Work management

Get on top of marketing compliance before it gets on top of you

  • by Matthew Clements
  • 6 months ago

The second round of public hearings for the Royal Commission into the banking, superannuation and financial services industry is just about to kick off, and already the scale of the enormous compliance costs facing the industry is emerging. Figures of $1 billion have already been bandied about as the likely cost to industry — costs that will eventually be passed back down to customers and investors.

The Royal Commission is expected to cost taxpayers $65-75 million — but that figure doesn’t even scratch the surface of the resulting expenses facing the banks and other financial institutions likely to be affected.

It’s not just banks, of course, that will be subject to scrutiny by the Royal Commission over allegations of misconduct.

Superannuation and insurance brands in the mix

More than 1600 public submissions have been received to date, two-thirds (64%) of them related to banks. But the superannuation and insurance sectors have also come in for their fair share of complaints. More than one in 10 submissions related to superannuation (12%) and 6% related to general and other forms of insurance.

To illustrate how expensive compliance breaches can be, each institution can be expected to contract an array of highly paid lawyers and advisers to help it deal with the Royal Commission proceedings and events as they unfold. This is likely to cost many hundreds of millions of dollars across the industry — reportedly at least equal to the cost of the Commission itself to each major bank.

Then there are the large numbers of internal staff that can expect to be sequestered during the Commission hearings.

Brands bunker down in damage control mode

National Australia Bank, for example, has set up a “situation room” akin to a wartime bunker in which “silks” and other lawyers, senior bank executives and media will reside, with proceedings from the public hearings piped in via live feeds.

And you can expect the big four consultancy firms to be raking it in as they advise institutions on how to structure themselves to root out entrenched poor practices in the future, conduct audits and advise on new compliance procedures.

While all this is happening, the banks are frantically cleaning house: the Commonwealth Bank, for example, recently announced it would refund up to $16 million to customers who bought questionable add-on insurance policies.

Its “CreditCard Plus” and “Personal Loan Protection” products will be withdrawn immediately from the market, resulting in significant administrative and marketing costs.

This is before we even get to the hearings that will kick off this month with mortgage brokers, a sector of the industry that is responsible for more than half of all residential home loans in Australia.

The importance of trust in brands

After first decrying the need for a Royal Commission, the banks gave in and supported the call in the recognition that so much damage was being done to trust in the industry and to each major brand involved that it was better to take the hit and do the clean-up than to try to push through.

According to PwC Thought Leadership Institute managing director Cristina Ampil, the firm’s annual global CEO survey shows the growing importance of trust to brands: 15 years ago, only 29% of global CEOs believed that corporate misdeeds posed a serious threat to businesses; in the most recent CEO survey of 2017 that number went up to 58%.

It’s a salutary lesson that is just as applicable to marketing as to the broader organisation: the cost of establishing a robust compliance framework is far lower than the inevitable costs to companies and brands associated with breaching regulatory requirements.

As the Royal Commission illustrates, those costs extend far beyond any fines or repayments to customers. The industry has also already been lumbered with a new regulatory body, a beefed-up competition watchdog and is facing the threat of compulsory independent reviews of its risk management systems.

Fix your marketing compliance problem

Now is the time for the industry to ensure it is utilising all available means to get its compliance culture, processes and technology under control.

A marketing resource management system that gives marketers the ability to take human error out of the equation and automate approval and compliance procedures — not only for marketing but for all communications materials — should top the list of financial services mar tech purchases this year.

Cloud technology and flexible features make these systems cheaper, easier and more cost-effective than ever to implement, increasing the agility of workforces while building in risk protection.

Because if brands can’t prove they’re compliant with the ever-growing list of regulatory requirements raining down on the industry, eventually they’ll cop the associated costs.

Simple’s marketing resource management system helps enterprise marketing teams to plan, review and optimise their marketing activity to create exceptional customer experiences while ticking every marketing compliance box. Book a Demo to see how it works.

 

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