Westpac’s multi-year project to fix its risk governance, the CORE program, continues to face delivery risks because of capacity constraints, independent reviewer Promontory Australia reported in its latest assessment.
Westpac’s released Promontory’s seventh report yesterday, which said: “The challenges associated with resourcing and capability gaps continued during the reporting period, with the overall program health status for resourcing rated ‘amber’ and ‘on watch’. The challenges have largely been driven by capacity constraints, as well as strain on existing subject matter resources in some cases.”
The bank started CORE following Austrac’s finding that its anti-money laundering process was badly flawed.
In December 2020, APRA said 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.
It is a massive project, with 350 separate “design, implement and embed activities”.
In a report released in May, Promontory said structural and leadership changes at the bank were having an impact on the “executive sponsorship arrangements” for the program. It said it would be a challenge for the bank to avoid the potentially disruptive impact of its organisational restructure. As a result, the program’s status “moved from green to amber”.
In February, the bank announced that it would reduce the size of its corporate functions by 20 per cent; combine the roles of chief risk officer and group executive financial crime, compliance and conduct; and create two new divisions, corporate services and customer services and technology.
Promontory said one of the bank’s challenges was making sure CORE did not get swept up in its ambitious cost reduction program and it warned that the bank has a history of not seeing big projects through.
In its latest report, Promontory said the bank has maintained its efforts to implement and embed uplift activities, “moving into program operationalisation.” It said the program is on track.
But it warned that risks in execution remain. “In a program of this scale the risk of change fatigue persists. Given this, the elevation of risks such as capacity constraints requires additional focus.
“Timing considerations and momentum remain important but should be balanced against the need for consistent quality in execution to deliver the intended target state.”
The bank has history of skating over Promontory’s concerns and its comments in the 2021/22 financial report are no exception.
It said: “Our CORE program has been confirmed by the independent reviewer as on track. At September 2022, 213 activities have been assessed by the independent reviewer as complete and effective.”