15 March 2006
Brisbane, 15 March 2006: A leading Australian business adviser is warning the banking and financial services sector that with its increasing risk of reputational threat it is imperatives that corporates within the sector develop water-tight due diligence processes to protect their ongoing viability.
Speaking at a Quality and Productivity workshop in Sydney Randal Dennings, head of the National Compliance Division within Clayton Utz, said that corporations need a truly robust due diligence defence strategy to protect the organisation, its senior executives and directors, should something go wrong.
Mr Dennings says that over the past couple of years the business sector has been increasingly focused on the need to implement compliance and risk management systems but often, when tested, the systems fail to provide sufficient robustness.
"It is important that companies adopt strategies focused around vigorous and measurable due diligence," Mr Dennings says. "Our clients are now concerned that they can recognise and prepare for over-the-horizon legal and regulatory risk, and the imperative to do this increases with each bout of reform, such as the impending anti-money laundering legislation and the new Australian Standard on Compliance AS 3806 - 2006.
"Several years ago my team recognised the importance of moving beyond the 'form' of compliance to enhance its substance. This is so that a company could actually demonstrate how its systems were working. As a result we developed a product called Complir8 which has been implemented with positive results in this sector.
"Business need a cocktail mix of methods that they can test for effectiveness in order to ensure they are crisis prepared because generally speaking, when something does go wrong, it's genuinely either something that's literally come out of the blue that you could be not reasonably foresee such as September 11, or alternatively, and more usually, it's something that with the benefit of 20/20 hindsight may have been foreseeable.
"So it is important to have a degree of crisis preparedness to draw upon the good work that you've already done in business improvement, and to be able to demonstrate that you've been duly diligent. This approach enables you to come out with confidence when you speak to your other stakeholders, the public, the board of directors, your staff and the media about the preventative measures that had been implemented.
"Genuine business improvement based on identifiable objectives offers a number of rewards. It saves on waste because the business improvement is measurable and it enables better change management because the steps being implemented ensure the company is working on firm foundations despite the fact that it may be operating in an uncertain environment."
Mr Dennings says the sector most in need of this approach is financial services because it is on the 'bleeding edge' of regulatory oversight.
"The sector faces intense pressure from a whole range of different stakeholders unhappy with the sector's performance in terms of reputational risk, legal risk or compliance matters. This ensures that the scrutiny of financial services, whether from the media, regulators, government or the community, is at an historically high level.
"I am not arguing that such scrutiny from the regulators isn't appropriate but that in an environment of extraordinary vigilance this is all the more reason for well run companies to ensure they have water-tight due diligence defences.
"In an environment where regimes are continually changing no company will be able to 'get it perfect' in every way. Things will go wrong so the best defence is to be able to thoroughly audit the compliance system.
"I predict this situation will be exacerbated with the advent of anti-money laundering, which will totally rewrite the relationship you have with your customers. This relationship is at the heart of what you do in financial services."
