Exploding cultures that ignore risk

April 1, 2019

The banking royal commission’s final report has put a spotlight on non-financial risks. For financial institutions, addressing copyright issues is one of the crucial risks that can easily be addressed.

“I feel like I gotta say something. Sh*t ain’t sitting right with me.” US rapper, Kendrick Lamar

“I feel you bruh. Do it for the culture.” US rapper, Quavo.

According to Urban Dictionary, 2017, the phrase ‘do it for the culture’ is “usually a statement requesting that someone carry out a specific action for the benefit of their shared culture”.

In the examples above, these rappers are discussing the behaviour of fellow artists who were leveraging the work of others without giving due credit. It’s easy to imagine a similar conversation in the corporate setting where questionable behaviours and treatments of customers and/or employees are being called to question, albeit using different language.

Trust of banks is at an all-time low after the release of the banking royal commission findings.

RFi Group’s Banking Trust Index (BTI) showed that institutional trust in the banking sector has diminished significantly in the last 12 months.

Alan Shields, chief product officer, RFi Group said: “The banks are still the most trusted institutions when it comes to data security and keeping money safe, but trust means different things to different people, and high up on the list of factors that can help to build and rebuild trust are transparency of fees and charges and putting customers interests first. It is in these areas that the banks will need to focus as they seek to recover.”

Natasha Hall (pictured) from governance and risk management firm, Hall Advisory, says governance can get off track for a number of reasons.

  • A lack of alignment between remuneration/incentives and risk, compliance and conduct outcomes;
  • Inadequate resourcing – either monetary or by seniority – of risk and compliance and internal audit functions to effectively challenge the business on operational practices;
  • A disconnect in the flow of information between the hierarchical levels of an organisation and various business units;
  • A lack of action on the behalf of responsible executives and board members upon the receipt of formal reporting or other information suggesting that operational risk, compliance and conduct issues may exist.

Ms Hall says, “The culture of misconduct that has developed in the banking sector in Australia, as highlighted in the royal commission, is reflective of all of the above factors, as well as the degree of complexity involved in the business administration of very large organisations. The larger an organisation, the more difficult it can be for operational risk, compliance and conduct issues to be evaluated at the appropriate level and intra-corporate conflicts of interest to be effectively dealt with in the face of shareholder drivers to maximise short-term profits.”

Ms Hall says banks and other financial services organisations can take a number of steps to rebuild their reputations and improve trust with their customers.

  • Enhance internal communications to reinforce the desired behaviours and approach to compliant business operations to meet consumer expectations
  • Revise remuneration and reward frameworks
  • Conduct risk management initiatives throughout the organisation
  • Undertake holistic reviews of business processes across all retail lines to ensure that the customer experience is considered throughout, both from a conduct perspective and a customer service perspective
  • Commission periodic independent risk culture diagnostics, including both risk culture surveys and extensive interview / workshop processes in cross-sections of the organisation
  • Establish a public education process to provide to relevant stakeholders on the steps that are being progressively taken to balance the drivers of retail banks and deliver appropriate outcomes for customers, employees, suppliers (both direct and indirect), and other stakeholders alike

The Royal Commissioner’s findings also spoke directly of the importance of managing non-financial risks. The report states (p404, 3.2.2.) “When financial services entities have considered risk and risk management, they have focused on financial risks, rather than non-financial risks.”

Ms Hall says copyright should absolutely be considered one of the many areas of non-financial risk that banks should be addressing.

“The Royal Commission has certainly demonstrated the costs associated with complacency and not paying due regard to the obligations owed to all stakeholders.

“The payment of licence fees for using material subject to copyright material is considered fair by the general public. The material has been created by others and so to reuse it requires permission and/or a fee – demonstrating respect for the expertise of others.

“Banks and other financial institutions typically use a large amount of copyright materials throughout their business operations, including both the internal storage and sharing of such materials, as well as the reuse of copyright materials in external forums. Appropriate licences for the use of copyright materials are not always in place.

“In reforming their business operations to achieve a greater degree of trust with stakeholders going forward, financial institutions should give due consideration to the interests of all relevant stakeholders that are involved in some way in the value chain supporting their business operations and profitability.”

Partner at Holman Webb Lawyers, Tal Williams, concurs, saying IP and copyright (particularly software) had emerged as big issues for corporates. “Copyright is a big issue and many disputes involve ex-employees, or derive from the fact that contractual obligations around copyright were not thought about upfront.”

Williams says, “In one case I came across, 250,000 lines of codes were developed for an organisation by an employee. The employee left and they copied 800 lines of the 250,000 lines… that was enough to be substantial [and therefore a copyright infringement] as it was part of the core functionality of the website and essential to make it work.”

General Counsel with the Copyright Agency, Josephine Johnston, warns, “There’s a myth that you don’t need permission if you copy less than 10% of a work. In fact, using even a very small part of someone’s else work may require permission, particularly if it’s an important or integral part of the overall product and was the result of the creator’s skills and time.

“Australian copyright law allows the use of 10% without permission only in special circumstances, such as personal research or study in an academic context.”

It can also be confusing to determine who owns the copyright. “If the content creator is on staff and the work is created as part of their job, usually their employer owns the copyright. If the content creator is a freelancer then they usually retain copyright unless the contract specifies otherwise. For example, photos taken by a freelancer for a specific marketing campaign, might not be able to be used for another campaign or purpose, without asking permission first,” explains Josephine.

Copyright issues arise frequently. “The best way to overcome these issues is to educate employees, seek advice and consider purchasing a copyright licence that allows you share reports, and reuse images and articles.”

Free Copyright Risk and Compliance Guide

The Copyright Agency has produced a 20-page Copyright Governance Risk and Compliance Guide. To secure your copy of the guide or to find out more about buying a copyright licence for your business, contact Senior Licensing Consultant, Lisa Hill on 02 9394 7746 or lhill@copyright.com.au.

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