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Complacency evident in life insurer report – another reminder for all boards

Jan 30 2019

Yesterday’s report on life insurer conduct and culture by the Financial Markets Authority and Reserve Bank of New Zealand has yet again highlighted governance of conduct risks, says Institute of Directors’ chief executive Kirsten Patterson. Conduct risks are the risks of how people behave.

“Our November 2018 Director Sentiment Survey found just over half of New Zealand boards had assessed ethics risks – 55%, up from 44% the previous year. While this increase is a positive development, more focus is still needed by boards across New Zealand.

“Our survey found that less than half of boards (46%) receive comprehensive reporting from management about ethical and conduct matters.

“The Institute of Directors has highlighted culture and conduct as one of the top five issues for directors in 2019, and it was one of our key educational themes last year.”

Kirsten Patterson said the Institute was pleased the life insurer report found no widespread misconduct or poor culture issues but that the extensive weaknesses identified needed to be addressed immediately, as the reports’ authors have stressed.

“The report stresses how conduct directly affects customers and can result in a loss of trust and confidence in an industry. It finds that most boards of life insurers had not given any serious thought to conduct and culture prior to this review.

“All boards have a core role in overseeing corporate culture, conduct risk and setting high standards of ethical behaviour. They need to think beyond compliance, take the lead and set the tone.

“Boards need to ensure they are getting comprehensive and timely reporting from senior managers so they have a finger on the pulse of the organisation to ensure conduct risk is managed. Conduct risk such as fraud, corruption, bribery and unethical behaviour can cause significant financial and reputational damage.”

“By building good conduct into their business models, boards will focus on long-term sustainability, good customer and shareholder outcomes, and a healthy culture for staff.

“The Institute of Directors is committed long term to driving excellence and high standards in governance.”