Welcome Address by ISCA President Kon Yin Tong at “Risk Culture: How to Get it Right?” Publication Launch on 24 May 2018 at InterContinental Singapore at 9am

Distinguished Guests,

Ladies and Gentlemen,

Good Morning.

Introduction

I am delighted to welcome you all to this publication launch event on “Risk Culture: How to Get It Right?”, jointly organised by the Chartered Institute of Management Accountants (CIMA), Ernst & Young (EY), Institute of Singapore Chartered Accountants (ISCA), and with Aberdeen Standard Investments as a knowledge partner. 

This commendable collaborative effort has led to a meaningful publication, with the objective of understanding how good risk culture facilitates business growth, and how it helps businesses make risk-responsive decisions in today’s dynamic business environment. 

This publication is based on insights gathered from a series of interviews with business leaders of Singapore-based companies. Additionally, we held a roundtable discussion in January this year, with business leaders and investors to gather perspectives on the practical takeaways for businesses to consider regarding risk culture. 

I would like to take this opportunity to thank all our interviewees and roundtable participants for taking time to share their invaluable views and experiences on risk culture.

The importance of good risk culture

It is widely acknowledged that poor risk culture, leading to excessive and uncontrolled risk-taking, was responsible for the outbreak of the Global Financial Crisis. Risk culture continues to feature in high-profile incidents. In September 2016, the US bank Wells Fargo was fined US$185 million for creating over 1.5 million checking and savings accounts and 500,000 credit cards that its customers never authorised. 

Despite Wells Fargo’s reputation as a “paragon of risk management” that had all the necessary risk management measures in place, it was its culture of a high-pressure sales environment that was responsible for the wrongdoings. That was the conclusion of the post-scandal independent investigation. 

Just last month, the National Australian Bank, or NAB, admitted that some of its advisers had engaged in dishonest and illegal conduct such as misappropriation of client funds. This came in light of a Royal Commission inquiry into the financial sector in Australia. NAB has paid A$19 million in compensation to customers. It also admitted that for years it charged advisory fees to hundreds of thousands of clients without providing them with services or allocating them an adviser.[1] 

Closer to home, the Monetary Authority of Singapore (MAS) withdrew a bank’s status as a merchant bank in Singapore after unveiling several issues including an unacceptable risk culture, poor management oversight and gross staff misconduct. 

Issues of risk culture are not confined to the banking sector. When Alan Mulally took over the top job at Ford in 2006, the 100-year-old carmaker was on the road to insolvency. The first profit forecast Mullaly saw was for a loss of US$17 billion. When he retired eight years later however, he left behind a business in robust financial health. Ford did not need a government bailout unlike some of its rivals who were similarly battered by the global financial crisis. According to Mulally himself, the biggest change he undertook at Ford was cultural. When he first took the reins at Ford, the main challenge he faced was to persuade managers to work together, instead of focusing on internal rivalries. 

Such cases have underscored the importance for all businesses, including SMEs, to cultivate suitable and appropriate risk governance culture and values throughout all functional units of their organisation. 

Getting risk culture right is not easy. There are “hard” and “soft” elements involved, which need to be balanced. Many companies have been focusing more on the substantive and structural elements of risk management and regulatory compliance. These hard mechanisms, being tangible in nature can be more easily identified for monitoring purposes. The “soft” side of things – attitudes and behaviours – being intangible in nature and harder to measure and track, are often neglected. 

Warren Buffett once said that “Culture, more than rule books, determines how an organisation behaves.” While the structural implementation and operation of Governance, Risk and Compliance framework is important, having an appropriate Risk Culture aids the transition from mere compliance to something that creates value for an organisation. In most cases, adequate frameworks are in place, but they are not embedded in business operations due to misaligned risk culture.[2] 

All businesses should strive to develop and sustain good risk culture and to improve the effectiveness as to how risks are managed within companies.

 Closing remarks

We have an exciting line up of speakers and panelists who will share their insights on this topic more deeply. We have the privilege of hearing from Dr Ian Selby, Vice President – Research and Development (Management Accounting), Association of International Certified Professional Accountants, who will be giving a presentation on the Association’s findings from the stand point of being prepared for the future as a major risk issue. 

Specifically, in today’s panel discussion entitled “Risk Culture: Is There A Right One for You?”, the panel will discuss why it is important for businesses of all sizes to get risk culture right, and what the practical takeaways for businesses to consider with regard to risk culture are.

The panel discussion will be moderated by Mr Neo Sing Hwee, Asia Pacific Risk Advisory (Internal Audit) Leader, Ernst & Young Advisory Pte Ltd, who led the study. He is also our ISCA CGRMC Member. We look forward to a vibrant and thought-provoking discussion.

Before I end, I would like to express my appreciation to the distinguished speakers and panelists who kindly took the time off their busy schedule to share their invaluable views and insights with us here. Last but not least, I would also like to thank all of you for being here today. I hope you will find this morning’s programme relevant and insightful. 

I wish everyone a good day. Thank you.

[1] https://www.businesstimes.com.sg/banking-finance/nab-reviews-advisory-business-as-inquiry-exposes-misconduct

[2] The Importance of Risk Culture to Your Risk Management Structure http://www.genre.com/knowledge/blog/the-importance-of-risk-culture-en.html