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Compliance & Regulation

APRA CBA report already making a difference

The Australian Prudential Regulation Authority (APRA) report on Commonwealth Bank of Australia (CBA) subsequent to its prudential inquiry findings is already having an effect on the corporate governance of boards of directors across the domestic business landscape, according to a panel of corporation chairmen.

“With regard to the APRA review of the CBA, it’s a seminal report and every board that I know of has read it and is contemplating its findings. I think for me the big findings out of it are that even when companies are doing well, you must be vigilant and look down the organisation to what’s driving the performance,” Caltex chair Stephen Greg told delegates at the Australian Shareholders’ Association 2018 Conference in Sydney last month.

Greg cited the importance of organisational culture and the need to recognise the effect a large bureaucratic structure can have as other salient findings from the prudential regulator’s inquiry.

Coca-Cola Amatil chair Ilana Atlas echoed Greg’s sentiments.

“As far as the APRA report is concerned, I agree. I think it’s a seminal document, everyone should read it; it’s very well written so it is easy to read. All of the organisations I’m involved with are looking at it, analysing it and determining what are the implications for their organisations,” Atlas said.

Aristocrat chair Ian Blackburn revealed subsequent to the report his company is already looking at the number of activities allowing the board to scrutinise board conversations more thoroughly with regard to the quality and depth of discussions on subjects such as risk and culture.

Dexus chair Richard Sheppard, like Blackburn, said the report provided a catalyst for organisations to review their internal procedures.

“All of the boards I’m associated with, and I suspect all the boards, are running through an evaluation if you like of their performance against the APRA report. There is whole range of very specific recommendations,” Sheppard said.

The regulator’s final report, released on 1 May, found commercial success had dulled CBA’s sensitivity to other important elements such as the management of non-financial risks.

Specifically, the document identified areas of cultural weakness within the bank, including a widespread sense of complacency, a lack of learning from past mistakes and a reactive attitude towards dealing with risks.

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