BUSN603: Corporate Governance and Risk Management Audit of CBA

This report presents a governance and risk management audit of the Commonwealth Bank of Australia (CBA), examining the alignment between its proclaimed values and actual practices. It identifies core values such as integrity, honesty, respect, confidentiality, inclusivity, and accountability. The audit analyzes CBA's efforts to maintain these values through contracts, consequences, and policies. It also touches on the bank's community initiatives, marketing strategies, and financial performance, highlighting inconsistencies and areas for improvement in corporate governance and risk management. This document is available on Desklib, a platform offering a range of study tools and resources for students.

Corporate Governance and Risk Management 1
CORPORATE GOVERNANCE AND RISK MANAGEMENT
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Introduction
The aim of most commercial organization is to make profits within the boundaries of its
values (Christensen and Kent 2016) and for some multinational companies these values might
vary but they are consistent across the areas they carry out their operations. To determine
whether the company adheres its policies or the vales that it has set and that they are recognized
globally, a governance and risk management audit is carried out.
A governance and risk management audit is an activity that is carried out inn ensuring
that the policies of an organization whether proclaimed or actual are put into practice recognizing
the social differences in organizations and that the structure in place is comfortable and
encouraging to these values. The main reason why most organizations undertake this audit is to
ensure that they are operating in line with the government policies and laws.
A government and risk management audit is important because it determines the whether
a company implements its values as it stipulates, it helps the mangers to knee the expectation and
disappointment from the stakeholders and the shareholders and how they can improve, it is also
the basis to which the decision-making if the future of the organization is made (Kommunuri
2017).
In this paper I am going to do a governance and risk management audit on
Commonwealth Bank of Australia, I will be providing an analysis in identifying the gap between
their values and their application after identifying the values.
Unlike in social audit which is centered on the organization the environment (Bodnar and
Hopwood 2012) this paper is more concerned on the values and their applications during

Corporate Governance and Risk Management 3
operation, though it recognizes that the bank operates within an environment that is key in
determining the extent of application of the company values.
Overview of Commonwealth Bank
Commonwealth bank also called CommBank or CBA is a public financial institution
located in Australia with its headquarters in Sydney Australia, it has over 1100 branches globally
with banks in areas such as New Zealand Asia, United States and United Kingdom with over
4,300 Automated teller machine (ATM).
This bank was founded in the year 1911 and it became a public bank in the year 1991 it
has been labelled as the first and the best bank in Australia with Forbes ranking it at position 58
in terms of the size among organizations in the globe.
The vision of NAB is to excel at securing and enhancing the financial wellbeing of the
people, business and community within the values which are integrity, accountability,
collaboration, excellence and service.
The bank is headed by Matt Comyn as the chief executive officer and the managing
director amongst other six management members, the responsibility of the managers is to ensure
that the company is functioning fully and at its best in their respective areas, they also outline the
operational strategies and the risk policies that are in the organization they revise the
remuneration policy of the employees and lastly they evaluate the reporting quality and strategy
in the organization, in dealing with risks they have a chief risk officer called David Cohen who is
in charge of risk management within the company.

Corporate Governance and Risk Management 4
The company has had several initiatives to ensure that they are in good rapport with the
community and the stakeholders at large, they have mainly focused in the promotion of
education and community business activity, they have summarized their involvement in the
community as ‘helping the people, their businesses and the entire community to save, spend and
invest’. This year they provided $1.8 million to help in the education sector, with 2% of the
company’s profit invested in making the community better.
Some of their objectives in the environment are: enhancing the financial performance of
the community, preparing new students and employees for the future, to educate the community
on the value of money, to build a good transparent relationship with the stakeholder and to foster
an environment of inclusive culture, to lend and invest responsibly and in a sustainable manner
to the community.
Commonwealth bank provides several services (Mahdavi, and Daryaei 2016) as a
financial institution which include retail banking, insurance, business banking, management of
funds, investment services, lending services, institutional banking, supper annulations, wholesale
banking and broking service
They also have a capable team of board of directors that is headed by Catherine
Livingstone the former president of Business Council of Australia (Bui, and Villiers 2017). The
board is responsible for the remuneration policy of the management and ensuring that the plans
by the management are risk free and that the organization has employed adequate governance
and risk management strategies.

