank can render active customer support to the chief shareholders of the project and ensure that other stakeholders fulfill their financial liabilities properly.
Along with the inquiries were a few recommendations that were stated for addressing the issues that were mentioned in CBA (Cummings & Durrani, 2016). It was observed that the Board and Executive Committee that was set up were considered rigorous and stern. It also dealt with the level of governance of the non-financial risks. There was a substantial upgrading of the authority and the possibility of the risk management and the functions of the compliance (Williams, 2016). There was however a change in the cultural sector that shifts the dial from challenging and striving the perfect method for risk identification (Heard, Menezes & Rambaldi, 2018). The CBA had identified the existing issues that were undermined by the efforts of the bank and which responded to the recommendations of the Panel. These recommendations are therefore, made in a particular time (Godwin, Guo & Ramsay, 2016). These are generally and purposely addressed in aiming the satisfaction of the Australian Prudential Regulation Authority (APRA). It therefore adds up the operational risk for the application. It can be stated that a properly capitalized institution is CBA and hence it deals with the shortcomings in governance and culture, which is ahead of this inquiry (Dixon & Finnane, 2018). Thus, the issues that were identified in the report were properly regulated in all the financial institutions from conducting a self-assessment to decide whether such similar issues can exist in these institutions.
For the findings of the inquiry, the Panel had therefore agreed with the Board and all the existing committees that have been presiding for quite a number of years. It also experienced the success in a financial manner (Docherty et al., 2016). The risk management is particularly treated as an individual business with the help of plenty of committees and other forums. According to the significant views of the Panel, it is mandatory for not including the oversight of the necessary risk profile of the group (Montague, Larkin & Burgess, 2016). Generally, if the Executive Committee is a well-functioned one, it becomes easier in operating and acct accordingly in the best interests of the institution while holding the ownership and accountability of the business. It is essential to encourage the process of diversity of the thinking pattern and from different perspectives. This was one of the most important recommendations (Dalton, 2017). Oversight of the risk should be taken care of. There were better risk outcomes program that will help to indicate the purpose of an operational and compliance risk (Heard, Menezes & Rambaldi, 2018). In the country of Australia, the experts of the CBA will be focused on the executive level of risk committee that deals with the risk occurring in the situation. Along with the executive committee of financial risk, non-financial risk executive committees have also been highlighted over the years (Clarke, 2018). The reason was to produce or give proper and immediate response to the major issues of conduct that have caused damage. The purpose of these committees have acted to risen the visibility of the operational risk in the level of the Board management. There have been better practices that the committee has dealt with. The recommendations thereafter stated that the CBA has determined an effective and proper non-financial risk committee at the Group Executive Level (Taylor, Tarr & Asher, 2016). It can be said that Banks generally focuses on the financial objectives for their own benefit. Profitable and strong banks can survive and keep up with the market that is filled with competition. The financial strength can therefore help the customers in meeting up with the interests of the customers, shareholders and employees who are engaged with the bank. The correct balance is important to maintain it will be marked or highlighted globally (Montague, Larkin & Burgess, 2016). The process of investment prioritization of CBA plays an important role for achieving its merits.
The CBA have faced the challenges and made inquiry thereafter when it is related to the implementation of the model of three lines of defence. The purpose of the model states that the management of compliance risks and operational management are to conduct the risk strategies and profiles (Parsons, 2015). The findings of this inquiry worked on the first basic areas that reflect on the existing issues over the mentioned time-period. The management itself hence looks after the challenges (Montague, Larkin & Burgess, 2016). These principles have effectively embedded and subjected to the relevant strict governance. It is the duty of the CBA to make sure that all the units of the business have taken over the primary ownership of the concept of risk management. Another recommendation included CBA where it can strengthen its management of operational and compliance risk (Heard, Menezes & Rambaldi, 2018). The Australian Securities and Investments Commission have conducted the risk of unethical and unlawful behavior based on employees and the management. Conduct Risk Strategy had determined a formal conduct risk strategy as it have been designed for managing broader conduct risks except for the designs and the distribution (Gurran & Phibbs, 2015). There was hence a review of the risk that conducts the risk profile in the units of the business. There are existing strategies that can be used to make sure that the conduct of risk can be taken into consideration in the process of decision-making. The maximum issues of CBA are generally raised by the staff. Generally, the Board helps in looking after the matter by holding the issues that are the concerns of the Board.
