17 nancy milne - fsaa.com.au
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Nancy Milne
RESULTS THE BOARD WANTS -
It's not only about profit ....
• Perspective of a director of a financial services organisation
• Emphasis on compliance
DISCLAIMER:
My own personal views derived from:
1. Board Experience
2. Gossip
3. Legal Career
Not speaking for Comminsure or any other Board
OVERVIEW
1. Director's role and workload
2. Current issues - what is happening in Directorland
3. Centro, James Hardie
4. Regulatory environment
5. Risk Management
6. Compliance
7. Pet hates and loves
Director's Role and Workload• Stewardship
• Oversight not management
• Line between director/management role can become blurred
"The Board's function is to set the company's aims
and objectives and to ensure that they are achieved."
Sir Adrian Cadbury - Corporate Governance & Chairmanship
We need ... "directors who are business-savvy interested,
shareholder-oriented, and who will think and speak independently"
Warren Buffet 2002
Overlay of Regulation
• Imposes personal liability/responsibility on directors, eg Life Insurance Act,
WH&s, Prudential Standards
• APRA & ASIC expectations
Oversight Detailed involvement in business
Current Issues in Directorland
• Increased expectations
"Directors are expected to meet an increasing range of
obligations amidst commercial and legal expectations
of their actions."
Jeffrey Lucy AM, Chairman ASIC, August 2006
• Technology
Centro• Classification of liabilities as non-current in financial statements was a breach
by directors of s180 Corporations Act
• Highlighted issues of:
- volume of material provided to directors;
- difficulties of relying on implicit assurances provided by management and
auditors;
- need for all directors to read and understand financial statements.
James Hardie
• High Court judgment
• Held directors' liable for misleading ASX announcement
• Critical role played by minutes. Court relied on the minutes even though
directors denied their accuracy
Regulatory Environment for Financial Services Companies
HELP!
• LAGIC
• ICAAP
• FOFA
• Superannuation reforms
• Remuneration
Regulatory Environment for Financial Services Companies
HELP!
• FATCA
• Flood
• Privacy
• Dollar Disclosure
• Australian Consumer Law
• Various enquiries - compensation, schemes, Ripoll ....
How can all of this be addressed?
• Strong risk management and compliance functions
• Education sessions
• Dialogue about what is working and not working
• Papers that are succinct but informative
• Absolute transparency
• Right culture - speak up
Risk Management
• APRA's drive to embed Risk Appetite statements, development of risk
tolerances and parameters
• Less qualitative, more quantitative measures
• Applying a risk appetite lens to all decisions, eg, reinsurance program and
pricing
• What's over the horizon?
• Stress testing/scenario testing
• Separate Risk Committee?
Compliance
• Directors need to have confidence in the adequacy of the compliance system
• Education sessions on how it works
• Testing? Is it robust? Internal audit? External assessment?
• Complaints data - does it make sense in light of compliance reports? Is there
any mismatch?
• Root cause analysis of problems that emerge
• KPIs?
Compliance - Financial Statements
• Green sheets
• Directors' questionnaires
• Allow time for longer audit committee meetings
• Should all directors receive papers and/or attend audit committee meetings?
• Preparation - identification of likely issues as early as possible
• Separate sessions on actuarial reports, liabilities, valuations, FCRs etc
• Legal sign off
Pet Loves
• Clear simple, short jargon-free papers
• Hard copies of financial statements
• Sufficient time to read most, if not all, papers
- at least a week, not 24 hours!
• Frank realistic communication
• Thoughtful dialogue
• Discussion about making it better
Pet HatesCover ups
• Duplication
• Mindless or formulaic adaptation of policies etc from elsewhere
• "Desktop" risk management
• Rushed decisions
• Insufficient time to digest and think
"Pay attention to where you are going because
without meaning you might get nowhere"
A A Milne
This presentation has been prepared for the FSAA National Conference 20-22
May 2012. Opinions put forward herein are not necessarily those of FSAA
and FSAA is not responsible for those opinions.
The information presented at the seminar is of a general nature and a reader of
this presentation must seek their own independent advice before using it for
any purpose.
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