Risk management

Risk culture and conduct risk management

A sound risk culture has been integral to Macquarie’s risk management framework since inception. Primary responsibility for risk management in Macquarie, including risk culture, is at the business level. The Board, assisted by the Board Risk Committee, is responsible for:

  • reviewing, endorsing and monitoring Macquarie’s approach to risk culture and conduct
  • forming a view on Macquarie’s risk culture and the extent to which it supports the ability of Macquarie to operate consistently within its risk appetite.

Maintaining an appropriate risk culture

Macquarie’s approach to maintaining an appropriate risk culture is based on the following three components: 

Senior Management, with oversight from the Board, set behavioural expectations. The way we fulfil Macquarie’s purpose is defined by our principles of What We Stand For: Opportunity, Accountability and Integrity. Staff are made aware that these principles must form the basis of all behaviours and actions. These behavioural expectations are specified in the Board approved Code of Conduct, which is actively promoted by Management and cascaded through the organisation.

Management implements behavioural expectations through:

  • leadership actions and communication
  • organisational governance
  • incentives and consequence management
  • organisational and individual capability.

Macquarie monitors and measures its risk culture to gauge effectiveness while promoting continuous improvement. Mechanisms include:

  • reports incorporating behavioural elements (such as policy and limit breaches) are prepared by all Operating and Central Service Groups, including reports prepared by the Risk Management Group (RMG), HR and Macquarie’s Integrity Office and escalated, where relevant, according to our governance framework. These include regular reports relating to risk culture which are provided to Senior Management and the Board
  • the Risk Culture team in RMG Behavioural Risk uses a well-developed assessment process, governed by the Risk Culture Framework. The team undertakes independent risk culture reviews across the Operating and Central Service Groups to assess the relative strengths and areas for development within a business or function.

These mechanisms facilitate a feedback loop of sharing good practice and lessons learned to enable cultural alignment. 

Remuneration and consequence management

Macquarie’s remuneration framework and consequence management process are designed to promote accountability, encourage innovation, reward appropriate behaviours and discourage inappropriate behaviours. Effective consequence management is a key component of Macquarie’s risk culture. Macquarie aims to apply consequences for non-compliance in a timely manner, and as fairly and consistently as possible.

Conduct risk management framework

Macquarie defines conduct risk as the risk of behaviour, action or omission by individuals employed by, or on behalf of, Macquarie or taken collectively in representing Macquarie that may have a negative outcome for our clients, counterparties, the communities and markets in which we operate, our staff, or Macquarie.

Such behaviour, actions or omissions may include:

  • breaches of laws or regulations
  • disregard for Macquarie’s principles of What We Stand For or the Code of Conduct
  • negligence and/or a lack of reasonable care and diligence
  • failure to escalate improper conduct.

Conduct risk can arise inadvertently or deliberately in any of Macquarie’s Operating and Central Service Groups.

Macquarie’s approach to conduct risk management is integrated in our risk management framework and is consistent with our three lines of defence model. Risk-taking must be consistent with Macquarie’s principles of What We Stand For: Opportunity, Accountability and Integrity which must form the basis of all behaviours and actions. These behavioural expectations are outlined in the Board approved Code of Conduct.

Macquarie has a range of controls and processes in place to identify and manage conduct risk, including:

  • new and emerging conduct risks are identified through the annual strategy and business planning process
  • conduct risks that may arise when Macquarie establishes a new business or product, or makes a significant change to an existing business, product, process or system are identified and assessed through the new business and product approval process
  • independent monitoring and surveillance conducted by RMG, in addition to front line supervisory activities performed by the business
  • the Risk and Control Self-Assessment incorporates a conduct risk lens, requiring businesses to identify and assess their key conduct risks
  • where incidents occur, we investigate the underlying contributing behaviours and record where they are the root cause of the incident
  • performance-based remuneration reflects an individual’s performance, which includes assessment of a range of factors including risk management and behavioural measures
  • an Integrity Office that is an independent point of contact for staff to safely raise concerns about misconduct, unethical behaviour or breaches of the Code of Conduct
  • a global Staff Hotline for staff who wish to speak up anonymously.