Royal commission: organisations best to check rear-view mirror before rushing forward
QMV recently hosted a panel of insurance and superannuation leaders to discuss the path forward post the royal commission. The purpose of the event was to share initiatives and ideas that will drive an industry-wide transformation around people, process and technology.
The panellists offered generous insights and real-life accounts that both resonated and challenged attendees:
Martin Mulcare – Principal of Etiam and Independent Director SGLA (facilitator)
Geoff Black – Vice President, RGA Australia (panellist)
Kathryn Forrest – EGM Operations, Telstra Super (panellist)
Chris Powell – CEO, Integrity Life Australia (panellist)
Mark Vaughan – Managing Director, QMV (panellist)
The event was held under Chatham House Rules and below is a summary of how the conversation unfolded.
When reflecting on the outcomes and impact of the royal commission it is clear that there is no silver bullet solution. Decline in the level of trust is at its highest. Most industry observers are expecting greater regulation and more severe penalties to be imposed. It is predicted that the appetite of many organisations to create new products and evolve will decrease and this will impact the rate of innovation.
There was consensus that the industry is highly driven to be more innovative and creative, especially given rapid advancements in technology, including business intelligence and predictive analytics. However, the royal commission will force organisational introspection. One potential outcome may be that industry players will endeavour to rebuild consumer trust by demonstrating investment in customer-centric systems and processes. However, the added layer and cost of administration may stifle and dampen this drive, not to mention more layers on top of already stretched legacy platforms.
New entrants in financial services are at an advantage in this space as they do not carry the weight of entangled legacy systems which has been a persistent issue for larger, more established institutions. Start-ups have the advantage of a blank canvas, uninhibited ideas and the adoption of more powerful and nimble technological platforms. These organisations are pushing hard to deliver high performing customer-centric service and outcomes and can rapidly deploy new products to market.
It was recognised that distrust is not only being felt at the consumer level. Employees of financial institutions have been heavily impacted by the findings of the royal commission and this has significant cultural implications. To regain confidence, senior management will need to drive a cultural paradigm shift to encourage a new way of conducting business, which may include personnel changes of those who do not meet the new vision and behavioural expectations. Key people may be replaced by new leaders with fresh views and a different ethos.
This cultural change ultimately must empower employees to clearly identify the right way to undertake processes ensuring that the best interest of the customer is always considered. Employees must be encouraged and rewarded to come forward and call out issues early. Subsequently, all such processes should include review mechanisms and swift action taken where deviations and issues are identified.
GREATER EMPHASIS ON INTERNAL CONTROLS
Organisations that will thrive both in corporate culture and consumer trust post royal commission will be proactive in routinely running internal monitoring and testing for potential breaches or process failures. Successful organisations will communicate transparently with their customers to inform, resolve and redeem errors or failures that are discovered. Organisations that continue a practice of denial or avoidance, remaining in the same tired cycle of reactive remediations are building a ‘remediation debt’ that will ultimately bear significant financial and reputational cost.
Most organisations will typically forecast an overly optimistic annual spend on data remediation without looking carefully at their ‘actual’ retrospective spend in previous years. There has been an industry-wide attitude of apathy that it is ‘ok’ to wait for a problem to occur and then fix it, rather than a proactive and preventative approach. Post royal commission there is much scrutiny, much ground to make up and much at stake.
SHORT TO MEDIUM TERM FUTURE
On the topic of what the industry would look like in three-years, the panel viewed the aggressive change agenda of some of the industry’s big players with caution.
While talk of artificial intelligence and blockchain may dominate industry conferences, the royal commission alongside other regulatory impositions has forced most institutions to look in the rear-view mirror. The resultant clean-up activities and increased regulatory oversight are likely to hinder significant advancements in innovation, products and the technological landscape.
In closing I would like to thank once again the many efforts and valuable input from our exceptional facilitator and panellists. Thank you also to our wonderful attendees for supporting the event and joining us in what was a very effective session. We look forward to seeing you at our next event!
Wendy Colaço – Principal Consultant
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