Corporate Governance and Risk Management 5
Looking at the investment that CBA has made in the community the management does
not just focus on increasing the profits but they are also concerned with making the community a
better place (Salehzadeh 2014) to strike a balance between the company’s objective of being the
best performing bank and empowering the community.
The company has invested also in marketing of the organization (Simkin et al 2017) by
several means and the main one is using media both the television and the social media, they
have set up social media platforms such as twitter (@CommBank and @CommBank_ID),
Facebook (Commonwealth Bank), LinkedIn (Commonwealth Bank) and Instagram. They have
carried out several advertisement in the national television as seen in 2017
https://www.youtube.com/watch?v=jkAlUIT1okE and 2018 https://www.youtube.com/watch?
v=l_ZPLaSjmZ8.
Other methods in which it has carried out its advertisement is using national campaign
where they advertise their services and the products in which they have invested. Additionally,
CBA emphasizes on provision of quality services to the customers as a way of encouraging them
to continue using the bank.
The performance of CBA over the past years has been inconsistent over the past years
with failure and scandals in some areas and management problem CBA has had a decline in its
returns though the equity has increased by $18 billion and the earnings of the employees has
increased by $1.8 billion. It has also increased in its expansion reaching other counties yet the
shares of the company continue to remain constant while in the past years the company has
experienced increasing loans and undercapitalized balance sheet.

Corporate Governance and Risk Management 6
Values of Commonwealth Bank
The vision of CBA as mentioned earlier is to excel at securing and enhancing the
wellbeing of the people, business and the community and they are aiming at carrying out this
practice within its core values that are within the value guidelines. Some of the core values are:
Integrity
Integrity is a key aspect in the organization and all of the employees and the management
are required to adhere to it, though it is related to honesty integrity in CBA entail the act of
behaving in a manner that promoted professionalism in the organization, it entail carrying out the
banks activities legally and disclosing anyone who is found engaging in any illegal activity, the
employee should also not be found threatening another employee or any of the stakeholders by
any means and if anyone is found he is accused of breaching integrity of the organization.
Honesty
Th company encourages honesty which is also interpreted as transparency in the way the
employees in the bank relate with the shareholders, the stakeholders and the customers. Honesty
include maintaining of trust in their dealings with the customers who they serve, it also includes
talking about the products of the company honestly without adding any kind of information,
honesty entails maintain a truthful expression of views when required concerning colleagues or
any leader without causing conflicts. The greatest form of honesty is seen when a member in the

Corporate Governance and Risk Management 7
institution realizes that they have done wrong and then they report to their seniors of their
mistake without leaving any information.
Respect
Respect in CBA is a very important aspect to the organization and it is wide since it
entails one’s involvement in the community, the shareholder, the stakeholder and the regulations
and other employees. Every member is required to acknowledge the diversity of the other person
and respecting it for them to work successfully, it includes showing utmost respect to the
customers during their services and treating the shareholders with obedience, respect is seen
when they can carry out task as assigned by their leaders. Lastly respect is at its best seen in the
way everyone abides to the available laws and regulations that dictate how they should behave.
Confidentiality
Since in the workplace there are several people they value of confidentiality means that a
person can respect the privacy of others by keeping the trusted information that they have of the
company and of one another depending on their ranks in the organization quietly to themselves
unless they have permission to disclose the information in their possession.
Managing conflict of interest
This value of the organization means that when there an issue in the organization such as
conflict of interest among the colleagues, the engagement with the customers or any part they
should report this issue to the manager or their superiors as soon as they can and try to avoid any

Corporate Governance and Risk Management 8
form of conflict that could tarnish the name of the organization or lead to physical engagement.
This value limits the reception of gifts from strangers claiming that it could also cause conflicts.
Inclusivity
This value entails teamwork in carrying out the daily activities of the company, it also
advocates for the equal treatment of the customers regardless of their gender, physical
appearance, culture or sexual identity. This will help create unity in the company and the people
that it serves. Inclusion as a value in this organization is emphasizing on creating of fairness in
all activities even access to some areas so that everyone can feel as a team
Appropriate use of technology
Appropriate use of technology entails the way the people uses their phones, any gadgets
in the office and the different media platforms where they are engaged at (Crowther and Sefi
2010), it entails the use of the available equipment’s in the organization for their purpose and
using social media wisely so that it doesn’t affect the company negatively.
Accountability and Responsibility
Lastly the company values responsibility which is the basis in which everyone is
employed, it entails carrying out of each member duty as expected of them and taking care of the
organization tools that they use in this process while carrying out their activities. It is
comprehensive of all the values and it entails taking part in the activities by the organization as
agreed during employment without being involved in external employments in other
organizations while working in this institution (Alzoubi 2016).

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Efforts in maintaining these values
Commonwealth bank has a set of values that dictate their operations (Bachiller and
Garcia 2018), in ensuring that all the members adhere to these values they have put up several
means as indicated below:
They have used contract method to ensure that the members follow this values in that
when one is but to be employed they are required to commit to adhering to the laws by the
company and they do this by signing a contact pledging commitment to these values so that if
they don’t they face penalties as shown by the contract.
The easiest method that has been implemented by CBA is the use of consequences or
punishment (Siddique 2017) where all the values have a penalty if committed this then regulates
the behavior of the employees who might think of engaging in this activity.
The company has managed to regulate the behavior if the employees using several
policies and principles (Susanto 2017) of the organization and those of the country, example of
this policies and principles include:
Group fraud policy: This is a policy that discourages involvement in fraud activities by
the mangers and the workers of CBA which is falsifying information and trading it for personal
gains, this policy fosters the value of honesty as a key value in CBA.
Remuneration Principle: This policy dictates how the salaries and the benefits of different
category in the organization should be issued apart from the salary and benefits of the CEO, this

