Companies are artificial living organisms and experience changes with time. They identify weaknesses in their operations by using existing structures to fix them. Even when they are operating efficiently, they also foresee the need to buy into new ideas that will enable them to maintain optimum results. Many academics, therefore, proffer new ideas which companies need to shape their operation. Thus, an associate professor of Information Systems at the University of Ghana Business School, Richard Boateng identified the broad framework within which companies can situate their policies to facilitate efficient delivery of their services.
Policies are the standards, rules, guidelines or procedures companies follow in their activities. In his view, a company’s policies for its daily operations should fall within three (3) distinct contexts – regulatory, advisory or informative. The material looks at business models through Information Technology lenses and how they can be used in a digital economy.
Even though other schools of thought have different categorisations of policy-types, I consider his framework very useful – and with that insight, will explore how it can be used to improve a bank’s organisational design. By extension, this will help close any missing link or gap to achieve efficient results.
Regulatory policies require companies operating in a particular sector to comply with the relevant laws and regulations therein. The Companies Act, Banking and Financial Laws (i.e. Banks and Specialised Deposit-Taking Institutions Act 2016 (Act 930) and the Directives emanating from them are regulatory.
Banking policies – including the Credit policy, Liquidity Risk Management policy, are required by regulation to be in place for a bank’s daily operation, and are therefore clear examples of regulatory policies. Recent directives on Financial Holding Companies, Fit and Proper Test, Mergers and Acquisitions, and Voluntary Winding-up also provide clear insights into regulatory policies. A bank’s compliance or legal department, for instance, is responsible for matters relating to law and ensures that the bank’s activities are compliant, or agreements between it and the public meet the standards.
Apart from the regulatory policy, we can consider a policy as advisory if it aims at advising or educating a bank’s stakeholders such as employees or customers on its activities regarding what is acceptable or not acceptable. In his example: “An advisory policy is one covering acceptable use of the email. This policy might state that employees should use corporate email addresses for only business-related transactions or communication; if they violate the policy, it could lead to disciplinary action”.
Indeed, it has always been the norm in the banking sector that all employees adhere to the email or access control policy, which is advisory. IT Departments always champion the email policy and are responsible for monitoring to ensure staff comply with it. Similarly, Marketing Departments oversee product development and research, and as part of their responsibilities liaise with other departments (retail, corporate, investment, Treasury etc.) to engage or advise customers and the public on the bank’s products and services.
In this regard, they endeavour to adhere to the bank’s service charter while ensuring its positive reputation is sustained. In effect, the marketing function and the other departments consider the product manuals, Human Resources policy or manuals, the Treasury policy and such related policies as advisory by design and purpose. Advisory policies may not necessarily be required by law to be in place, but are enforced with sanctions when breached.
Based on the understanding that regulatory policies relate to enforcement while advisory policies are implied by name or purpose, the third form of policies – which is informative – is designed to ensure stakeholders are always aware of the bank’s activities. Such company policies relating to confidentiality and information flow are informative. Corporate Communication/Marketing Departments usually have responsibility for controlling those policies. Hence, any form of communication design and strategies banks adopt to reach their stakeholders is informed by their information policy.
With this clear-cut understanding of the policy framework, we can equally establish from a bank’s administrative structures that the ownership and occasional reviews of the policies are controlled by the various departments into whose domain they fall. Thus, the Credit Department controls the Credit Policy while the Treasury Unit governs the Treasury policy, with the Risk Department in charge of its policy administration.
Though there is a collaborative working relationship between the departments, the overall monitoring and evaluation tend to be in silos and creates a situation in which there is a missing link with regard to effective coordination of the various regulatory, advisory and informative policy-types.
Indeed, internal control (audit units) play vital roles to ensure deviations or breaches are corrected in line with the laid-down procedures; but due to the absence of a standardised policy unit to serve as a centralised anchor to hold all together, the various departments’ policies tend to weaken policy governance and efficiency.
It is therefore necessary to advocate that banks and other financial institutions streamline their operations with the establishment of a policy unit – to be responsible for policy governance, monitoring and evaluation. This will not only help to bridge the policy administration gaps, but also ensure banks catch up with modern and best practices. Invariably, policy units will also help to improve corporate governance in banks.
My call for banks to institute policy units, or activate systems for effective coordination of policies, in banks is also opportune in the wake of the reforms and with many new directives being introduced by the regulator. I am always grateful and enjoy your company through this column. Keep reading! God Bless.
This script was written by a Chartered Banker with a flair for feature writing. Apart from his work schedules, he edits or proof-reads corporate material for his colleagues, executive managers – including distinguished professionals working in various fields outside Banking. Through this column, his articles feature on third-party online media platforms in Ghana and outside.