Westpac chief executive Peter King has provided a wholly inadequate response to Promontory Australia’s decision to change the status of the bank’s CORE program from “green” to “amber” following its recent review of the program.
In an assurance report issued in May, Promontory said the program had run into some “scheduling uncertainty, risk of disruption and quality issues” as a result of changes to the bank’s organisational structure and leadership team.
CORE is the bank’s multi-year project to fix its risk governance, started after Austrac found that its anti-money laundering process was badly flawed. It is a massive project, with 343 separate “design, implement and embed activities”.
In February, the bank announced that as part of its plan to reduce its cost base it would reduce the size of its corporate functions by 20 per cent, moving support services like HR and technology to the business units.
It also combined the roles of chief risk officer, and group executive financial crime, compliance and conduct. CRO David Stephen and group executive financial crime, compliance and conduct Les Vance both lost their jobs.
And it announced the creation of two new divisions, corporate services and customer services and technology. It said these business units would drive efficiency and productivity.
Promontory said the organisational changes are consistent with the objectives of the program and are intended to clarify accountabilities across the bank.
But it said it would be a challenge for the bank to avoid the potentially disruptive impact of its organisational restructure. It warned that the bank has a history of not seeing big projects through and it must maintain a “rigorous focus on execution”.
On Wednesday the bank hosted an investor briefing to cover the status of the CORE program, new climate commitments and digital banking developments.
Referring to the Promontory report, King said: “Overall we are on track. Westpac’s program rating has moved from green to amber and that reflects the fact that we are focused on the business outcomes and managing those, but also managing the significant change in all our divisions.
“By the end of this year, we’ll be mostly in the ‘embed’ phase, and that’s where we repeat the processes and demonstrate they are sustainable.”
No mention of “scheduling uncertainty, risk of disruption and quality issues” and no assurance about how the bank would “avoid the potentially disruptive impact of its organisational restructure”.
You might have expected King to deal with Promontory’s concerns in a bit more detail, given that the bank has run into trouble with its CORE program before.
In December 2020, APRA announced that CORE was falling short. Westpac gave the regulator an enforceable undertaking to “lift substantially its efforts to address risk governance deficiencies”, agreeing to submit a detailed integrated plan outlining all major remediation activities related to risk governance, with clear timelines and accountabilities.
King presented some metrics, including staff survey results, to show that the bank was making progress achieving its targets. More staff said there is evidence that “people constructively challenge” and more said they were clear about how they were expected to manage