Are risk management and business culture where we want them to be?
Dr. John Lee, Country CEO and CEO Maybank Singapore explores the current landscape when it comes to risk culture and what steps can be taken to improve and reap the rewards. Dr. John Lee will be speaking at RiskMinds Asia in Singapore this October.
It has been 10 years since the Global Financial Crisis (GFC). Financial institutions lost significant trust from the general public after the GFC. Many new regulations have since been introduced and imposed on financial institutions, including regulations relating to conduct, ethics and compensation. It is still early days to see whether the impact on these regulations has improved the culture of financial institutions. Conduct, ethics and culture are ultimately about human mindset and behaviours. It is not something that can change overnight. However, it is not clear that human mindset and behaviours can indeed be regulated. We need to go back to the basics of what doing the right thing means rather than through regulations. We need to instill the need and importance of social responsibilities into the corporate culture and mindset of people.
Conduct, ethics and culture are ultimately about human mindset and behaviours. It is not something that can change overnight.
Many organisations have embarked on corporate philanthropy, that is, developing a Corporate Social Responsibility (CSR) strategy and implementing CSR activities to demonstrate that they are a more socially responsible organisation. The litmus test of the success of these philanthropic efforts is the sustainability of these efforts and the commitment from the employees over time, and ultimately resulting in a better corporate culture. For CSR to be sustainable, we need to embed CSR into our day-to-day business. Embedding CSR means that organisations must be measured not only on maximising the return to their shareholders, but also their return to the community and society at large. Shareholders of these organisations must hold the management more accountable for their CSR progress and be active in their advocacy of doing the right thing.
Similarly, employees must be measured and compensated for doing the right thing not only from a financial perspective, but also from the perspective of conduct, ethics and culture, before a fundamental change in mindset could happen. In fact, it is equally important to reward someone for doing the right thing as well as penalising a person for doing the wrong thing. Often, for conduct and ethical issues, the focus is on penalising. Employees are often not encouraged or motivated enough to do the right thing.
For financial institutions, in addition to the usual CSR efforts, their business activities need to also put in place a sustainability agenda. This is why increasingly we are seeing financial institutions doing more in this aspect and adopting an Environment, Social and Governance (ESG) framework within their business activities. Financial institutions want to ensure that their business activities are more socially responsible. For example, at Maybank, we have a mission statement of ‘Humanising Financial Services’. One of the tenets of this mission statement is providing everyone with access to financing, whereby the idea of ‘access’ is not just about access in terms of funding, but also about assisting and empowering our communities to save, invest and improve their living standards in the long term. Additionally, financial institutions with an ESG framework can play a leading role and become part of an important movement to shift overall corporate practices across industries towards greater accountability and increased mindfulness over ethical conduct for a sustainable planet.
Embedding Corporate Social Responsibility means that organisations must be measured not only on maximising the return to their shareholders, but also their return to the community and society at large.
Employees must also be encouraged to do social volunteering work. Through volunteering their time and service, hopefully employees will build a greater sense of purpose, humility and ultimately understand what doing the right thing means. It is through these organisations and people changes that will align the right conduct, ethics and culture in organisations.
In summary, we are moving in the right direction where we are seeing positive improvements in the culture of organisations. All stakeholders, namely shareholders, management, employees, the community and society at large, have a role to play on this journey. Despite what has been achieved across the industry, much more work needs to be done to raise the bar to yield higher standards for a brighter future.
