If you want an example of how much clear written policies and procedures matter in the real world, just look at the current crisis in the banking sector. Everyone from shareholders, and cable talk show hosts, to Congress wants to know what standardized procedures, management practices, and safeguards were in place and who was responsible for what. Ultimately, it is the bank’s Board of Directors and Management Executives that are accountable for whatever happens in the bank.
The board of directors has very specific oversight duties and responsibilities. The directors should always know how the bank is being run, and once a policy is in place, it is the board of directors’ responsibility to ensure that both management and staff are following the directives that they have.
Because of the board’s role, it is standard practice to have a bank’s board read, review, and approve all the bank’s written operating policies. But, the team here at Comprose has been hearing from a variety of sources in banking, including customers and regulators, that “Board Approved” doesn’t always mean what it sounds like.
In many cases, the policy and procedure material given to the board to review is so convoluted, overly complicated, and downright confusing that board members don’t actually read it. And even when they do, they rarely understand it. Often, the board just rubber stamps the P&P documents, which then go on a shelf and never get used. As a result, there isn’t much actual oversight, and it is virtually impossible to ensure that correct standard operating policies are being followed throughout the bank’s operation.
In fact, some managers intentionally bombard their boards with tons of pages of policy and procedure documents to review because it avoids their own accountability. If asked about an inefficient or questionable policy or process, a manager can simply say, “The Board approved it,” and they are off the hook.
It may be that because of the high volume and poor quality of written policy and procedures being passed to them, Bank Boards cannot perform the oversight they should, and, therefore, the safeguards that were meant to be in place are failing.
An oversimplification? Of course! Bad P&Ps alone didn’t cause the current banking crisis. But it is one problem that can easily be corrected and which can help correct many other problems in bank operations as well.
It’s no secret that increased regulation and oversight of banking is on the way. Clear, accurate, and understandable policies, procedures, and operations manuals will be key at every level of the bank’s organization–starting with the Board of Directors.
Consider Zavanta Software for Banking and Financial Industry Policy and Procedure Management. Our system is ideal for heavily regulated industries. We can help you streamline and automate your process. Contact us today to start a conversation.
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