The implications of the Royal Commission’s final report are still echoing across multiple industries. In the meantime, the focus of the report, the financial sector, needs to buckle down and prepare to change. Outlined in more than 500 pages, Commissioner Hayne brought the industry to task for issues of financial reporting, visibility and overall best practices—among many others. While the commissioner’s recommendations will take time to implement fully, proactive companies would be wise to take stock of how they can improve with automation now. The final report lays out 76 recommendations in full, but we will address those three issues of risk management in this blog.
“The commission will have a lasting impact on the way banks go about their business because it will force them to change focus from profits to compliance and risk management,” Michael Wayne, of the investment firm Medallion Financial in Sydney1.
1. Improve Your Financial Reporting
Consequently, the commission may only have jurisdiction over domestic financial institutions, but the Australian financial industry is inextricably linked with not only the nearby powerful Asian markets but the world at large—therefore these problems need to be addressed at their foundation.
One of the hallmarks of a financial institution, for the public and regulators, is trust. Institutions build trust through clear and accurate financial reporting. Regarding the Australian banking misconduct, customers were not adequately informed on the performance of the banks they were prepared to trust with their hard-earned money2. When managed in disjointed spreadsheets, it is all too easy to introduce risk into the reporting process through inaccurate data and inefficiency.
Since July 1st, 2010, almost $250m in remediation has had to be paid to almost 540,000 consumers by financial services entities for poor conduct in connection with home loans3.
Financial institutions cannot afford a more significant loss of reputation, remuneration and new levied fines through further mismanaged financial reporting. Fortunately, an automated solution enables the office of finance to improve their control, accuracy and timeliness of financial reporting.
To learn more about transforming your required statements, check out our solutions.
2. Strengthen Your Visibility
While accurate financial reporting is beneficial for key stakeholders and board members, strong visibility through the Record to Report (R2R) cycle is critical for the organization. From general accountants up to the CFO, everyone that needs to have access should easily have it. Risk management means having a solid strategy for combatting areas of financial risk and that strategy starts with having the proper information.
Though the royal commission does not equate the same process as a regular audit, it did employ similar scrutiny into the financial sector’s operations and found them wanting. If managed with manual methods, these organisations’ financial close process was exposed to the risk of compounded errors. By employing an automated account reconciliation process, managers and reconcilers alike can have visibility at any time during an accounting period, not just period end.
3. Overhaul Your Overall Best Practices
Finally, Commissioner Hayne was particularly harsh on the overall culture of the financial sector. One of his recommendations was summarized as, “requiring all financial companies to assess their own culture and governance2.” Culture is built through best practices, communication, accountability and data-driven insights.
Once companies have evaluated and updated their processes they can realize improved collaboration and communication throughout the R2R cycle. Greater accountability and data-driven insights will follow when the office of finance can refocus their energies on value-added activities instead of merely managing data. Strong risk management is also beneficial to a healthy corporate culture as it drives accountability.
While compliance isn’t a choice, you can choose to transform your entire financial close while saving money in short order. Many, many recommendations were handed down, and an automated solution will put you on the right path to revamp your error-ridden processes. Commissioner Hayne’s report will be implemented this calendar year, so you have no more time to dally.
Build the tools to get ahead of these issues by checking out our solutions.
Written by: Chelsea Downey
1 Farrer, M., Hutchens, G. (20 November 2018). ‘It’s not even scratched the surface’: bank victims demand royal commission 2.0. Retrieved 11 February 2019, The Guardian.
2 Czoch, K., Patel, N., Siavelis, J. (8 February 2019). Banking royal commission report – in a nutshell. Retrieved 8 February 2019, Gilchrist Connell.
3 Hutchens, G. (19 April 2018). Banking royal commission: all you need to know – so far. Retrieved 7 February 2019, The Guardian.