It can be stated here that the purpose of corporate governance defines the framework of the rules and the systems that is governed with the authority. Hence, as per my opinions the Board should take care of the principles of ASX and apply the appropriate recommendations accordingly (Godwin, Guo & Ramsay, 2016). The management of the non-financial risk is therefore treated to be critically evaluated for the benefit of the banks. It is therefore, the basic duty of the management to take care of the risk and it will make the possibility better. It can be stated that the Commonwealth Bank of Australia can will have a direct effect on it with the help of the corporate governance. Thus, as per my recommendations and opinion, it can be said that shareholder involved with it can take care of the market risk management and hence it can conduct the process of risk. It is essential for the financial institutions to take care of the monetary benefits and how the institutions have transformed over the years. When the Board takes care of it, the risk management is particularly treated as an individual business with the help of plenty of committees and other forums. According to the significant views of the Panel, it is mandatory for not including the oversight of the necessary risk profile of the group.
The Commonwealth bank in Australia did not take active participation in the risk sharing of the Securities Exchange. This is why the relations of corporate organizations with the Commonwealth Bank in case of handling liabilities have been poor. However, the bank have the largest investment framework in the Asia-Oceania belt (Cummings & Durrani, 2016). Hence, they can effectively reduce the securities’ and liabilities risk of the corporate organizations through active Customer relationship management. The organizations that have their projects hypothecated to the Commonwealth Bank should provide a detiled stakeholder map of the business projects with the Bank (Authority, 2018). Thus Commonwealth Bank can render active customer support to the chief shareholders of the project and ensure that other stakeholders fulfill their financial liabilities properly.
It can be said that as a result for the banks, the management of NFR is still not duly fragmented that includes and consists of plenty of functions, systems and methods of reporting of individuals. The approach of it can be shifted if the management faces all the major challenges (Dixon & Finnane, 2018). Corporate governance plays a significant role in the banks as their purpose if to manage the people and money. Roles and responsibilities are related to the NFRs that are considered to be less clear as compared to the financial risks. The jobs of the banks are to go for a clear set up and pay less attention to the need to work on a transformation of the culture of risk associated with it. The legal issues will also be applied accordingly in case of the risk management (Heard, Menezes & Rambaldi, 2018). In these situations, the legal duties must be carried out by the management for resolving the necessary issues of the banks of Australia. Legal issues can also arise while dealing with the problems of risk management inside the bank. The banks of Australia face problems while handling the frameworks of corporate governance and its necessary rules and principles. Therefore, in my opinion, the ASX principles can be applied in this scenario.
References:
Authority, A. P. R. (2018). Prudential Standard SPS 225.
Clarke, A. (2018). ‘Culture’and its place in the corporate governance puzzle. Governance Directions, 70(1), 10.
Conley, T. (2018). The stretched rubber band: banks, houses, debt and vulnerability in Australia. Australian Journal of Political Science, 53(1), 40-56.
Cummings, J. R., & Durrani, K. J. (2016). Effect of the Basel Accord capital requirements on the loan-loss provisioning practices of Australian banks. Journal of Banking & Finance, 67, 23-36.
Dalton, C. (2017). The Australian securitisation market 10 years on from’the global financial crisis’. JASSA, (2), 22.
Dixon, K., & Finnane, G. (2018). S is for stakeholders, not shareholders: The shift in board responsibility. Governance Directions, 70(6), 322.
Docherty, P., Bird, R., Henckel, T., & Menzies, G. D. (2016). Australian prudential regulation before and after the global financial crisis.
Donald, S., & Vrisakis, M. (2014). Superannuation and the Financial System Inquiry. Governance Directions, 66(8), 511.
Godwin, A., Guo, L., & Ramsay, I. (2016). Is Australia’s’ Twin Peaks’ System of Financial Regulation a Model for China?.
Gurran, N., & Phibbs, P. (2015). Are governments really interested in fixing the housing problem? Policy capture and busy work in Australia. Housing studies, 30(5), 711-729.
Heard, C., Menezes, F. M., & Rambaldi, A. N. (2018). The dynamics of bank location decisions in Australia. Australian Journal of Management, 43(2), 241-262.
McIlroy, J. (2017). Bank inquiry aimed at heading off royal commission. Green Left Weekly, (1151), 2.
Montague, A., Larkin, R., & Burgess, J. (2016). Where was HRM? The crisis of public confidence in Australia’s banks. In Asia Pacific Human Resource Management and Organisational Effectiveness (pp. 67-86).
Parsons, L. (2015). Regulating Australia’s financial stability in the national interest. In Australia’s Trade, Investment and Security in the Asian Century (pp. 251-269).
Taylor, S., Tarr, J. A., & Asher, A. (2016). Australia’s flawed Regulatory Impact Statement (RIS) process. Australian Business Law Review, 44(5), 361-376.
Williams, B. (2016). The impact of non-interest income on bank risk in Australia. Journal of Banking & Finance, 73, 16-37.
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