AMP's Ethical Lapses and Sustainability: A Financial Analysis Report

This report provides a comprehensive analysis of AMP's ethical and sustainability challenges, stemming from the Royal Commission into banking and financial services. It examines the company's alleged misconduct, including charging fees for unprovided financial advice and misleading the Australian securities and investments commission. The report explores AMP's social responsibility framework, its impact on shareholder wealth, and the sustainability outcomes the company should adopt. It highlights the negative effects of misconduct on AMP's financial performance, including a significant drop in profits and shareholder dividends. Furthermore, the report identifies the changes AMP has implemented in response to the Royal Commission's findings, such as remediating policies and improving transparency to avoid future misconduct. The conclusion emphasizes the importance of ethical practices and sustainability for long-term financial stability and stakeholder trust within the financial sector.

ETHICS AND
SUSTAINABILITY

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
Company's overview and the nature of the alleged inappropriate behaviour.........................3
Practices of AMP in regard to social responsible framework................................................4
Effect of malpractices on the wealth of shareholder's of AMP..............................................5
Sustainability and socially responsible outcomes for AMP...................................................5
Identification of changes on AMP in regard to the findings of Royal Commission..............6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
The study is based on the operations of Banking and Financial Industry in Australia. It
reviews that after a number of scandals of banking and financial industry, The federal
Government of Australia called Royal Commission into banking and financial services. The
study discusses the inappropriate conduct of AMP alleged by Royal Commission. It further
defines the practises of AMP in regard to a socially responsible framework and how it affected
the shareholder's wealth. It also explains the sustainability and socially responsible outcomes that
should AMP take in regard. The essay also specifies the changes on the company's behaviour as
per the findings of Royal Commission.
TASK
Company's overview and the nature of the alleged inappropriate behaviour
AMP is an Australian company founded in 1849 which provides financial services such
as investment products, superannuation, financial advice and insurance. Craig Meller, the CEO
of AMP resigned on 20th April 2018 after it was revealed about the inappropriate behaviour of
AMP (Baldwin and Black, 2016).
AMP was alleged of misconduct and inappropriate behaviour as it charged clients for the
service of financial advice which was not provided actually and it also misled the Australian
securities and investments commission on various occasions. The allegation resulted on loosing
more than the amount of 1 billion dollars in market value from AMP's shares. AMP was defined
as a party of misconduct as it mistreated customers by charging extra fees for the unprovided
service. The company was also charged of interest rate rigging and money laundering activities.
It involved concealment of the origin or source of money obtained from illegal sources. The firm
was severally alleged for extracting revenue for no service from its clients (Davis, 2019). This
lead to reflection of profit that was earned by false means and it manipulated its shareholders by
showing its false financial statements. Royal Commission exposed the nature of alleged
inappropriate behaviour of AMP which lead to the shrinking of profit of 848 million dollars to
just 28 million dollars. AMP executives may face criminal charges for mistreating its clients. The
practices of AMP have been treated unethical by Royal Commission (O’Brien, 2019).
Practices of AMP in regard to social responsible framework
Social responsible framework focusses on ethical business practices, sustainability
initiatives, fulfilling economic responsibility and to hold an obligation to act for the welfare of

society as a whole. The practise of social responsible framework involves making responsible
investment decisions on behalf of AMP's clients and maintain the quality of its corporate
governance. It also involves making decisions by evaluating potential opportunities and risks
which will lead to maximising shareholder's wealth. All the clients of AMP affirms same level of
dignity irrespective of caste, age, race, creed, gender and religion (Godwinand Schmulow, 2015).
The practises of AMP have contributed its commitment in Environmental, social and governance
factors. The environmental, social and governance factors are integrated with portfolio
construction and investment analysis to offer the investors of AMP long term growth and
sustainability. The AMP portfolios do not consist of shares of tobacco and chemical weapons
manufacturing companies. This approach is followed to disapprove the presence of companies
which are harmful for the society as a whole. The practices of AMP promise a positive impact on
the environment (Ferguson, 2018).
The practices of AMP reflect its authority to be answerable to its shareholders for its
regular function. The financial statements are communicated to secure a true view of company's
financial position in front of its shareholders.
AMP did not embed by the practises of socially responsible framework and mistreated its
customers by charging considerations for the services not provided. Its malpractices lead to the
allegation of inappropriate conduct by Royal Commission (Lui, 2016).
Effect of malpractices on the wealth of shareholder's of AMP
AMP was alleged for misconduct by charging fees for no service provided. The
malpractice negatively affected the wealth of shareholder's of AMP. When Royal Commission
exposed the scandals of AMP, the annual profit of AMP crumbled by a rate of 97 percent. The
net profit after tax of AMP in 2018 went down to 28 million dollars from the amount of 848
million dollars. It effected the shareholder's wealth by slashing of final dividend from 14.5 cents
in last year to 4 cents in 2018. The decline in payment of dividend to shareholders resulted in
their decreased overall returns which devastated the growth f wealth of shareholders (AMP profit
crumbles amid royal commission scandals, life insurance sale, 2019). The inquiry of misconduct on AMP
lead to customers withdrawing about 4 billion dollars from the wealth of AMP. The stock of
shareholder's of declined by 7.8 percent at a value of 2.25 dollar. The allegations damaged the
brand value of AMP which destructed the attractiveness of shares of AMP. The allegation will
hinder the potential growth of shareholder's wealth.

