Answer To: BULAW2611 Organisations Law – Semester 2, 2018 Assignment Two This assignment is relevant to...
Soumi answered on Sep 11 2020
Running Head: ORGANISATIONS LAW 1
ORGANISATIONS LAW 2
BULAW2611 ORGANISATIONS LAW – SEMESTER 2, 2018
ASSIGNMENT 2
Table of Contents
Introduction 3
Discussion of Shortcomings in Commonwealth Bank of Australia’s Governance, Culture and Accountability Frameworks, particularly in dealing with Non-Financial Risks 3
Discussing the Recommendations 3
Justifying the Recommendations 7
Conclusion 9
References 10
Introduction
The commonwealth Bank of Australia (CBA) is one of the most trust organisation in Australia. The financial performance of the bank has been better than most of the financial organisations across the globe. During the financial crisis of 2008, the CBA was exposed to multiple financial risks. It had been able to deal with the issues at that point of time. However, the success of the organisation in the past has led to ignorance of a number of non-financial risks such as corporate governance risks, issues in accountability framework and others. The Australian Prudential Regulatory Authority has released a report that deals with the issues of CBA. A number of recommendations have been made in regards to that. This assignment deals with discussion of such issues and analysing them in detail from the perspective of benefits that will be accrued to the organisation.
Discussion of Shortcomings in Commonwealth Bank of Australia’s Governance, Culture and Accountability Frameworks, particularly in dealing with Non-Financial Risks
Discussing the Recommendations
During the financial crisis of 2008, the Commonwealth Bank of Australia was exposed to a series of risks. The weakness of governess, unprofessional behaviour, ethical lapse and compliance failures were observed during that period. The was issues in the provision of financial advice, dubious lending practices, issues in setting of benchmark interest rate, compliance breaches and miss-selling of financial products were observed during that period. In spite of such issues, the entity emerged as a reputed organisation and dealt with such issues. A number of steps were taken during that period that reduced the financial risk of the organisation. However, due to reputation, performance and growth of organisation, the non-financial risk was ignored. According to the views of Koh and Leong (2017), the non-financial risks include operational, compliance and conduct risks that cannot be seen on the financials of an organisation (APRA, 2018).
In the recent times, the panel has identified a number of issues. Such issues include unclear accountabilities, unambiguity in the method of identification of risks, over complex and bureaucratic decision-making process that leads to delay in decision-making. The operational risk management framework of the bank was more effective on paper in comparison to real market scenario. The compensation scheme of the bank was not highly based on efficiency. The incentives were provided to the staff who did not even produce healthy customer outcomes.
There are a number of cultural issues, which include tolerance to delays in audits and such matter. The organisation was proactive rather than pre-emptive. As per the opinion of Sheedy and Griffin (2018), once the issues were highlighted, swift action was taken by the management. No measures were taken to identify the creeping issues that could have an impact on the performance of the management. The output of the organisation had been even better, if all the above-mentioned issues were dealt with seriousness (APRA, 2018).
The panel had made a number of recommendations to deal with the issues that have been mentioned above. Such recommendations included formation of a more rigorous Board and Executive Committee for the governance of non-financial risks, upgrading the capability and authority of the compliance functions as well as operational risk management, along with hanging the culture of the organisation from pro-active of pre-emptive. The panel also recommendation to align its practice of the Board and Audit and Risk committee with the risk management practices at global level. Effective co-ordination among the Risk and Remuneration, Audit and Board was suggested to reduce the delay in decision making along with efficient flow of information to the target users. The organisation was suggested to take idea from all the employees in the organisation through debates and meeting. According to the opinion of Deresky and Christopher (2015), involvement of employees would lead to identification of simple ideas that may not come into the minds of the senior management.
The panel also provided suggestions on creating accountability among the management and the group. The CEO should ensure that the executive committee promotes the voice of the support function, takes...