please find the attachment for the assignment. I need case study report based on the CBA report attached addressing all the questions asked in the assignment instructions
Microsoft Word - instructions CASE STUDY.docx AFIN8003 CASE STUDY (25%) DUE: 5pm Friday 16 October Instructions Each student will write an individual Case Study report about issues raised in the APRA prudential inquiry report (2018) into the Commonwealth Bank of Australia (CBA) group focusing on frameworks and practices in relation to governance, culture and accountability within the bank. The report is to address the following specific questions: • What types of problems were identified in the prudential inquiry into CBA that delivered its final report in April 2018 (Australian Prudential Regulation Authority, 2018)? How do these problems arise within financial intermediaries? Discuss with reference to recent examples in the financial services industry (using CBA or other financial firms). • How do these problems impact on financial intermediaries and their customers? • What role does regulation play in addressing governance, culture and accountability problems within financial intermediaries? • What actions have financial firms taken to identify and rectify these problems? • How successful have these actions been? Where have they been inadequate? • How can industry practices in this area be improved in the future? The report must be your own work, crafted using your own words. Your report will be submitted online via Turnitin and an originality report will be generated immediately. Plagiarism will result in penalty marks deductions or possibly failing the assignment. Grading The report will be graded against the following criteria: • relevance—the report directly answers the above questions • knowledge and understanding of the issues • critical, analytical and integrative thinking • evidence of the use of appropriate materials (e.g. books, journal articles) • structure and presentation—the report is well organised and ideas are expressed clearly Length and format The maximum length of the report is 6 typed pages. Reports must be 1.15-spaced, size 12 points, font Times New Roman. Use margins of at least 2.54 cm (1 inch). Do not include abstract, introduction, conclusion, or references/bibliography. Appendices should also not be used. Tables and figures should only be used sparingly, if at all. Submission details The report is due by Friday 16 October 2020 at 5pm (17:00 Sydney time). No extensions will be granted. There will be a deduction of 10% of the total available marks made from the total awarded mark for each 24 hour period or part thereof that the submission is late (for example, 25 hours late in submission = 20% penalty). The report must be submitted as a PDF file to Turnitin via the unit iLearn site (use link in week 10 module). The first submission by each student is final - you will not be permitted to resubmit your report. Reference (this is the only reference required) APRA, Prudential Inquiry into the Commonwealth Bank of Australia (CBA): Final Report, April 2018 (available on iLearn) Prudential Inquiry into the Commonwealth Bank of Australia (CBA) Final Report 30 April 2018 Mr Wayne Byres Chairman Australian Prudential Regulation Authority Level 12, 1 Martin Place Sydney NSW 2000 Dear Mr Byres Prudential Inquiry into the Commonwealth Bank of Australia (CBA) Final Report On 28 August 2017, the Australian Prudential Regulation Authority (APRA} announced it would establish a Prudential Inquiry into the CBA. This followed a number of incidents in recent years that have damaged the reputation and public standing of the CBA group. The purpose of the Prudential Inquiry, contained in the Terms of Reference, was to examine the frameworks and practices in relation to governance, culture and accountability within the CBA group that have contributed to these incidents. The Panel provided its Progress Report on 31 January 2018. The Panel has now completed its assessment. In brief, the Panel has identified a number of shortcomings in CBA's governance, culture and accountability frameworks, particularly in dealing with non-financial risks, and has made a series of recommendations designed to strengthen these frameworks. The Panel acknowledges that CBA's efforts to address these shortcomings have gained momentum under its new leadership, but regaining community trust will require, time, hard work and an undistracted risk and customer focus. We are now pleased to provide you with the Final Report. Yours sincerely John Laker AO Jillian Broadbent AO Graeme Samuel AC PRUDENTIAL INQUIRY INTO THE COMMONWEALTH BANK OF AUSTRALIA APRIL 2018 PRUDENTIAL INQUIRY INTO THE COMMONWEALTH BANK OF AUSTRALIA 2 CONTENTS EXECUTIVE SUMMARY 3 1. Introduction 6 SECTION A: GOVERNANCE 9 2. Role of the Board 12 3. Senior Leadership Oversight 22 4. Risk Management and Compliance 27 5. Issue Identification and Escalation 37 6. Financial Objectives and Prioritisation 47 SECTION B: ACCOUNTABILITY 56 7. Accountability 58 8. Remuneration 65 SECTION C: CULTURE 80 9. Culture and Leadership 82 SECTION D: REMEDIATION INITIATIVES AND PANEL RECOMMENDATIONS 94 10. Remediation Initiatives 96 11. Panel Recommendations 102 APPENDIX A. APRA Prudential Inquiry into CBA: Terms