Sustainability and socially responsible outcomes for AMP
Sustainability is important for AMP as it is a business approach to create long term value
of organisation. Sustainability plays a great role in improving brand value and goodwill, it
increases the efficiency to impart services and balance costs by achieving maximum growth.
Sustainability definitely matters to AMP as it ensures optimum utilisation of resources, retains
existing workforce, maintain the ecological balance of environment. A sustainable environment
at AMP will provide the long term stability to the concern (Baldwin and Black, 2016).
Sustainability of organisation can attract potential shareholder's to invest in stocks of AMP.
Sustainable development restricts government regulations on the organisation and assist the
stakeholders in being satisfied.
An organisation obtains its resources from the society, so it's the duty of organisation to
payback the borrowed resources to the society in form of social welfare. Social welfare activities
includes providing employment opportunities to society, using eco friendly methods of
production, minimize environmental damage, etc (Davis, 2019). Fulfilling the social
responsibility by AMP increases its brand value and it establishes a positive image of company
in mind of its client. This benefits in long term survival of AMP and enhance the scope of
increased profits. AMP should provide fair and adequate advice to its clients. There should not
be any miscommunication or fraud with the clients. AMP should present its financial statements
in appropriate manner and there should not be concealment of any facts and figures. AMP must
charge fees for the service it provides and should not levy any hidden charges from its client.
This will result in building trust between the client and company and will boosts its stability.
AMP should make its investment decisions keeping in mind the potential risks and opportunities.
It should aim on maximising the return of clients and provide worthy advice to them ( O’Brien,
2019).
Identification of changes on AMP in regard to the findings of Royal Commission
AMP company was charging the fee from consumers against the services which were not
provided by the firm to the consumers of organisation. Royal commission has claimed that firm
will have to repay all the collected amount from clients for the fake services. This has created big
trouble for the business and AMP was forced to make changes in its practices or behaviour. But
later on AMP has agreed that it will continue to remediate its policies as per the baseline
approach. Furthermore, company becomes more serious about banking regulations and now it is

following the practices very carefully (Godwinand Schmulow, 2015). Furthermore, AMP has
made changes in its attitude and started following regulations and now it is very honest towards
consumers and not engaged in such kind of malpractices.
AMP company has hired professional consultant for ensuing that now it is not charging
any kind of fake fees from consumers. Furthermore, now it has become compulsory that it is
essential to maintain transparency in every small detail. Now officers will get the access of all
records of company so that such kind of malpractices can be avoided in organisation. On 12
February company has officially announced that it will pay dividend of 75m to all its
stakeholders (AMP profit crumbles amid royal commission scandals, life insurance sale, 2019). Hence after
passing the report of royal commission AMP company has made drastic changes in its behaviour
and now it will not charge any fake fees from consumers. Furthermore, it will ensure clarifying
all necessary information to all its stakeholders in order to avoid future compliances. Company
has made changes in its fund management practices and now all its activities will be supervised
by authorised person (Baldwin and Black, 2016).
CONCLUSION
From the above study it can be concluded that Royal commission is responsible for
conducting inquire and investigating about misconduct activities in banking and financial service
industry. AMP was involved in malpractices and now it is liable to pay to consumers all such
amount which was charged by business for services which were not given to them. The main
issue with AMP was that it was not following the regulations carefully. Now it becomes essential
to maintain transparency in transactions.

REFERENCES
Books and Journals
Baldwin, R. and Black, J., 2016. Driving Priorities in Risk‐based Regulation: What's the
Problem?. Journal of Law and Society. 43(4). pp.565-595.
Davis, K., 2019. The Hayne Royal Commission and financial sector misbehaviour: Lasting
change or temporary fix?. The Economic and Labour Relations Review.
pp.1035304619847928.
Ferguson, A., 2018. Banking royal commission: APRA a ‘hear no evil, see no
evil’regulator. Business/Banking & Finance/Financial Services', The Australian
Financial Review, published by Fairfax Media, Sydney, NSW.
Godwin, A. J. and Schmulow, A. D., 2015. The Financial Sector Regulation Bill in South Africa,
second draft: lessons from Australia. South African Law Journal. 132(4). pp.756-768.
Lui, A., 2016. Financial stability and prudential regulation: a comparative approach to the UK,
US, Canada, Australia and Germany. Routledge.
O’Brien, J., 2019. “Because They Could”: trust, integrity, and purpose in the regulation of
corporate governance in the aftermath of the Royal Commission into Misconduct in the
Banking, Superannuation and Financial Services Industry. Law and Financial Markets
Review. pp.1-16.
Online
AMP profit crumbles amid royal commission scandals, life insurance sale. 2019. [Online]. Available through <
https://www.abc.net.au/news/2019-02-14/amp-profit-crumbles-amid-commission-
scandals-life-insurance-sale/10810386 >