Managing the legal environment: Commonwealth Bank

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Managing the legal environment: Commonwealth Bank
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Executive summary
The Commonwealth Bank can be considered as one of the leading financial
institutions in Australia and other parts of the world. The bank offers integrated financial
services such as retail, business, and institutional banking. Moreover, the bank also offers
financial management, superannuation’s, insurance cover, brokerage of shares among other
services. Notably, in recent years since the financial crisis, community trust in banks has been
affected significantly. Globally, the financial crisis exposed huge scandals involving
banks .This included Weakness in management, Unethical conducts, serious professional
misconducts, lapsed ethical conducts and failure to comply with the established laws. All
these issues have resulted in significant financial losses and penalties due to multiple
litigations. Multiple management issues have infiltrated the CBA and most regulators have
clearly pointed out the dangers associated with such moved.

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Contents
Introduction........................................................................................................... 4
Characteristics/features of the organisation..........................................................4
Legal governance, management and relationship issues that affect the
Commonwealth Bank............................................................................................. 6
Management Issues............................................................................................ 6
Legal governance Issues.................................................................................... 8
Relationship issues............................................................................................. 8
Specific legislation that is of particular importance (Commonwealth Banking Act
1959)................................................................................................................... 10
Areas of high legal risk for the organisation........................................................11
Compliance risk................................................................................................ 11
Operational challenges..................................................................................... 13
Implications of this legal risk for the organisation both short –term and those that
may arise in the long-term..................................................................................14
More time would be required to is set the appropriate cultural tone for the
organisation...................................................................................................... 14
More time will be required for constructive consultations................................15
Significant effects on its overall operations......................................................15
Describe strategic options for management of Commonwealth Bank.................17
The assessment of compliance risks through the internal audit process.........17
Recommendations............................................................................................... 18
Establishment of a cross-functional team.........................................................18
Outline and assess all the key elements of an effective risk mitigation plan. . .19
Initiatives that would improve the culture and ethics.......................................20
Conclusion........................................................................................................... 21
References........................................................................................................... 22

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Introduction
The main objective of this paper is to show situational analysis of Commonwealth Bank of
Australia. This paper also analyses various organisational structures of the bank and the legal
strategies that the institution that ought to put in place in order to ensure that its operations
are efficient. Since every business requires to take various actions that would assist the
company to maintain a better position, it is important to find the cause of various barriers and
establish the strongest resolutions. The useful information in this paper will assist the
company choose the most appropriate resolutions, and develop strong corporate strategies
which would eventually assist them in achieving their objectives.
Characteristics/features of the organisation
As one of the leading banks in Australia, the company has multiple branches, ATMs,
Agencies and an all-round accessible call centre, as well as internet banking services. The
bank's visions are to ensure that it excels and enhancing financial services and securing the
well-being of its customers and the community at large1 (Sheridan, & Jang, 2012). The
company is a long-standing contributor to various community development programs such as
schools, athletics, among other programs through the community funds drive, volunteering,
sponsorships, and grants. From technological innovations and development of new products
and services, the company ensures that it has an unwavering attention to consumer needs and
the regulations set forwards to ensure that quality is guaranteed.
The way the company conducts its business, it is much easier for customers to
manage their own financial wellbeing. As an international financial institution, the
commonwealth bank has also put into consideration all the communities in which it operates
within. Since the company takes its social obligations seriously, it always ensures that they
1 Sheridan, N., & Jang, M. B. (2012). Bank capital adequacy in Australia (No. 12-25).
International Monetary Fund.

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build a constructive association with the communities in which it operates in as well as their
culture. On legal matters, the company has been a member of the UN Global Compact since
2009 and it is still committed to the development of Global Compact principles that would be
covering human rights, professional environment, labour laws and anti-corruption among
other constructive agendas2 (Stapledon, 2009).
2 Stapledon, N. (2009). Housing and the global financial crisis: US versus Australia.

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Legal governance, management and relationship issues
that affect the Commonwealth Bank
Management Issues
It is important to note that CBA was resilient all through the crisis but its managerial
techniques are far from unblemished. Failures in the provision of financial guidance to its
clients, misleading lending practices and challenges in establishing benchmark interest rates
have undermined the management practices of the company. Management is the foundation
of any bank, and improper management goes to the extent of undermining the confidence or
might even harm the consumers3 (Salim, Arjomandi, & Seufert, 2016). Over the years, the
Commonwealth bank has worked to earn the status of financial icon, built on integrity and
innovation. Therefore, as one of the largest financial institutions in Australia, customers
always hold high expectations for the institution. However, the company has succession of
misconducts and various compliance issues with one of the recent one being the
AUSTRAC’s legal action4 (Davis, 2011).This has resulted in most customers losing trust
with the company which in turn has resulted in huge financial losses5 (Turner, 2011).
A recent report by the Australian Prudential Regulation Authority (APRA) on the
legal accountability of the bank has stripped away the idea that the bank is being run properly
within a proper mode of governance. The reports showed that all managerial aspects of the
company are weak, ranging from the board of directors to the executive management. The
responsibility to rectify such issues lies with the bank itself. However, more could be done
3 Salim, R., Arjomandi, A., & Seufert, J. H. (2016). Does corporate governance affect
Australian banks' performance?. Journal of International Financial Markets, Institutions
and Money, 43, 113-125.
4 Davis, K. (2011). The Australian financial system in the 2000s: dodging the bullet. The
Australian Economy in the 2000s, 313-314.
5 Turner, G. (2011). Depositor protection in Australia. Bulletin of Reserve Bank of
Australia December Quarter, 142.