of Reference 105 APPENDIX B. Panel Membership 106 APPENDIX C. Activities Undertaken by the Inquiry 107 PRUDENTIAL INQUIRY INTO THE COMMONWEALTH BANK OF AUSTRALIA 3 EXECUTIVE SUMMARY Community trust in banks has been badly eroded, globally and in Australia. Globally, the financial crisis exposed a series of corporate scandals in banks. Governance weaknesses, serious professional misbehaviour, ethical lapses and compliance failures have resulted in substantial financial losses and record fines and penalties. ‘Conduct risk’ has entered the lexicon of bank Boards and regulators as a clear and present danger. Banks in Australia were resilient through the crisis but their conduct is far from unblemished. Failings in the provision of financial advice, dubious lending practices, mis-selling of financial products, shortcomings in the setting of benchmark interest rates and compliance breaches have undermined community trust, drip by corrosive drip. Trust is the currency of banks, and improper conduct that undermines confidence or causes harm to customers devalues that currency. The Commonwealth Bank of Australia (CBA) has acquired the status of a financial icon, built on its history, its continued financial success and its innovation in customer-facing technology. As Australia’s largest financial institution, CBA touches a wide range of Australians. Hence, the community holds high expectations for the institution, as does CBA itself. Nonetheless, it too has had a succession of conduct and compliance issues – AUSTRAC’s legal action a recent high-profile example – and these expectations have not been met. CBA has ‘fallen from grace’. How can this happen in a bank of CBA’s stature and sophistication? This, fundamentally, is the question that the Inquiry Panel has been asked to address. There is no simple answer, no ‘silver bullet’ remedy. A complex interplay of organisational and cultural factors has been at work. However, a common refrain has emerged from the Panel’s intensive analysis and enquiries over the past six months: CBA’s continued financial success dulled the senses of the institution. This dulling has been particularly apparent, at least until recently, in CBA’s management of its non-financial risks (that is, its operational, compliance and conduct risks). These risks were neither clearly understood nor owned, the frameworks for managing them were cumbersome and incomplete, and senior leadership was slow to recognise, and address, emerging threats to CBA’s reputation. The consequences of this slowness were not grasped. The Panel has identified a number of tell-tale markers: • inadequate oversight and challenge by the Board and its gatekeeper committees of emerging non-financial risks; • unclear accountabilities, starting with a lack of ownership of key risks at the Executive Committee level; • weaknesses in how issues, incidents and risks were identified and escalated through the institution and a lack of urgency in their subsequent management and resolution; • overly complex and bureaucratic decision- making processes that favoured collaboration over timely and effective outcomes and slowed the detection of risk failings; • an operational risk management framework that worked better on paper than in practice, supported by an immature and under-resourced compliance function; and • a remuneration framework that, at least until the AUSTRAC action, had little sting for senior managers and above when poor risk or customer outcomes materialised (and, until recently, provided incentives to staff that did not necessarily produce good customer outcomes). In the environment of continued financial success, two critical voices became harder to hear, leaving EXECUTIVE SUMMARY PRUDENTIAL INQUIRY INTO THE COMMONWEALTH BANK OF AUSTRALIA 4 CBA vulnerable to missteps. One was the ‘voice of risk’, particularly for non-financial risks. The fact that there had been no large loss-making events in this area (though reputational damage clearly), the heavy emphasis of the risk function on financial risks, and the ineffective operational risk and compliance frameworks, muted that voice. The other was the ‘customer voice’. Notwithstanding the customer focus enshrined in CBA’s Vision and Values, and its industry-leading customer satisfaction scores, the customer voice (in particular, customer complaints) did not always ring loudly in decision-making forums and product design. In the Panel’s view, cultural factors lie at the heart of these shortcomings. Four broad and interlinked cultural traits stand out. First, and obviously, a widespread sense of complacency has run through CBA, from the top down. CBA’s first ranking on many financial measures created a collective belief within the institution that CBA was well run and inherently conservative on risk, and this bred over-confidence, a lack of appreciation for non-financial risks, and a focus on process rather than outcomes. CBA was desensitised to failings with customers. Delays in (or premature closing of) risk and audit issues and the late delivery of projects were readily tolerated, with limited remuneration or other consequences. Secondly, CBA has been reactive – rather than proactive and pre-emptive – in dealing with risks. Operational risk and compliance issues tended to