Rhizome believes a new era of governance is emerging. More active Boards, management and stakeholders will usher in a higher standard of corporate governance. The outcome of this evolution will be financial institutions that proactively understand the elements of their governance that support or detract from the delivery of sustainable customer, risk and business outcomes.
Rhizome helps financial institutions gain the clarity they need and help develop solutions to ensure truly effective governance.
Strong corporate governance is essential to the sound and sustainable functioning of financial institutions. The relationships between policies, processes, behaviours and oversight through which an institution is controlled and directed, operationalise an institution’s governance. The last decade has produced consistent evidence indicating that governance practices have not been meeting the expectations of customers, shareholders, regulators and the wider community. Loss of trust in the financial sector has been the result.
Balancing risk and return is central to the success of financial institutions. In a rapidly changing and increasingly complex environment, a key challenge for institutions is to continuously ensure risks are being identified, understood and managed appropriately within a risk management framework that is responsive to change.
Accountability of leaders within financial institutions has been a major focus for industry, regulators and governments since the Global Financial Crisis. The Australian government’s introduction of the Bank Executive Accountability Regime (BEAR) will require authorised deposit-taking institutions to formalise and institutionalise an accountability framework for senior executives and directors.
Incentive frameworks and the outcomes they generate can be powerful indicators of an organisation’s culture. The interlinked nature of incentives means that they, in turn, can also significantly influence culture. These observations were among the key lessons learnt from the Global Financial Crisis, which led financial sector regulators to subsequently introduce regulations over executive remuneration.
Culture is increasingly being recognised as among the root causes of the numerous instances of institutional failures, misconduct and poor risk outcomes that the global financial sector has experienced since the Global Financial Crisis. While the understanding of culture is not yet widespread, its importance is universally accepted.
A paradigm shift is occurring in corporate Australia, with expectations of the role and function of Boards increasing significantly. At the same time, financial institutions and the markets they operate in are increasing in complexity.