ANZ - 2021 Annual Report

Risk management The COVID-19 pandemic has continued to impact our operating environment. Our Risk Management Framework has underpinned our response during this challenging time and has enabled us to maintain sound risk management practices. Over the last year we have continued to invest in our Risk Management Framework, processes and systems, strengthening our ability to respond to changes in existing risks, and to deal with new risks as they arise in our increasingly complex external environment, including those discussed below. COVID-19 We have maintained a range of support measures to assist employees and customers, and to deliver safe and secure operations throughout the pandemic. The Risk function has helped with the transition of staff to remote working, or conversely, their return to the office. We are continuing to assess the implications of ‘living with COVID’, which is still evolving. The Risk function has also partnered with our divisions to protect the bank through the management of credit risk associated with customer COVID-19 support, as well as industry deep dives and portfolio reviews. We recognise the mental health and wellbeing risks associated with staff fatigue after almost two years of COVID-induced change. We are working together with our Talent & Culture team to ensure appropriate supports are in place. For further detail on how we have supported our people see page 30. RISK CULTURE We strive for a risk culture where our employees demonstrate the right risk behaviours, have clear risk roles and responsibilities and are enabled by effective policies and processes. This year we conducted an internal Risk Culture survey for the first time. The survey gathered the perceptions of target risk behaviours from more than 24,000 employees. We have undertaken a lot of work over the past three years to encourage a strong ‘speak up’ and risk culture and, pleasingly, responses to the survey confirmed our people believe they can speak up and challenge each other respectfully if they see unethical behaviour, with over 80% of staff expressing a very positive sentiment for ANZ’s risk culture. Risk culture (as a critical component of our organisational culture) remains an important focus. We have refined our risk culture principles and defined our target risk culture. A framework for assessing each risk culture principle is embedded across the organisation and incorporates desired risk behaviours and business and risk outcomes. Risk culture maturity is assessed at an organisational level, as well as divisional and functional levels, with risk culture plans in place to address identified gaps. Risk culture goals have been set to monitor progress and drive sustainable change towards our aspirational culture. A priority this year has been transforming behaviours through formal mechanisms (including systems, structures, policies, procedures and processes) as we seek to ensure leaders demonstrate accountability for managing risk within a ‘speak up’ environment, with clear consequence management processes. Guided by our purpose, our behaviours help us to bring our values to life and to execute our strategy. To further strengthen and evolve our risk culture, this year the Enterprise Accountability Group (see page 30) recognised over 40 individuals as role modelling outstanding risk behaviours for their work to manage and mitigate the organisation’s risks and their continuous improvement of our risk culture. The recognition provided included personalised messages from the CEO, the opportunity to meet with the Board and ExCo and having their achievements profiled on our intranet and in internal newsletters . CONDUCT RISK Providing our products and services in a manner that delivers fair customer outcomes and promotes market integrity is integral to our strategy. This year Conduct Risk was elevated as a key material risk for the bank, highlighting its importance in our Risk Management Framework. In addition to key initiatives to strengthen our Conduct Risk management approach, our Code of Conduct was enhanced to provide clear guidance to our people. For example, there is guidance relating to some of the ethical considerations employees may encounter in daily decision-making, when dealing with customers and/or undertaking market activities – we expect our people to consider not only whether ‘can we’ do something, but also 'should we'? LINKS TO 2021 GROUP PERFORMANCE FRAMEWORK Our already strong risk management framework enabled ANZ to continually manage the evolving risks presented by COVID-19. Clear progress continues to be made on risk culture maturity, evidenced in employee engagement scores including ‘My business leaders demonstrate personal accountability for managing risk and sound risk behaviours’ (87%) and ‘I can raise issues and concerns in ANZ without fear of reprisals or negative consequences’ (80%), exceeding the record highs reached in 2020. These results are the product of sustained efforts over several years to encourage a speak up and risk culture where people feel they can challenge each other respectfully. Sound progress has been made in addressing the findings of the Risk Governance Self-Assessment and on key regulatory/non-financial risk projects. However, a $500 million APRA capital overlay remains in place pending confirmation of an improvement in operational risk management across the bank. See section 4.5.3 of the Remuneration Report for more details. 51 ANZ 2021 Annual Report