Corporate Governance and Risk Management 10
policy prevents favoritism in the organization in the remuneration framework thus encouraging
inclusivity or teamwork within the organization (Lin, and Hwang 2010).
Anti-Bribery/Corruption policy: This is a policy that limits act of corruption in the
organization and some of these acts such as fraud have their own set of policies aside (Mangala
and Kumari 2015) while this includes corruption activities such as bribery and any form of
favoritism, this policy helps the organization by fostering integrity of the organization which is
very crucial to any organization.
Tax transparency policy: This is a policy that outlines the behavior of the organization in
the manner it handles issues with taxes, all the employees are required to pay their taxes
accordingly and that the organization can pay taxes on time without them accruing, this policy
promotes the integrity of the company.
Human rights position statement: This is a policy that fosters the respect towards the
behavior of the everyone in the organization to the customers, shareholders and the management
in acknowledging and promoting the rights of each other even when carrying out business
activities in their daily interactions.
Diversity principle: This principle outlines the expected norms of people even when
dealing with people form diverse scenario diverse in this scenario implies differences such as
gender, age, culture and religion
Accessibility policy: This is a policy that provides guidelines on access to information
and services, it advocates for the equal administration of services to the customer regardless of

Corporate Governance and Risk Management 11
their frequency or status, it regulates the amount of information that should be accessed by
different individuals at certain levels in avoiding breach of confidentiality.
Suppliers policy: This is a policy that outlines how the business should be run in terms of
the engagement with the suppliers and the ethics that should be involved when dealing with
them, this policy helps to prevent any form of unfair deals or behavior with the supplier hereby
fostering respect and honesty respectively.
The organization has also been able to maintain the values of the organization by the
impanation and the advocacy of the Australian code of conducts (Drogalas et al. 2016) and ethics
including the regulations or laws that dictate overall behavior these laws include: Code of
Banking Practice, Code of operation, Australian Direct Marketing Association code of practice,
Australian Financial Markets Association Code of Practice and Financial Planners code of ethics
and rules of ethical conduct.
Analysis of extent of application of this values
The role of a governance and risk management audit is to determine the gap between the
values and their implementation (Kenny, and Larson 2018) for the management to find ways of
rectifying this behavior. After identifying the values of this organization and the methods that
they have put in practice I realized the following gaps in the implementation of their values.
Recently Commonwealth gave $375 million as an order by the court because of
involvement in money laundering activities and funding of terrorist activities. For an
organization which has his crore values as integrity involvement with terrorism activities goes

Corporate Governance and Risk Management 12
against this company’s failure to implement some of these policies it has noted down to
implement.
It was also found that four of its smart deposit machine was used for illegal activities by a
group of syndicates ,where three of the machines were used by drug importation and distribution
groups who deposited $21 million into 11 CBA accounts for a continuous period of a year 2015
– 2016 resulting to a total of $497 million (Husnin et al. 2016) yet the bank did not report to the
relevant authority this suspicious behavior, this shows how much the bank is negligent of the
values it has set as a public institution.
In 2016 the bank fired an employee Matt Watter because he was mentally ill and
according to their analysis he was not able to continue with his employment(Astami et al.
2017),this was very disgraceful and harsh to the employee who was gifted the prize of the best
employee of the year in 2010 before undergoing depression in the year 2013.The insurance
company refused to give the insurance claiming he was fit for work, the employee was thus
neglected with his condition for more than two year, this shows the failure of CBA to take
responsibility of its employees, in this case they would have helped in seeking the pension for a
person who used to be one of their best.
The bank has also continued to benefit amongst accusation of fraud activities by the bank
to the customers that has greatly reduced the customers that are served by the bank (Srairi 2015).
The bank has engaged in dishonesty by lying to the Australian Securities and investment
commission that they had only 27,800 such customers while in real sense it had over 64 000

Corporate Governance and Risk Management 13
customers. This are a group of customers between 2011 and 2015 who were in the scandal where
the bank sold them credit card insurance to them (Ferramosca, D’Onza and Allegrini 2017).
Conclusion
It is evident that despite the many number of policies and guidelines that are indicated by
the bank there is a huge gap between their presence and their implementation. While this are
issues that affect the overall performance of the bank, they can be largely attached to the
management who have failed to run the company adequately and the board of directors who do
not follow up the engagement of the mangers.
A management and risk audit is key in commonwealth bank in helping the management
and the company to get back to the track so that it can continue accruing more profits, there
should be more emphasis on the implementation of this policies that are formed by the company
rather than emphasis on more of their formation (El-Masry, Elbahar, and Abdel 2016).

Corporate Governance and Risk Management 14
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