Assignment Two Question
Governance, Risk and Compliance
You are an experienced compliance and risk professional who has recently been appointed as the Head of Compliance and Assurance at Worldwide Business (WB). WB is a firm regulated in a jurisdiction of your choice and it has multiple divisions across that jurisdiction, which operate as independent business units, focusing on separate products and services.
During a recent internal audit of one small, financial services division of WB, it was identified that a number of high-risk investment products, with a recommended minimum investment term of over 10 years, have been sold to customers aged in their 80s. The board of WB has not previously been advised of any such issues or any other weaknesses within the financial services division.
Given the recent adverse publicity around the sale of unsuitable investments elsewhere in the industry, both in your chosen jurisdiction and overseas, and because of enforcement action being taken against several financial institutions as a consequence, the findings of the internal audit raised concerns for the board about the impact that problems in the financial services division might have on WB overall.
The board has therefore asked you to lead a team to examine activities within the financial services division in further detail. Alongside this, they wish to you to consider the role and activities of the Compliance and Assurance team located within the financial services division, which currently operates as an independent ‘satellite’ of the main Compliance and Assurance department located at head office.
Together with several long-serving members of your team, you carry out an initial review of operations within the financial services division, liaising with key personnel within the division as you do so. Amongst numerous other issues that are an indication of a poor sales and compliance culture, you observe record-keeping issues in respect of customer due diligence matters and find that there has been minimal oversight of sales activities in relation to high-risk products, either by management within that area or by the Compliance and Assurance team.
You also note training weaknesses relating to both the sales team and the Compliance and Assurance team. You further find that there is no single compliance or governance, risk and compliance manual in use within the division, with staff instead relying on ad hoc guidance and information, and that there is a limited level of reporting and interaction between the satellite and main Compliance and Assurance Teams.
What you find disturbs you, as it raises issues not only about risk management practices relating to the specific product noted in the internal audit findings, but also regarding compliance and assurance practice within the financial services division and how this links in to the central compliance and assurance operations.
In summary, you are now of the view that the findings regarding problematic sales of the high-risk investment product are merely initial evidence of a far wider problem regarding activities within the financial services division. You plan to investigate further prior to finalising a plan of action to address the weaknesses identified; however in the meantime you need to provide the board of WB with a report of your findings and outline immediate next steps.
Drawing on the findings in the above scenario, complete the following:
- a) Prepare a report to the board of WB that provides a brief overview of the key findings from your review, explaining why your initial findings give you cause for concern and providing a clear explanation of why continuation of such practices will be detrimental to WB.
- b) Produce an initial plan of action to address the weaknesses identified. This should cover the immediate actions and indicate further actions that need to be taken in the medium and longer term, explaining why these actions are necessary. Responsibilities for action should be assigned, together with an explanation of why responsibility for action has been so assigned.
Appropriate examples should be included to support your assertions.