The corporate regulator has warned all big companies against dudding customers in the pursuit of short-term profit following the scandals exposed during the royal commission and said boards need to quickly identify "toxic revenues".
As part of its plan to improve the culture of finance, the Australian Securities and Investments Commission (ASIC) also flagged plans to expand its program to "embed" supervisors within the country's big four banks and AMP.
ASIC's chief enforcer, deputy chair Daniel Crennan, QC, on Friday underlined the wide-ranging impacts of the Hayne royal commission into financial misconduct, saying all corporate businesses must be aware of a "societal shift" in public expectations of higher standards of conduct.
"The mandate of the royal commission was limited to financial services, but the philosophical underpinning of that analysis and the recommendations that arose from that analysis equally applies to all corporate activity," Mr Crennan said at the regulator's annual conference in Sydney.
Mr Crennan, a former barrister who was appointed to ASIC last year for his expertise in enforcement, made it clear he would make full use of the tougher penalties the watchdog has been granted. "We will apply them, we will need to apply them because otherwise they are an abstract concept," he said.
Karen Chester, also a deputy chair at ASIC, underlined the need for all corporate leaders to think about "non-financial risk," pointing to the massive financial pain the issue is causing banks.
"Your director or your company that doesn't feel like they're impacted by the Hayne royal commission because it doesn't directly relate to them - it does.
"If you don't manage these non-financial risks, if you don't make sure you put the systems in place such that the CEO and the board know what they are, they pretty quickly crystallise into big financial risks and financial losses and provisioning that we're seeing today," she said.
Ms Chester, an economist and former deputy chair of the Productivity Commission who described herself as "a bit of a public policy terrier," also highlighted that boards' senses could be "dulled" when companies were making high returns in markets that lacked competition.
She invoked an American term for boards to consider: "toxic revenues".
"It's really up to the board to identify what are toxic revenues," she said. Boards should be thinking about revenue streams that might, in the future, "be of harm to consumers" and therefore not sustainable, Ms Chester said.
Mr Crennan and Ms Chester made the remarks in a wide-ranging panel discussion among ASIC's expanded leadership team, appearing alongside chairman James Shipton and commissioners Cathie Armour, John Price, Danielle Press and Sean Hughes.
As part of its "toolkit", ASIC last year started "embedding" its staff in the big four banks and AMP, and Mr Shipton said it wanted to expand this team, and it had the budget to do so.
Amid concerns of a mortgage credit crunch, Mr Shipton denied it was being over-zealous in enforcing responsible lending laws, saying fears of a crackdown on lending standards were "overhyped".
With ASIC under pressure following a string of scandals in finance, Mr Shipton said his confidence in the team of ASIC staff was "extremely high," though funding of the watchdog was a "perennial challenge".
- SMH/The Age