An interim report on the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was released by the Commissioner, the Honourable Kenneth Madison Hayne AC QC, on 28 September 2018.
Whilst there is likely to be a shake-up of the financial services industry once the inquiry is completed, it is evident from the report that the shortcomings boil down to a lack of adherence to basic business principles. With this in mind, it is a good time for businesses across all sectors to look in the mirror.
Commissioner Hayne, amongst many other things, addressed some very simple principles that I believe apply to all businesses:
- Obey the law: ensure that the business is compliant with legislation and implements appropriate compliance policies and procedures. This is not a “set and forget” regime, but requires continued monitoring and adaptation.
- Do not mislead or deceive: transparency is the key here. Consumers across all industries need to understand what they are getting, what they are not getting and what their rights are.
- Be fair: legislation changes dealing with unfair contract terms and the like have gone some way to more broadly implementing this principle. Ensure engagements or terms and conditions with customers are fair and reasonable so they can be properly enforced.
- Provide services (or products) that are fit for purpose: under the Australian Consumer Law goods and services sold to consumers need to be fit for the purpose for which they were sold. Businesses cannot offer one thing and deliver another.
- Deliver services with reasonable care and skill: ensure that services are delivered in good faith and by competent, experienced and appropriately trained/skilled staff.
These principles might seem obvious and a matter of common sense when written down like this but it is amazing how many times businesses incur liability or increase their risk profile by not adhering to them. If these principles underlie every action we take in business, this will be a step in the right direction and will negate the need for costly Royal Commissions in the future.
