NAB: Corporate Governance and Risk Management Audit Report

This report provides a comprehensive audit of National Australia Bank (NAB), a major financial institution in Australia, focusing on its corporate governance and risk management practices. It begins with an overview of NAB, detailing its history, structure, services, and recent developments, including i...Read More

Running head: Corporate Governance and Risk Management 1
Corporate Governance and Risk Management
Student’s (Name)
Institution

Corporate Governance and Risk Management 2
Introduction
Every company has its policies and values that are set to all the members which could
come from the government or from the management of the institution. A governance and risk
management audit is carried out in ensuring that an organization has clear and legal outline
(Crowther, and Sefi 2010) and that the behaviors and expectations of the organization are in line
with the recognized expectations worldwide without disregarding the social and cultural
difference. To determine if an organization adheres to the set of values systems that it set, it
examines the stakeholders and their effect in the overall function of the organization. This audit
is important to any organization because from this study the predictions of the future
performance of the organization can be known, the stakeholders can express their expectations
from the organization and this could help the organization to learn the issues that face the
managers and the employees and how to motivate and improve its performance meeting the
expectations that the environment has about it (Mangala and Kumari 2015).
This paper provides an audit of a financial institution in Australia called National
Australian Bank (NAB) in trying to provide a gap analysis which is the essence of government
and risk management audit specifically in values and risk audit, it examines the relationship
between the and commitment and performance of the value and risk management sector. It
should be noted that his paper is not a social audit that specifies on the company and the
environment relations only, this paper includes this section but its emphasis is on the values of
the organization.

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Overview of National Australian Bank (NAB)
National Australian Bank is a financial institution located in Australia with its
headquarters at Melbourne Australia. It was founded in the year 1982 and at that time it was
referred to as National Commercial Banking Corporation of Australia Limited. It is a bank that
has grown quite fast with branches in New Zealand and parts of Asia. This bank was among the
top three best banks in the country with customers around 12.7 million globally, according to
Forbes statistics it was position 100 in the globe with reference to its size.
The bank has a vision of being the best bank in Australia and New Zealand, to achieve
this, they have set strategies in which they have categorized into three, one branch of strategy is
concerned with the customers and the advocates, the other is concerned with the customers and
the stakeholders while the last one is concerned with the shareholders.
This bank is headed by an able team of management led by the Andrew Thorburn the
chief executive officer heading over 35, 000 employees, this public organization engages in
activities that include commercial banking which entails taking deposits, provision of loans and
other investment products, retail baking which entails offering of services to the public such
things include savings credit and debit cards and mortgages, wholesale banking which entails
which is just provision of large services to the public such as real estates and other finance
businesses ,wealth management which is an integration of planning in finance and financial
services in coordination of activities such as estate planning and how to invest, lastly it provides
services for insurance which is just a policy to deal with financial risks and losses it is also
referred to as hedging in some scenarios (Hopwood, Leiner and Young 2012).

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Above the management of is the board of directors that is responsible for: going through
the management plans to ensure that they are risk free, provision of oversight of the risk
management by the company, it oversees promotions and oversight of the organizations systems
annually.
The purpose of the management is to ensure strategic and operational planning, the
planning of succession and handing of organization power, risk management and compliance and
lastly financial management and monitoring of the reporting system of the bank.
Over the past five years there have been several changes within NAB, there has been an
increase in the number of customer served from 8.3 million (2013) to 12.7 million (2017) with an
increase in numbers of branches and the number of employees from approximately 1900(2014)
to 3600 presently. It has had fluctuation of profits until 2015 in which the prices started to rise
thereby reaching up to $5.29 billion in 2017.The dividend share has continued to be constant
since 2016 but the cash earnings are continuously increasing estimated at 2.5% from 2014.It has
expanded its branches from just Australia and New Zealand to UK and India while continuing to
increase their services since they launched a direct branchless bank separate from UBank in
2008.It however has also maintained a spree of scandals throughout this years, in 2009 NAB was
accused of lacking policies, in 2014 to 2015 there were scandals of fraud in NAB that begun in
2013.In 2017 the main scandal has been in its risk management policy.
It has offered several services to the community as seen in its engagement with the
schools and community originations in provision and management of financial services. The
main way in which they advertise themselves to the shareholders as a public institution is
provision of quality services (Atak, and Erturgut 2010) with the main of reaching maximum
profits thus attracting the investors and shareholders they also occasionally carry out

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advertisement of the bank, the community services that they engage in also exposes them to
shareholders impressed by their initiative in the society. National Australian Bank has greatly
used the media both the social and television for its advertisement the recent one entitled “NAB
Supporting Tomorrow’s game https://www.youtube.com/watch?v=nZZzHl3AGXU.
NAB mainly promotes itself to the stakeholders by quality performance and they also
have a code of conduct for the company to guarantee a good behavior so that the customers can
have the best experience, it mostly uses the social media to interact with the stakeholders where
they can give their comments and complains, the community activities that they carry out can
also be a way of dealing with the stakeholders to meet their ever-changing expectations. There
social media platforms are @NAB, @NAB Show and NAB (Facebook). Lastly in its
advertisement NAB carries out widespread nation campaigns promoting their brands and those
they are invested in as a way of reaching the stakeholders.
Values of the organization
National Australian Bank just like any other organizations operates within some values
that they aim to use in promoting their vison and mission (Scott 2015). These values might keep
changing depending on the agency of the situation that is in question. These values are the
foundation of the organization in which every employee must sign to abide to during their
recruitment.
The values that the company follows is found din the National Australia Bank Code of
Conduct:

