Finity co-authors paper on Social Condition Reporting

Finity co-authors paper on Social Condition Reporting

By May 21, 2019News, Uncategorized

The Actuaries Institute has released a paper recommending financial institutions measure social condition.

Authors, including Finity's Hadyn Bernau said the ‘social condition’ of a financial services business – the state of its relationships with its customers, employees, regulators, intermediaries, politicians and the wider community - is “no less important to a company’s long-term success than its financial condition”.

The value of how organisations treat customers and other stakeholders, need to better understand their social risks and the social condition of their business. Read AFR article on this topic.

“The basic premise underlying this paper is that relationships with key groups in society are so fundamental to the success of a financial services business, and of such great value, that there should be a systematic approach to the management of those relationships,” the paper states.

“Financial services companies should commission a formal Social Condition Report to aid Board and management in their respective duties.”

The paper argues that management and boards often have a poor understanding of their relationships with the social groups with which they have relationships.

“Those relationships are often quite poorly managed and nowhere near as strong as the organisation (and other parties) would desire.”

Social and relational events can quickly destroy significant business value. And “pedalling a lot harder” at the same tasks to correct deficiencies, including being more diligent, working harder, applying more resources, and improving reporting in the post-Royal Commission world, isn’t good enough. “We are sceptical about the effectiveness and efficiency of such responses,” the authors said.

Many social risks are being “poorly managed – perhaps not even being identified”. The paper states: “it is common for assessments of the current level of a risk (of whatever type) to be based on backward-looking measures – and this can give a very poor indication of the actual risk profile”.

Read the paper 

 

Download the Actuaries Institute media release

Read more about Relational Analytics [pdf]