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Positive challenges for the outsourcing and advisory industry in a post Royal Commission era

Thursday 14 March, 2019
by Boris Bieler
Boris Bieler CFA, FCPA (Australia) is a signatory to The Banking and Financial Services Oath and raises awareness of the Oath in his role as guest lecturer at Macquarie University and UTS when lecturing on topics around auditing, risk management, corporate governance and ethics in banking. We invited Boris to provide his insights on what he thinks some of the positive challenges might be for the outsourcing and advisory industry, post Royal Commission.

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services industry identified failures of senior management, at the board level and in the corporate culture of financial institutions overall. It also reshaped the regulators, and thereby addressed the concerns and interests of banking clients and the broader community. An ongoing challenge now is on how other players leverage the outcome of the commission - in an industry which heavily outsources business processes, engages more and more independent contractors and seeks comprehensive advice from consultancy firms.

Financial institutions have become increasingly reliant on the global outsourcing industry. Outsourced services include automated credit decision making tools and contact centres which respond directly to customer queries. Current regulation assigns the ultimate responsibility of the services provided by a third party to the local banking industry, which needs to assess, monitor and supervise such non-regulated providers. In light of the Royal Commission, the banks might need to strengthen their process to verify on how their corporate values have been embraced by outsourcing partners and their subcontractors. In addition, the outsourcing industry itself might enhance their ethical decision-making and customer-focused advice by reviewing their own in-house standards.

The current discussions about ethics in self-learning technology applications may provide a good example. While still holding the financial institution as buyer and vendor manager ultimately responsible for the application's ethical behavioral standards, the accountability needs to be further directed and accepted by the technology sector.

In relation to the bank's increasing number of independent contractors, the challenge remains to customize concepts to integrate all staff into a strong corporate culture and fully incorporate specifically contractors and temporary workers in governance models, communication channels, training concepts and team building events.

The banking industry has engaged a number of external consulting firms to assist them with their regulatory responses and remediation efforts. Advising on such themes, these external consultants have a great opportunity to act as a multiplier of best practice standards and demonstrate their ethical behavior. An idea to publicly commit themselves would be to sign the Banking and Financial Services Oath creating further momentum for a mindset change in the industry.

In conclusion, the banking business is in the midst of behavioral and in-house process changes. As part of this mammoth task, financial institutions may need to revisit aspects of their outsourcing arrangements by expanding culture assessments, validating governance and accountability models of their outsourcing partners and influencing third party performance and fee schemes to reflect the bank's core value in being customer centric.

Similarly, the outsourcing industry itself has now a prime opportunity to adopt such measures in a self-regulated and pre-emptive manner which fosters their level of integrity. Also, the bank's focus might still be needed to consider all forms of employment arrangements including independent contractors in building a strong, sustainable and trustworthy in-house culture.

And lastly, while being in such a high demand at a time of significant transformation, advisors are positively challenged to act as role models, including by taking up the Banking and Financial Services Oath which is open to all individuals working in banks and banking-related businesses.

Boris has spent more than 20 years in risk management roles in the financial services industry, most recently as Head of Audit at Deutsche Bank and Bank of America Merrill Lynch. He has been a speaker and chair at conferences held by the Institute of Internal Auditors Australia and CPA Australia and supports the CFA Institute globally with its programs and curriculum.


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The Oath

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