Powered by MOMENTUM MEDIA
subscribe to our newsletter

Financial industry slammed for outdated risk management

A new paper from the Actuaries Institute has warned that financial institutions are applying ineffective and outdated risk management strategies.

In the Actuaries Institute’s Social Risks – for a financial services business dialogue paper, author Ian Laughlin slammed the financial services industry for failing to adapt to changing social norms and attitudes.

Mr Laughlin questioned the industry’s inability to manage risks to prevent misconduct, which have culminated in widespread scrutiny from government, media and the general public.

“How can it be that institutions spend huge amounts of money, resources and intellect on managing risk, and still find themselves being castigated by the press, politicians and social media for unacceptable attitudes and behaviour?” the author said.

“The government has freely criticised the banks, subjected them to intense parliamentary scrutiny and has announced its intention to impose new law on accountability and remuneration.

Advertisement
Advertisement

“[Now] after much political battle, there is to be a Royal Commission into misconduct in the banking, superannuation and financial services industry.”

Mr Laughlin acknowledged that financial institutions are presently held to a higher standard than in the past, but he argued that the industry has been slow to address social risks and adapt to “new social capabilities” that intensify scrutiny.

“[Institutions] have not managed the risks that come from changing social attitudes and norms and the power of new social capabilities. Such risks need a fresh approach,” Mr Laughlin said.

Further, Mr Laughlin noted that the factors that fuel social risks are ready access to information spurred on by the evolution of social media.

The author outlined the different types of social risks that he believes the industry should be aware of. These include:

PROMOTED CONTENT


  • Cynicism risk – A business’ conscious acceptance of its own poor attitudes and behaviour
  • True values risk – When the actual values of management and staff conflict with those espoused by the business
  • Insight risk – When a business has a poor appreciation of current social norms and expectations
  • Tolerance risk – A company’s failure to adapt to fast-changing social attitudes

Mr Laughlin urged the financial services industry to adopt a “risk-sensing” approach to have “deep and effective capabilities” in place to adequately monitor and assess social risks.

[Related: Royal Commission submission takes aim at mortgage lending]

Financial industry slammed for outdated risk management
mortgagebusiness

If you’re feeling overworked and overwhelmed in this fast-paced mortgage market, it’s time to make some changes, and the Business Accelerator Program can help! Early bird tickets are on sale now. Work smarter, not harder, this year.

Charbel Kadib

Charbel Kadib is the news editor on the mortgages titles at Momentum Media.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

You can email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.

Latest News

A foreign bank has had its Australian banking licence revoked by APRA after it pulled out of the Australian market. ...

The average number of days properties spend on the realestate.com.au site fell to a record low in May, with records broken in many states a...

The big four bank has hired the former boss of AUSTRAC as the regulator has launched an investigation against NAB for potential anti-money...

How long do you think it should take to discharge a mortgage?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.