Navigating Financial Services Compliance
Disclosure Accuracy, TMD Update, and ESG/Climate Risk Disclosure
Disclosure Accuracy, TMD Update, and ESG/Climate Risk Disclosure
In the world of financial services, compliance and document management are crucial elements that shape the industry's landscape. Consider a recent discussion that unfolded among industry experts, touching on pivotal changes in the industry, notably the evolving landscape of Environmental, Social and Governance (ESG) within Australia.
Andy Moy, VP of Objective Keystone hosted a riveting panel discussion with guest speakers; Joanne Powell, CEO of Transform Consulting, Sarah Penn, CEO of Mayflower Consulting and Natasha Gray, Disclosure Solutions Consultant for Objective Keystone.
In this panel discussion, a range of themes emerged encapsulating the ongoing transformation within the financial sector. It began with a conversation about the changes instigated by ASIC, leading to alterations in risk ratings and the necessity to reevaluate various investment funds. This shift stirred up concerns about aligning Product Disclosure Statements (PDS) with Target Market Determinations (TMDs), a process laden with complexities and potential pitfalls.
The dialogue swiftly turned toward ESG, once considered a niche concern but now thrust into the mainstream. The progression of ESG from a fringe concept to a pivotal aspect of investment strategy underpins the increasing scrutiny to be set by regulators. However, the absence of specific legislation governing ESG practices amplified the uncertainties and challenges faced by financial institutions striving for compliance.
Update from ASIC: Changes to TMD Templates
ASIC's latest update abolishes Amber ratings, simplifying managed funds into 'on the market' or 'off the market' categories. This prompts organisations with TMDs to reevaluate and moderately update their documents for compliance. Additionally, expanded review triggers impact transmitted data through aggregators like API and IRIS Morningstar. This necessitates thorough reviews to align with the revised guidelines.
CEO of Mayflower Consulting
Starting With the 'Why'
Simon Sinek's advice to "start with why" rings true in the realm of financial services. It's not just about knowing what documents to produce; the 'how' becomes a pivotal factor in shaping practices for long-term sustainability. It's about setting up processes that not only ensure compliance but also support auditability down the line.
Responding to Regulatory Changes
The Banking Executive Accountability Regime (BEAR), also known as the Financial Accountability Regime (FAR), emerged as a joint initiative by ASIC and APRA, aiming to hold individuals accountable for organisational decisions, particularly within the financial services sector post the Royal Commission and issues at CBA in 2017. FAR mandates a Senior Executive to take responsibility for specific legislative sections impacting APRA-regulated entities like Banking, Super, and Insurance. It involves comprehensive reviews by subject matter experts (SMEs), verification processes, Due Diligence Committees, and an additional step wherein a Senior Executive takes accountability for ensuring due process compliance. This new regime poses significant challenges in mapping responsibilities, urging early attention and preparation ahead of its full enforcement in 2025 for Super and Insurance sectors. Engaging with APRA's report on CBA provides insights into the essence of FAR, highlighting the critical aspects of compliance and accountability. Early familiarity with FAR becomes crucial, considering the complexities involved, particularly for Super Funds, to proactively address impending challenges.
Advancements of ESG within Australia
The discussion on ESG within the Financial Services industry highlights the significant evolution this concept has undergone, from being an unconventional concern to becoming a critical mainstream focus. The conversation revolves around the considerable shift in ESG's perception and implementation, with a specific emphasis on climate risk. It's noted that what was once considered a niche concern for a select few has now become a mandatory consideration for all Super funds, prompted in part by APRA's requirement for climate risk response in portfolio management. Despite the urgency and focus on ESG, there's a distinct lack of specific legislation governing it, creating discomfort and uncertainty among financial entities. ASIC's scrutiny focuses on possible misleading practices, even in the absence of dedicated ESG legislation, causing unease in the industry. The absence of a legal framework creates challenges for organisations, leading them to anticipate forthcoming legislation, potentially mirroring European ESG regulations, although this prospect is viewed as cumbersome and challenging. The narrative emphasises the evolving landscape of ESG in disclosures, necessitating more frequent updates due to shifting requirements. While some clients assert their existing adherence to ESG principles under corporate law, the current scenario intensifies scrutiny and places a heightened focus on ESG aspects within financial disclosures.
A Trans-Tasman approach to Climate-Related Disclosure
The discussion delves into the potential transfer of knowledge and practices from New Zealand's advanced initiatives on climate risk disclosure to the Australian landscape. The conversation highlights the robust framework developed for Objective Keystone's New Zealand clients, focusing on disclosure frameworks, statistical reporting, and meticulous record-keeping. Leveraging this framework, the team aims to adapt and create an industry standard for Australia, anticipating emerging requirements in line with ongoing developments, particularly in taxonomy and sustainable finance strategies. The mention of a recently released consultation paper by Treasury on sustainable finance strategy underscores the evolving landscape awaiting further clarity. With regulations set to solidify by the 2024-2025 financial year, the emphasis remains on staying informed, preparing for confirmed directives, and aligning Objective Keystone configurations to meet forthcoming requirements, drawing parallels to past experiences with TMDs. Objective Keystone's versatile features, particularly in data management, statistical graphing, data integration via APIs, and robust verification capabilities, are spotlighted as valuable tools in aiding the acceleration of climate risk disclosure processes. The discussion highlights the importance of seamless data handling, accuracy, and compliance, alluding to the evolving digital demands globally and the necessity for robust digitisation. The integration of data directly from the source into disclosures eliminates errors, version conflicts, and enhances reliability, showcasing the potential for a smoother and more accurate approach in deploying climate risk disclosures in Australia.
The Importance of Robust Document Management
In the financial world, the stakes are high. Failure to meet compliance standards can lead to severe consequences. When it comes to PDS and TMDs, the goal isn't just about keeping the lights on; it's about staying active in the market. No disclosure means no product on the market and ultimately no sales.
Objective Keystone is a robust solution in this landscape. Its ability to store, organise, and present information becomes indispensable in managing compliance. The system's capacity to handle various document types beyond standard compliance documents is an added advantage.
CEO of Transform Consulting
The mentioned transformation revolves around a substantial shift in content management dynamics through the adept utilisation of Portfolio Management Capabilities and Workflows. By linking content states to groups and types, the process moved away from a centralised team setup, mitigating redundant handling and empowering SMEs to directly manage content updates. Leveraging Portfolio Management and Workflows allowed for easy tracking of content location and status, streamlining the verification and review process. The ability to manage content packages within the Portfolio Management system facilitated bulk content distribution, enabling proactive deployment while monitoring content status efficiently. Notably, this approach significantly reduced duplication, engaged SMEs in content editing, and streamlined the verification process for over four thousand pieces of content. Clients witnessed a transformational realisation of time and resource savings. Furthermore, the transition allowed them to focus on future content updates by isolating specific content changes for distinct timeframes, simplifying verification processes for forthcoming rolls. Overall, this evolution in content management signifies a remarkable reduction in effort, paving the way for more efficient and strategic content management practices.
In the ever-evolving landscape of Financial Services, staying ahead of the regulatory curve and embracing transformative tools like Objective Keystone is not just about compliance; it's about setting the stage for operational excellence and future-proofing your organisation. To find out more contact us.
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