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Professionalism
The workers at the bank are to conduct themselves in a professional manner in their
undertakings, this professionalism helps to foster trust and confidence of the stakeholders and the
community in them. Some of the factors that they should observe under professionalism is
treating others fellow employees with dignity adhering to the rules and regulations the behavior
and outlining their role in the organization, professionalism also means accessing information
only that one has clearance to access and that it should be work related if one is at work.
Professionalism also entails using the information system and computers or other
telecommunication devices wisely, this device must never be used to distribute any illicit sexual
information, a comment that is abusive or threatening to another person and lastly the comment
should not show any form of ethnic or cultural discrimination.
According to NAB’s policy professionalism is also concerned with the use of social
media in propagating the correct messages that do not interfere with the face of the organization,
this includes using the social media lawfully, with transparency and in a manner showing respect
to everyone that is online.
Honesty and integrity
Another major value of NA is honesty and integrity, honesty in this scenario entails
carrying out businesses in a transparent manner that does not show any intent of malice or any
other negative behavior
Honesty and integrity are grouped together and they entail an employee or any member
should not be found stealing the property of the company, they should also not be found

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converting the company tools or equipment’s to their own interest without proper permission
from the authority or the person in charge (Howlett, Ramesh and Perl 2009).
Honesty also entails that an employee should not misappropriate the tools or the
equipment of the organization. Integrity should be observed in the dealings or the relationship of
employees in the organization. It also entails complying with NAB Expense management policy.
One must not hide the truth or try to protect a member of the organization who has gone
against the laws and regulations that are stipulated in their conduct if there are the issues of
suspecting that any of your colleagues might be engaging in this. Lastly NAB does not allow any
form of retaliation or threats of retaliation in the company. They have a person who one reports
to incase of any concern. This policy that is attached to honesty and integrity lease a question on
whether the employees are not allowed to protest in times when they feel their rights are
infringed.
Fairness
All the customers that are in the company whether new ones or existing ones are
supposed to be treated fairly. Information must be provided in a manner that the customer will
understand
Fairness also entails fair competition amongst the company and its competitors, the
competition should be fair a legal.
Averting corruption
The company does not tolerate any corruption activity it the daily operation and this kind
of operation could include thigs such as fraud or any form or racism or nepotism. The employees

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in the organization should not falsify information to obtain money, data or any property. Under
corruption one is not allowed to engage in any form of bribery.
Confidentiality
Every employer in the organization has access to information that maybe about the
organization, the other workers, the suppliers, the management and other business affairs
depending on their level of ranks (Simkin, Rose and Norman 2012) or priority in the
organization this information according to the company policy should not be disclosed to anyone
outside the company including the family member since it will be against the company policy
Personal information about another worker should also not be disclosed to any other
person if not permitted by the organization. All this information is under the Private Act [1988]
and it can only be stored, used, disclosed, updated or thrown away in accordance with this act
(Ajmi, 2009).
Adherence to legal obligations, regulations and standards.
All organization especially banking institution have standards and accounting policy that
I should use in its provision of report the company expects that all these policies are adhere to
and that the employees are good citizens who follow the country laws.
Processes to maintain these values
The term value accounting is diverse in its scope since it not only touches in the book
keeping area but it also encompasses the behavioral sector, it ca be contrast to creative
accounting or any other accounting methods with any other ulterior motives that is not positive.
To deal with this, NAB has come up with various ways as discussed below:

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Policy
The main method that NAB is using in ensuring that their values are adhered to strongly
are use of policies, this policies control or limit the behavior of the members in the organization
at almost every activity, these activities include:
Group human right policy
This is a policy that dictates how an employee should act in front of other fellow workers
in terms of ensuring that he does not infringe any of their right in any form such as abuse or
physical engagement. This prevents the employee from some ‘funny ’behaviors when they are
together as a group example during work.
Conflict of interest policy
One should be able to align their interest and the interest of the company to work for the
good of the company, this policy provides the rules that should be adhered to in ensuring that the
rules of the organization and those of the person do not conflict to cause errors.
Expense management policy
This is a policy that determines how the members of an organization should spent the
money of the organization in the expenses this limits the employee from overspending or
manipulating books of account for their own benefit.

