Westpac boasts benefits from risk governance overhaul following latest Promontory report

Independent reviewer Promontory Australia says Westpac remains on schedule with its plan to overhaul the bank’s risk governance.

Westpac, led by Peter King, is benefitting from its risk governance overhaul. Picture: Jonathan Ng

Westpac claims it is seeing the benefits of an improving culture and reduced complexity, as the bank released the latest report by independent Promontory Australia on its plan to improve risk governance.

At the end of September, Westpac had submitted 121 of 327 activities to Promontory for assessment.

Of those submitted, 102 were assessed as complete and effective, and assessment of the remaining 19 was underway.

The report, which covers the period from February 1 to September 30, notes Westpac’s progress is on track.

Westpac chief executive Peter King said the board and executive team remained committed to completing the plan’s activities on time and delivering the change in culture and capability it was designed to achieve.

“The foundations we have established are helping to improve our risk governance, capability and risk culture, and ensure we are a simpler, stronger bank for our customers,” Mr King said.

“We are already seeing improvements in our culture and benefits through reduced complexity and improved accountability.”

The prudential regulator in December agreed to an enforceable undertaking from Westpac pledging to significantly improve its risk governance deficiencies.

Under the EU, Westpac was required to establish a remediation plan to address APRA’s concerns with the bank’s progress in addressing its governance weaknesses.

The remediation program covers both financial and non-financial risk, with Westpac appointing Promontory to provide external independent assurance over the design and implementation of the plan.

Last March, Promontory delivered its first independent assurance report, which focused on initial compliance assurance with the EU in relation to development of the plan.

The second Report, in July, centred on Westpac’s compliance with the EU and the plan, and whether Promontory considered implementation of the plan to be effective and sustainable.

Promontory said in its latest report that the program, which is due to run until 2023. Had so far concentrated on the design aspects of the risk governance remediation.

The reviewer said it had assessed 65 of the plan’s 114 design activities and assessed them as complete and effective.

Implementation work was tracking according to plan.

While work to embed the program had started, it was “limited” so far.

“As work continues to move from the design phase to the implement and embed phases, Westpac will confront one of the key root causes of its risk governance deficiencies, namely, the ability to execute programs and ‘stay the course’,” Promontory said.

“For this reason, there has been an increasing focus on driving ownership, accountability and the right culture into business divisions, consistent with Westpac’s lines of business and three lines of defence operating model.”