Paul O’Sullivan: a clear pathway for action

Today is an important day for ANZ as we acknowledge the findings of a review into non-financial risk management practices and risk culture within ANZ’s Global Markets business, while confirming we have entered into a court enforceable undertaking with our regulator.

We are taking responsibility and committed to making things right.

For everyone at ANZ, the independent review by Oliver Wyman concerning culture and risk governance in our Global Markets Business is important to read.

It outlines 19 recommendations and 53 sub-recommendations which I, the Board and our management team are fully committed to putting in place.

The court enforceable undertaking also announced today by the Australian Prudential Regulation Authority (APRA) includes an additional operational risk capital overlay of $250 million.

How are we thinking about these matters as an institution?

First, and most importantly, we are immensely disappointed that we have not met APRA’s expectations of how the bank manages non-financial risk and its risk culture.

Strong non-financial risk regime management practices are critical to protecting our bank and our customers.

It is clear we have work to do, and we are committed to doing what it takes to regain APRA’s faith.

ANZ understands that with issues of such importance, we will be measured by what we do, not what we say. Therefore, we are committed to being open and transparent about our work so that our progress can be tracked by our stakeholders.

We know there is more work to be done to ensure conduct and behaviour issues do not go unaddressed in the future.

But let us be clear, the Oliver Wyman review and the court enforceable undertaking give the Board and the bank a clear pathway to meeting APRA’s expectations for how we manage non-financial risk and uplift risk culture.

Oliver Wyman review

The review was carried out in response to concerns around conduct, workplace behaviour and non-financial risk governance within ANZ’s Global Markets business.

While there was no evidence of widespread or systemic misconduct, the shortcomings outlined in the review – no matter how isolated – are unacceptable and will be addressed.

The Board will require our Group Executive of Institutional, Mark Whelan, to oversee the implementation of the review’s recommendations, supported by a dedicated working group and secretariat, with regular reporting to the Board.

We are not starting at ground zero. APRA has recognised the bank has a significant agenda of non-financial risk work underway and has made some progress with improving our practices.

But we recognise there is more to do to uplift our management of non-financial risk and to improve risk culture across the bank.

Court Enforceable Undertaking

My goal as Chairman right now is to work with APRA to deliver what's required to resolve their concerns outlined in the court enforceable undertaking.

It is also my priority to give management and our investors clarity and certainty as to how ANZ will achieve a strong and enduring trust with our regulators. This is especially important as we have a leadership transition to a new CEO at ANZ next month.

We have already embarked on an enterprise-wide body of work to uplift our non-financial risk management.

While we have not yet done enough, the court enforceable undertaking does provide us with a clear construct and roadmap for addressing APRA’s concerns. We are confident that we will deliver on this work over the next two to three years.

Most importantly, we will work with APRA who will have a view of what is the right timeframe and the right response as we work through these issues.

Above all, we acknowledge that maintaining risk culture is not something with an end point. It is something we maintain consistently and improve daily.

Further actions

Immediate actions have been taken in response to both the Oliver Wyman review and the court enforceable undertaking, and this work will continue to accelerate.

This includes appointing senior executives to strengthen non-financial risk management practices across the group.  

Primary among these is the creation of a new Executive role Group Head, Non-Financial Risk Program Delivery reporting to the CEO, which will be filled by current Head of Singapore and Head of South-East Asia, Middle East and India, Mark Evans.

I will work closely with Mark and the CEO to ensure the timely and effective delivery of our commitments.

Customers, shareholders and everyone at ANZ should be assured that I as Chairman, along with the Board and management, will work tirelessly and bring a sharp focus to completing this work and embedding the right approach throughout the bank, which in turn will enable us to have the court enforceable undertaking and capital overlay removed as quickly as possible.