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:
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. Staff are made aware that Macquarie’s principles of What We Stand For - Opportunity, Accountability and Integrity 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:
Macquarie monitors and measures its risk culture to gauge effectiveness while promoting continuous improvement. Mechanisms include:
These mechanisms facilitate a feedback loop of sharing good practice and lessons learnt to enable cultural realignment where necessary.
Macquarie’s remuneration framework and consequence management process is designed to promote accountability, encourage and reward appropriate behaviours and discourage inappropriate behaviours.
The Board considers that the effective alignment of remuneration with prudent risk-taking is fundamental to its remuneration approach. Performance-based remuneration reflects an individual’s performance which includes an assessment of a range of factors including risk management and compliance as well as behavioural measures to promote good conduct and commitment to the Code of Conduct, and What We Stand For. In addition, the remuneration framework is characterised by significant retention and long deferral periods which enables risk outcomes to be taken into account over long periods.
The Board and Board Committees continue to take risk and conduct matters very seriously. There are robust processes in place to ensure that risk, reputation and conduct related matters, as well as financial losses and impairments, and other breaches of the risk management framework are specifically considered when assessing performance and determining remuneration outcomes. These processes may result in a downward adjustment to group and/or individual profit share allocations where appropriate.
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.