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Social Media guidelines and policy
This are policies or regulations that dictate how a member should use their own social
media I terms of the breaches that they should not commit example sharing a material that could
tarnish the image of the organization. This prevent the employee from sharing information that is
unpleasing in the social media whether it of their accounts or it belongs to the organization an
example would be if a person had conic with the manager he should not post it on the Facebook
or twitter page.
Customer complains policy
This is a regulation that allows the customers to complain when an issue does not go on
well, to the accountant sit provides a guideline on how to deal with the complains that are
provided by the customer, this helps in making the dealing s with the customer to be fair. It
therefore stops the accountants from handing he customers in a manner that is not ethical
(Cohen, Krishnamoorthy, and Wright 2002).
Anti-fraud policy
This is a policy that stops the members of the organization from falsifying information
with the purpose of gain whether personal or as a group. It sets out the responsibility to act
transparency in their internal control.

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Anti-bribery and corruption policy
This policy sets out the groups and individual approach toward respect to the anti-bribery
laws to control the issues to do with corruption in the organization, this policy stops a person
from carrying out any form of corruption in the interest of personal gains.
Serious misconduct policy.
This policy is diverse in that it prohibits the employees from engaging in an extreme act
whether to the other fellow employee or to the shareholders or to the stakeholders. An example is
it would stop on employee from fighting with another employee during working hours.
Anti-money laundering and counter terrorist financing policy
This policy limits the stakeholders in an organization from engaging or colluding with
someone from the outside of the organization in perfuming money laundering activities an
example would be limiting the planning of money heist.
Employee conduct management policy
This is the last standard that contain all this measures from, it contains how the employee
should behave within and outside the organization in a comprehensive way.
Privacy and data protection policy
Tis regulation provides security for each member in the organization on sharing of
confidential information so that one cannot just share the private information of another person.

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Other policies that supplement this regulation that controls or dictate the ethical behavior
of members in an organization are mainly the countries policy such as The Private Act [1998]
and other Australian professional standards.
Benefits
Benefits has been used to regulate the ethical behavior of employees right from the book
of accounts to the behaviors (John, Litov and Yeung 2008) this is because of the attachment of
remuneration benefits to ethics, this then makes the employees to strive hard in ensuring that
they have good ethics so that they can earn high remunerations.
Extent of application of the company to its commitment.
As seen in the above examples National Australian Bank (NAB) is committed to ensuring
that the value system that it has established in the organization is met in accordance with the
policies they have established (Lin and Hwang 2010), but, the question that an auditor asks is the
extent of implementation of this commitment and if there is a gap between their commitment and
their delivery of the commitment.
Understanding how important this was I tried to book for an appointment with one of the
cashiers of the organization to no avail, my emails were replied after a long time only to be
informed that there was no time since she was busy, I therefore did several personal researches in
trying to find out on this gap, I believe her behavior could also have been increased by the fact
that she didn’t want to disclose any information that could breach confidentiality as their policy
Some of the gaps that I identified were on:

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Honesty
One of the banks major values is honesty yet there has been a problem in this sector,
according to an internal audit carried out in April 2015 which was obtained by “The Australian
Financial Review” the company has problems with its risk management system. Adele Ferguson
refers to the risk management policy Of National Australian Bank as “ineffective and
inconsistent” (Aebi, Sabato and Schmid 2012).
NAB is a major banking institution and its rating in the risk management is expected to
be high (Andres and Vallelado 2008) but this was not the case since it had received a three-star,
elite internal audit team referred to this rating as “the worst rating possible”. Over the years NAB
has failed to come out and explain this issue to the public indicating this problem thus going
against their own value of honesty.
Integrity
Another gap that I could identify is in line with integrity, this company advocates for
integrity in the preparation of financial statement and the behavior of the company. David Fisher
the CEO of The Web Lender defines integrity as doing the correct activities with or without the
presence of anyone basing them on beliefs, values and morals of the organization.
In May 3,2018 NAB sold its MLC wealth management in trying to get away from a
scandal that has been in the headlines for quite a long time, this news was reported in ABC.
http://www.abc.net.au/news/2018-05-03/nab-offloading-mlc-$2.5b-half-year-profit/9720782 this
scandal is attributed to the fact that during the process of wealth distribution there was a risk

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where they had forged some signatures of the clients which is a breach of integrity as a value in
the organization.
Professionalism
Another issue in the organization that shows a gap in the professionalism of the company
is seen when the British regulator closed a branch of NAB Clydesdale Bank for lying to the
Financial Ombudsman service after they had falsified records which can be classified also under
fraud by the organization indicating how they breached their own policy on professionalism that
advocates for honesty and use of the correct standards (Van and Bratanovic 2009).
Conclusion
Every organization has got their own values and standards though there are some shared
professional and ethical standards, most companies have been able to meet this value while
others are struggling to meet this value probably due to inefficient ways that are established in
reaching this quality (Bhimani 2009). This prompts for an audit to enable the organization
recognizes some of this issue related to the ethics and behavior in the organization before they
result to scandals.
In the case of National Australia Bank there are adequate policies and regulations that
dictate almost every aspect of their functioning, this has been significant but it can also be seen
that they have problems in meeting their own values, this could be attributed to by the
management since NAB is a large company that has a lot of branches. In general, an audit is
necessary and beneficial for accompany that want to achieve its goals (Walker 2009).

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