Background

Discuss about the Illegal Activities Committed By Terra Australis Bank.

The case study highlights the illegal activities committed by Terra Australis Bank (TAB). The forging of the documents and manipulation of the files of the clients were some of the activities undertaken by the bank with an aim of earning a high commission as well as a bonus. Thereby, the people of Australia had to suffer as their life savings were under jeopardy. The risk involved with the bank is that about 38 of its planners have been classified as having a critical risk. The risks identified were mainly due to the non-compliance with proper financial planning. The actions taken by the managers, in this case, were insignificant as, despite complaints made by Joe Bloe on Don, manager of TAB chose to ignore the issue. Complaints from clients were also made on Don but despite this in October 2008, Don was promoted was promoted to being the Senior Financial Manager. Despite several articles about the incompetency of Don, the mangers of TAB took no actions to make the matter better. Therefore, the risk of increased fraud and loss of customers became a high level for the company. Sam Venus, who had made a public apology could have taken serious actions against Don and forced the company to undergo a complete change in the company. Despite providing compensation to the victims, it is required that the loyalty of the customers is earned by making drastic changes in the process of the company.

The case study suggests that TAB depends on the bonus as its remuneration plan. These are depended mainly on to the short-term initiative schemes that define the company.  According to Calomiris and Carlson (2016), a bonus is usually the compensation received after a good performance of the employees. In this case, the bonus of the employees usually resulted from convincing the clients about investing in the company. Therefore, clients were forced to take risky schemes for the betterment of the lives and for improvement of the company. The case study also showed that the pressure from the top-level managers forced the employees to defraud the customers. The aggressive nature of the employees in terms of meeting the target has led to the forced fulfilment of the goals. Therefore, the short-term incentive scheme provided by the company led the employees to take a dishonest step in working. In this regard, it can be said that certain recommendations can be provided to TAB to reduce the internal conflicts. The recommendation is mainly on the remuneration plan that the bank can adopt. Instead of providing a bonus as a short-term incentive scheme, it can be prudent for the company if they provide incentive as per the number of sales. This can be made for the long-term scheme and any rules should be maintained about the application of any unfair and unethical means of meeting the target. The incentives can be deducted if employees are found to be dishonest in the organisation.

Unethical Conduct and Risks Faced by the Customers

The ASIC was reported to be slow in responding to the fraud committed by TAB. In the words of Graham and Kaye (2015), it is the duty of the ASIC to ensure that any type of fraud or criminal offence is taken instant care of and the perpetrators are punished for the actions. During the crisis, the ASIC sent a warning letter to TAB that indicated the 38 planners that have been involved in unethical conduct. However, after the initial warning notice, the ASIC began to act slowly about the situation. The ASIC had pointed out that Don was the main perpetrator that has pushed the company in the current unethical state. Despite the efforts of Bloe, there were no other initiatives taken by the ASIC to pursue with the investigation of the issue. Instead of gaining feedback from the TAFP, the ASIC opted to discuss the matter over with the company and consequently came to a closed decision that is beneficial for both the parties. However, after several complaints and visits from the pat of the whistleblowers, the ASIC managed to establish an office of whistleblowers so that quick response can be made. The challenge faced by the ASIC is that they did not have any whistleblower working for the company and because of this the responses of the ASIC was slow. Therefore, this can be considered as the reason for the slow response of the ASIC towards the ethical issues faced in TAB.

In the modern world, social media plays an important role in promoting companies. At the same time, the social media also help in bringing down the fame of a company if it finds the company involved in any type of fraud (Tricker and Tricker 2015). In the case, it can be said that the role played by social media for exposing the fraud of TAB was enormous particularly taking into consideration the lack of response by the managers and the ASIC. The series of articles that were published in Gotham Investigator exposed the fraud of Don. It was also seen that TAB had knowledge about 14 such fraud cases dating back from early October 2008, but did nothing to take any preventive measures. Therefore, as stated by McNeil, Frey and Embrechts (2015) the role of social media is important to make people aware of the type of fraud that may be caused by companies. The role can extend to control the risk management for the companies as reporting via social media can bring about more customers. The clients of TAB can understand the fraud and take necessary actions to ensure that the company pays compensation for the loss that they have caused. The social media can assist the enterprises as well by analysing the frauds that may be caused and the resulting impact of the unethical practises. It can help a company like TAB to make amends with the Australian people in terms of providing faith in the company.

Remuneration Plan and Short-Term Incentive Schemes

According to Bromiley et al. (2015), whistle blower protection policy can help companies to mitigate any unethical activities. The whistle blower can report the fraud and unethical practise of the companies to the highest authority. However, it is important that these whistle blowers be protected so that the managers do not get to know their identities. In the case of Bloe, the ASIC agreed to the fact that a whistle blower protection policy will be delivered so that protection can be provided to him for his assistance during the crisis. However, it is important to ensure that certain improvements are made so that the policy becomes a main source of success for the ASIC. In order to do so it is necessary that ASIC handle the complaints made with sensitivity and discretion. Another important improvement that needs to be made is the fact that quick response to the complaints need to be provided. In the case of TAB and Bloe, the ASIC took a long time in responding to the complaints made. Hence, the risk of exposure of Bloe to the company was high. In this case, it can be said that the whistleblowers need to be encouraged by the commanding departments to report any type of threats that exist in the organisations. Therefore, it can be said that the whistleblowers protection policy is important so that such fraud activities are reported often to protect the community from any type of harm.

After the analysis of the case study it can be said that the reputation that TAB had with the customers was significantly affect by the actions of the TAFP. The customers lost the trust of the company and made several complaints including the involvement of social media and other higher authorities. This provided a huge loss for TAB as the reputation of the company became lost to the public. Hence, it can be said that in such cases the company in terms of gaining its reputation back in the industry can face certain challenges. In promoting ethical behaviour, good governance practise and compliance, the company need to ensure that it reaches out to the public in a more subtle manner. It has been seen that Sam Venus had apologised to the people and attempted to compensate for the loss suffered by the people in a public statement. This can be considered as small steps towards the progress of regaining the reputation of the company. TAB need to ensure that the customers gain the trust of the companies with the ethical considerations that are required for a financial company. The money obtained illegally need to be returned so that the customers does not suffer from any type of issues related to the company.

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